JoshEverywhere one might care to look, the world is constantly changing, growing, and adapting, and the power of digital technology seems to grow stronger at an almost terrifying pace. Nearly every aspect of our lives has been profoundly impacted by technological advances and development, including the ways in which we bank and manage our money.
We have seen, in recent years, the rise of many interesting alternative banking services and finance solutions. But what do those solutions and services look like, and what might they mean for the forms banking takes over the years and even decades to come?
Below, we have sought to answer those questions.
What is meant by the term “alternative financial solutions”?
Before we look at the different types of alternative financial solutions that are available right now, it is important that we have a good understanding of what we mean by this.
In simple terms, alternative financial solutions and services are financial options that exist, as the name suggests, outside the framework of traditional banking.
These services and solutions can take a number of forms, and are far from a new concept. The idea of pawnshops and rent-to-own stores has been around for many years, but the growth in technology means that these alternative financial solutions are now taking new forms.
As a consequence, customers are gaining access to a wealth of new opportunities.
What are some examples of alternative financial solutions?
Alternative financial solutions come in a range of shapes, types, and forms. Some of the most important ones to be aware of include:
- Digital banking apps
In recent years, almost everyone has become accustomed to the notion that if we need to perform a simple task involving our money – for example, transferring some funds from one account that we hold, to another – we don’t need to put our coats on and head out to a physical bank premises.
Instead, we simply fire up the banking app that we have on our smartphone and tablet, log into our account, and carry out the transfer within seconds.
Banking apps on the devices that we carry around in our pockets every day, have enabled us to easily execute processes such as the above, wherever we are in the world (as long as, of course, there is an Internet connection available). To say that this has been life-changing for great numbers of ordinary people across the globe, would be quite the understatement.
- Peer-to-peer lending
In traditional banking, the lender of any type of cash or credit has always been the bank. Going by this time-honoured model, even if you go through a lending provider, it will ultimately be the bank that has the final say, and that actually lends you the money.
It is a very different situation, however, with peer-to-peer lending, which has revolutionised lending and borrowing. It operates on the simple principle of allowing transactions to be made between two individuals, without the need for a third party to be involved.
Not only is this frequently more convenient for both borrowers and lenders, but it can also make lending more accessible, as customers and lenders typically enjoy lower fees and costs, compared to traditional banking. Indeed, many lenders are seeing peer-to-peer lending as an attractive investment opportunity.
- Cryptocurrency
Another alternative financial solution that has seen a stellar increase in popularity, is cryptocurrency. This is a form of digital currency that operates on a computer system or network that is independent, instead of being part of a traditional bank.
Crypto, which uses cryptography to help enhance security, is seeing a huge rise in popularity and use in online transactions, largely due to the reassurance that transactions are safe and secure.
- Digital payment systems
Digital payment systems, too, have upended how we engage with money, goods, and services.
It is now possible to pay for what you need at the press of a button, thanks to systems such as Apple Pay and Google Pay. Many customers enjoy the convenience that this offers, as well as the additional security offered by extras such as Face or Touch ID.
The advantages that can be unlocked from using alternative financial solutions
So, what are the benefits of opting for an alternative financial solution over the traditional model? Some of the main advantages include:
- More attractive fees and rates
Alternative financial solutions such as peer-to-peer lending and crypto typically come with lower fees, which helps make them more affordable and accessible to a wider audience.
- Heightened accessibility
Unlike traditional banks, most alternative financial solution providers do not run credit or background checks. This can make it easier for those with poor credit or low incomes to access the funds that they need.
- Enhanced security
Many customers are also drawn to alternative financial solutions due to the notion that they are safer and more secure than their traditional bank counterparts. Of course, whether this is actually the reality or not, will depend on the specifics of whatever financial service or solution is being used.
No one should ignore the rise of alternative financial solutions
There is no denying it: alternative financial solutions are on the rise. And much more importantly, they are demonstrating that they have a valid place in how people of a wide range of backgrounds and circumstances manage their money in the 2020s.
By doing your research and giving yourself a clear understanding of the concepts behind such alternative services and technologies, you can make smart decisions, and embrace the future in ways that work best for your own needs as an individual or organisation.