Fintech’s responsibility to balance usability with consumer protections

By Vanessa Malone

The digitization of financial services has blurred, if not completely erased the lines between finance and technology.

Fintech has been making waves for years, but a tsunami in the form of the COVID-19 pandemic expedited its position as the clear new business model. For example, Microsoft’s CEO says the company has seen two years’ worth of digital transformation in just two months of its third quarter.¹

Today, what was originally thought of as back-end infrastructure technology for incumbent financial service providers has shifted to a consumer-focused model, a model that’s rapidly gaining traction.

As we discussed last week, fintech is not just a technological shift but a cultural shift. Peer-to-peer lending, crowdfunding, mobile investing, online banking, and other major sectors of the fintech industry all reflect the evolving values and perceptions of today’s consumer. Consumers demand accessibility, community, and transparency.

This has resulted in a wide array of financial products and services built to lower costs, empower financial decisions, and create personalized experiences.

Creating tools that simplify the capital raising process, better the investment experience and streamline trading are game-changing innovations. These technology solutions surrounding investing and crowdfunding have also brought attention to potential risks that all fintech companies should consider.

Appealing to a new wave of investors

The premise of democratizing finance and empowering individuals to take control of their finances with technology solutions is an important transformation, but targeting younger and less experienced investors inevitably opens the door to some risk.

To address this, the same care put in place to ensure a seamless user experience needs to be placed on educating users about the markets they’re participating in and investment strategies they’re now leveraging with the click of a button. Education, although not as sexy as the technology, should not be brushed aside or thought lesser of.

Streamlined tools, but with protective measures in place

In a recent New York Times article, one Robinhood user shared his experience with the trading platform’s “one-click trading, easy access to complex investment products, and features like falling confetti and emoji-filled phone notifications that made [trading] feel like a game.”² While this can do well to modernize the investment process, it’s critical to keep guardrails in place.

We believe that sacrificing investor protection for the sake of simplicity is unacceptable. This is why Horizon has always built its compliance and trading technology with the core focus on enhancing compliance and increasing investor protections.

Concluding thoughts

What responsibility do you think fintech companies have on educating and protecting this new wave of investors?

About Horizon:

Sources

¹livemint.com

²nytimes.com/2020/07/08

Horizon licenses and operates global securities exchanges.

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