I just attended a two-day investment conference to stay up-to-date on the most recent developments in the financial world. Depending on timing of this annual event, there is often an unofficial dominant theme heard in the sessions and hotel hallways. 

Previous topics along these lines have been social media and passive investing. This year the subject on people's minds was FINTECH.

FINTECH as a term refers to the fusion of technology and finance to deliver financial services efficiently and often directly to consumers. This concept goes way beyond its earliest iteration, the ATM, and is expected to disrupt many of the established paradigms of banking, investing and financial services.

When evaluating the FINTECH trend, I once again drew upon the experience of parenting a millennial. While my daughter's financial habits are recognizable to me as a dad, the way she actually interacts with money is quite different.  

She doesn’t like physical cash, even when she hits me up for money — yes, she still does this — she prefers me to “Venmo” it to her using an app on my phone. Even my preferred app to send her money, PayPal, is too slow in her mind and no longer preferred — sorry, I guess I’ll just have to adjust.

I also notice that she more often pays for things with her phone than she does with actual debit cards or cash. I will sometimes use Apple Pay when I remember I have it, but she actually looks to her phone as a payment mechanism before she reaches to her wallet.

She also uses an online bank, and will open accounts and transfer her savings account to other online banks for even slight increases on the rates they pay on her savings. I, on the other hand, have had the same “brick and mortar” banks here in the Region for nearly 30 years.

With these observations I can clearly see disruption occurring, but my other observation, that every service I’ve mentioned thus far is free, is something I’m still pondering. In order for a disruption to survive and evolve it needs to be profitable, and thus far I still haven’t figured out how to make a profit on free. 

Where I start to see a limit to the FINTECH disruption is with the more sophisticated financial services. Sure, making an extra one-eighth percent on your savings account is nice, but when an actual loan officer is needed to help fund a business venture or just give advice on a banking topic, how is an online bank going to meet that need? More sophisticated banking needs are still founded on relationships, not websites.

In the realm of investing and financial planning, the FINTECH disruptor is called the roboadvisor. I’ve played around with some of these roboadvisor websites, and they are admittedly cool. But can they help make investors make less emotional decisions during financial market corrections, or actually create a road map for funding a retirement? Not even close.

So I may be an old fuddy duddy, but thus far I think the disruptive power of FINTECH is a bit overstated. Instead of replacing human-delivered financial services, I see this trend changing many lower-level type transactions and becoming more of a tool to be used by human advisors for more sophisticated financial services such as investing and commercial lending. We will see.

Opinions are solely the writer's. Marc Ruiz is a wealth adviser with Oak Partners and a registered representative of Sll investments, member FINRA/SIPC. Oak Partners and Sll are separate companies. Contact Marc at marc.ruiz@oakpartners.com.

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