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June 26, 2019

How Technology is Changing the Finance Sector



The emergence of numerous startups has been made possible by the wide variety of financing options that are available today. One great example is P2P lending, which has been made possible by technology. While this is just one example, technology has impacted the finance sector in many ways. It is no longer the same financial sector that people interacted with a few decades ago.



However, it is worth knowing that the impact is two-sided, which means that there are pros and cons. As a financial expert, you need to know the following.

Technology That Has Impacted the Finance Sector

  • Blockchain technology - The current hype in the financial world is the blockchain technology used in cryptocurrency. It has changed how financial transactions are managed. It is a secure method since transactions have to be approved by numerous servers and issues related to fraud are now rare. Other financial sectors are quickly adopting this technology.
  • Credit rating - Today, you will not get any loans or other financial help before the lender can understand your credit history. Credit rating is a result of numerous sources of information that are remitted by lenders and other financial institutions. So, your tradelines information, bill repayment history, and any other important information will be consolidated against your file to get a score.
  • Crowdfunding - It is becoming common for investors and successful companies to be brought together by various platforms to help others in achieving their financial goals. They can give loans that have no interest or inject money into businesses after making a certain agreement. Thanks to technology, there are now many platforms that facilitate this.
  • Peer-to-peer funding - Just like crowdfunding, various platforms are now connecting peers to help each other with loans online. Those who have been given money should share it so that others can also borrow.

Negative Impacts of Technology on the Finance Sector

Even with the above positive impact, there is also another side of this revolution. The rate of cybercrime has increased with the goal of stealing people's money. But how does this happen? Some criminals create websites that look legit to innocent users with a promise of helping them get financial help. They have to pay subscriptions fees, but they will never get any help.

But the most painful thing is when hackers get access to your online banking details and drain all of your money. If this has not happened to you, then you are lucky. It is very common in this era, but there are many ways to protect yourself from such unfortunate things.

The other challenge with technology is the temptation to borrow money that you do not need. For instance, most P2P lending platforms are not thorough enough to know who is in need of money and who is not. It is possible to lie and secure a loan that you do not need in the first place. This will leave you struggling to repay it. Many young people have fallen into this trap.

Conclusion

Technology has significantly impacted the finance sector. But if you look at it closely, the pros outnumber the cons, which is why it is a good thing. People should take advantage of this to achieve their dreams of starting businesses and leading a better life.


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