Student Loans have helped millions of people in the United States achieve a college education (including many of us at SDI), especially since 2006. As of the end of 2016, over 43 million people have student loans. But there is of course, a significant downside to Student Loans: debt. Often, massive untenable debt.

If you take those 43 million Americans with student loans, they also have an average of $30,000 in debt. Overall, Student Loan debt (as of 2016) accounted for a grand total of 1.4 trillion dollars, or roughly 7.5% of the national GDP. This massive debt is not only burdensome to the holders, but represents a danger to the American economy, as it reduces the amount people can invest in the market.

But we live in a world of exceptionally clever people, people who are willing to tackle problems head on. Even better, the modern tools of tech help us fight problems with industries like Financial Services better than ever before. The perfect example of this is the Finances Services Startup, Social Finance Inc (more commonly known as SoFi).

SoFi has made some pretty big waves in the world of student loans and, more recently, the financial services industry overall. They recently raised another half billion in funding, placing their overall value at $4.3 billion – well above the “Unicorn” mark. While SoFi itself isn’t based off a tech platform in the way that SnapChat is; but recently they acquired Zenbanx, which is absolutely an online financial services platform.

While SoFi is clearly changing the game, it got our developers thinking – what else can tech do to disrupt the financial services industry? There’s clearly a market for this; after all SoFi went from a startup to a company worth over $4 billion in about 5 years. Zenbanx was itself was bought for about $100 million.

Plus, you don’t have to stop with Student Loans (SoFi certainly hasn’t); we’re living in banner times for the financial services, with the stock market higher than it has ever been. Right now, most casual investors are leery, waiting to see how it all pans out. But soon, ordinary Americans will again be drawn to the stock market and investing in general.

Hence, we have a problem (old models of financial services), and we have an opportunity (the rise of Stocks and Investing). Let’s take a look at some ways that tech can help provide a solution – and how a clever entrepreneur may take advantage.

Risk Management and Investment

Artificial Intelligence is capable of collecting, analyzing, and reporting upon untold gigabytes of data. More than that, AI learns and improves from every interaction with data (as we all wish we could!). This means it can learn to identify better metrics, better tests. But most importantly, AI is capable of running thousands of statistical models simultaneously, with slightly different variables.

In the realm of Financial Services, AI can help judge the health of an investment opportunity. It can tell a trader how risky an investment is and can even determine the level of investment a trader should make to get the biggest bang for their buck. AI can even run those models to predict the future health of an investment – using more variables than you can even imagine.

This idea isn’t anything new in the world of Finances – in fact exceptionally smart people get paid millions and millions of dollars to do just this. This position was recently immortalized by the hit show This Is Us, where one of the main characters uses weather prediction to judge agricultural yields. However, as smart as those people are, they aren’t an AI.

Security

Financial services also encompasses revolutionary ways of payment. We’ve already seen this some of these changes in the last few days (some of us are still old enough to remember what cash feels like). Today, most US Americans probably use a debit card more than anything and we all know that there were some growing pains there.

Tech really stepped up to the plate, with increased security – though admittedly that chip is a damned nuisance. That being said, Debit cards are on their way out. Android Pay, Apple Pay, Venmo, Square Cash – these are the payment methods of the future. Already, many retail locations, such as Starbucks, accept some sort of digital payment

They offer improved security through a process called tokenization (reach out to our developers to learn more about this) to help protect your money from hacked retailers. While some “Digital Wallets” can pose a security risk if a phone is lost or stolen, it’s generally a simple process to remove a devices security from any internet device.

Plus, a traditional wallet poses even more of a risk. A digital wallet means you can lock down all your credit cards with single click. With a wallet you have to cancel all your cards individually. You don’t even have to cancel your cards, always an annoying process.

Creating a better wallet isn’t the only way tech can make your money safer. The cloud, while often knocked, is actually quite a bit more secure than physical hardware. Not only does it prevent potential location-based hacks, but it’s easier to spot tampering (i.e. hackers) and to instantly update a cloud server’s security infrastructure. Don’t believe this? Visa and MasterCard are already on the cloud.

Tech can prove disruptive to this industry in more ways than the ones laid out in this post. There are dozens of ways that tech can help, including marketing and growth. Interested in starting your own Financial Services startup?

Then give us a call at 408.805.0495/408.621.8481 – or click to contact us!