The financial services sector has been one of the biggest beneficiaries of rapid advances in technology. People have figured out a way to make payments quicker and more secure, which in turn has contributed to the growth of the online marketplace.
Over the last decade, we witnessed an unparalleled disruption of the lending market with peer-to-peer lending and crowdfunding platforms capturing the attention of the global businesses.
We have also witnessed similar revolutionary changes in the insurance sector, the banking sector, and in personal finance, where taxation and compliance is always an issue. Asset and wealth management has also experienced a paradigm shift with the emergence of Robo-advisors, copy-trading platforms, and intuitive analytics tools.
Futuristic technologies like AI and machine learning have already started to make significant changes in the investment space. Personal finance management platforms are also making significant improvements in retirement savings and payment of personal taxes.
The Case of Canada
Some of these platforms have intuitive savings and tax management tools that allow users to determine how much they can save on taxes while saving for their retirement. For ease of integration and application, less complex tax systems play a crucial role.
Canada, which was ranked top among the G7 economies by a PWC report published this year for ease of paying taxes, has one of the most efficient taxations systems in the world.
The North American economy ranks 19th as of this year from a total of 190 economies, the US is closest to it among the G7 raked 25, while the UK comes in at 27. This shows that, despite the G7 membership featuring some of the world’s most advanced economies, they are not necessarily the most efficient when it comes to payment of taxes. Simplicity makes it easier to create intuitive tools that can help smooth the tax payment process.
Increased innovation in Canada’s fintech sector has helped to boost tax compliance primarily because of a less complex tax system. For instance, one of the country’s most popular savings schemes is the Registered Retirement Savings Plan popularly abbreviated as RRSP.
Top financial services firms have invested in creating tools that can help investors to determine how much they can save via an RRSP. Some investment companies provide their clients with free access to these tools, which makes tax compliance in Canada even simpler. One of the most popular savings plan tools savings and tax calculators. Some platforms have taken note of this and now even provide a free RRSP calculator, which taxpayers can easily use to calculate how much they can put in their RRSP account and how much savings on taxes they can expect upon making a withdrawal.
An RRSP is a type of financial account in Canada that holds savings and investments. To max out your limit, it is important to calculate how much your account qualifies for based on your income and other savings plans that you hold. This shows just how technology can help to simplify some of the most complex and bureaucratic processes in the financial services sector.
Technological Advances Are Behind the Emergence of Alternative Lending Platforms
In the credit market, fintech has ushered in a new era of peer-to-peer lending. This has so far been one of the most disruptive forces in the industry with the likes of LendingClub heading a long list of alternative lending companies.
It has forced mainstream lending institutions like banks to reorganize their lending policies in order to remain in the game. In fact, some multinational banks have gone as far as launching their own fintech-driven banking platforms or acquired promising startups.
Crowdfunding appears to have slowed over the last couple of years after peaking in the mid-2010s. However, it is still one of the most chosen options by startups looking to launch a new product on the market. Ideally, after coming up with the perfect product idea, developers pitch it to potential investors and early buyers for pre-orders via crowdsourced platforms to receive funding.
In return, the crowd funders are rewarded with early access to the product or service at a discounted price. If the product proves to be disruptive enough to the initial backers, then it often exceeds the amount of funding sought well before the campaign period expires.
In summary, the finance industry is a common denominator in everything that we do. From shopping, payments, and transfer of funds across borders to credit, taxes, and investments, it all spells one word, finance. Therefore, it was inevitable that as technological advances helped to revolutionize other industries, finance was going to follow quickly.
And over the last decade, we have witnessed one of the most revolutionary changes in the finance sector, especially with the emergence of cryptocurrencies, which are powered by blockchain technology. The distributed ledger technology promises more disruption of the finance sector including credit, asset management, and payments.
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