30/04/2021 7.49

How to Navigate as a Consumer in the Modern Financial World

It’s no surprise that the recent fallout from the COVID-19 Pandemic drastically transformed our reliance on technology. While most of us might know the most significant changes, unprecedented growth has come in the digital marketplace.

More than ever, consumers are searching for loans online but finding all the information you need can be challenging. There is a lot to consider as a consumer in the modern financial world.

Finance Terms Every Consumer Should Know

One of the hurdles of navigating the financial world as a consumer is understanding finance terminology. Let's cover a few essentials.

What Is FinTech?

The word ‘fintech’ means financial technology. Financial forecasting, investment monitoring, and online banking are a few examples of financial technology.

Fintech provides tools that make financial plans more adaptable. With insight into trends and other analytical data, you can watch in real-time how your finances are changing.

Digital innovations are more important than ever. Access to digital finance technologies was once an advantage, but now it’s the standard. Accounting apps and digital transactions are commonplace. Consumers and SMEs need to navigate emerging essential technologies.

With an increasing dependence on online systems, there’s a need for increased security. There’s no avoiding fintech, but trusting the companies you connect with is crucial when giving them access to your money. Institutions and nations are constantly updating regulations.

What is Open Banking?

Open Banking includes any banking system with an entirely digital infrastructure. The movement away from physical buildings developed thanks to advancing financial technology. A well-known example would be Pay-Pal. Users can facilitate transactions with big companies like Amazon, SMEs, or even person-to-person.

What are SMEs?

SMEs are small and medium enterprises with fewer than 250 employees. In 2018 there were 25 million SMEs in the European Union (EU), with a majority categorized as micro-sized or fewer than nine employees. SMEs employed 70% of the workforce in the European Union.

The Future of Business Survey, conducted through Facebook For Good with partners OECD and the World Bank, found that economies worldwide experienced SME closure rates between 20-40% in May 2020. Online stores and digital payment options have made it easier for SMEs to reach their customers without compromising safety.

Many of these innovations are here to stay. Companies have shifted from owning brick-and-mortar storefronts and adapted to grab-and-go or other delivery methods. Businesses that allow customers to interact digitally have increased sales. European eCommerce markets are experiencing an annual growth rate of 5.16 percent.

What Is Solvency?

Solvency, in finance terms, refers to assets that do not exceed liabilities. In other words, you haven’t over-extended your financial responsibilities. Responsible investment means never spending more than you can afford.

That doesn’t mean you can’t take risks, but you can take informed risks and a plan to create a soft ground to fall back on. As a consumer, finding a lender or financial plan that considers your solvency and your potential risks can impact your chance of success.

Consumer Rights

Finland’s official Legislation and Rights defines consumers as anyone who purchases goods or services. Sweden’s consumer affairs website describes consumer policies as protections that allow consumers more choices. In June 2014, the Consumer Rights Directive aligned consumer rights for all nations in the EU, giving all member nations the same fundamental rights. EU Consumer Rights:

  1. You have the right to truthful advertising.

  2. You have the right to the repair or replacement of faulty goods.

  3. You have the right to contracts without unfair clauses.

  4. You have the right to return most goods purchased online within 14 days.

  5. You have the right to access goods and services on the same terms as loyal customers.

  6. You have the right to free assistance from European Consumer Centres (for traders based in the EU/EEA).

The crucial takeaway is that a consumer has the right to informed purchasing and products that function as explicitly promised. While you can’t buy an apple and demand a refund when it doesn’t taste like a pineapple, you can expect it to taste like an apple.

Consumers have a right to be treated equally. There should be no restrictions in place that disqualify you from enjoying the same services as other consumers. That doesn’t prevent companies from offering you discounts or deals. Incentive consumer programs can have qualifiers, but the qualifiers must be accessible to everyone.

Consumer Lending

Consumer lending describes loans for individuals for personal use and the consumption of goods and services. Vehicles, electronics, education, and debt are examples of consumer lending.

Common Types of Consumer Lending

Here are the most common personal loans for consumers.

Mortgage Loans

Mortgage loans tend to have lower interest rates over more extended periods. Lenders assess your creditworthiness, including your solvency and the value of the intended property, before agreeing to a loan. You can obtain a mortgage loan from any lender based in an EU country. However, finding an institution based in the same county as the property usually gives the consumer the most generous financial benefit.

Student Loans

Financial support for students comes in many forms, including scholarships and grants. Depending on the country and educational institution, there might be more financial need. Finding flexible repayment models on loan applications can be challenging but are often the signs of a loan with lower risk.

Credit Loans

While the EU offers certain protections to consumers for credit loans, a consumer should compare other offers before buying a product on credit. For a reliable overview of terms and conditions, you can request a Standard European Consumer Credit Information form from any credit provider.

Expanding Markets

While economies worldwide are heralding new financial services, understanding how initiatives expand the market can benefit consumers.

With the evolution of digital infrastructure, countries are creating programs for increased activity in the financial market. In 2018 the European Commission acknowledged that the rapid pace of digital innovation required a FinTech action plan. Their action plan aimed to support innovative business models, stimulate new financial technologies and improve cybersecurity.

Cybersecurity has been a vital discussion topic in recent years. The New EU Cybersecurity Strategy presented at the end of 2020 was commissioned to create a more resilient system. While the digital finance world has risks, new strategies are in development to protect consumers, SMEs, and the companies we all commonly encounter.