If there’s one thing you can be sure of in the world of finance, it is change. As money flows through the economy, finance and technology are continually evolving to meet changing consumer expectations. Freedom Financial takes a look at some of the most recent financial trends, exploring what these trends could mean for consumers and businesses.
Job growth, consumer confidence, and inflation
August saw a slower growth rate than previous months, but fortunately the slower trend hasn’t dampened overall consumer confidence, according to Freedom Financial. Employers added fewer jobs this past August than in previous years, which indicates a slight ease in the hiring trend. The unemployment rate rose to 4.4% while the labor force participation rate, which measures the number of people who are working or actively seeking work, remained at 62.9%.
Digging deeper into the growth rates of a few specific industries, construction and professional business services both saw strong gains in hiring. ISM manufacturing employment in particular reached a six-year high. Not all industries saw such favorable gains. The retail and leisure & hospitality industries saw weaker job growth in August.
Consumer confidence rose 2.9 points, despite the slowdown in the job market. Consumers are optimistic about wages, expecting income to increase in the next six months. Personal income rose 0.4% after remaining flat in June. Spending in July rose 0.3%, which was slightly less than what markets expected, but still higher than June’s growth.
Inflation has remained low, which benefits real income and spending gains, but is an unwelcome stat for the Fed, as it impacts the Fed’s decision to raise rates.
Decreases in saving, increases in borrowing
The financial crisis of 2008 is almost a decade old, but after reviewing statistics on consumer ability to save, Freedom Financial reports that many consumers still haven’t fully recovered.
In a survey of household financial well-being, the Federal Reserve sought to find out how many households could come up with $400 to cover an emergency. While 53% of households said they could come up with the funds, 14% stated they wouldn’t be able to cover the cost and another 10% suggested they would have to sell something to come up with the funds.
When families can afford to save, exactly what they save for varies depending on household income. Of families who can afford to save, those with household incomes under $40,000 are saving for an emergency while those with incomes over $100,000 are saving for retirement. Households with higher incomes are likely able to focus on longer-term needs once their short-term savings goals are met, suggests Freedom Financial.
The amount of outstanding debt continues to grow, with U.S. consumers holding $3.9 trillion in debt, according to statistics from the Federal Reserve and U.S. Census Bureau. Of that, $818 billion is credit card debt. Over 38% of households have credit card debt. The average household carries close to $11,000 in credit card debt. Freedom Financial recommends families pay more than the minimum on their credit cards each month if they want to pay off the debt more quickly and minimize the amount of interest they pay on the balance.
Fintech trends are changing traditional banking
Millennials and their aversion for the brick-and-mortar bank are changing the way people make purchases and send money to each other. This has led to the success of many fintech startups and changes in traditional banking institutions. Freedom Financial suspects the days of walking into a bank branch will soon be a thing of the past, thanks to developments in digital technology.
Here are a few fintech trends to watch out for:
Mobile payments. Gone are the days of having to carry a wallet to make purchases. With mobile payment technology like Apple Pay and Samsung Pay, you can make payments at the terminal using only your smartphone or smartwatch. Just add your credit or debit card to your phone’s payment app before you go shopping, then you can complete transactions by holding your phone near the terminal. The latest smartphone models all have the capability have to make mobile payments.
Money transfer apps. Transferring money from person to person has traditionally been time-consuming and cumbersome, particularly when the two of you don’t bank with the same financial institution. While many banks have smartphone apps with a variety of banking capabilities, it’s still largely impossible to transfer money from bank to bank without having to wait a business day or three.
Apps like Square Cash, Paypal, and Venmo make it easier to make these “P2P transfers”, sometimes with funds showing up in the recipient’s bank account the very same day. This quick transfer makes it much easier to repay friends for picking up the bar tab or covering the last week’s concert tickets. Banks are working to catch up with the launch of Zelle, an app that will work with traditional banks and credit unions.
Messenger-based payments. Some social media messenger apps, like Facebook and Snapchat, already give users the ability to pay through the app by simply typing an amount and funding the transaction from a bank account. Native smartphone apps will likely add the feature in the very near future. Eventually banks will also give customers the ability to complete transactions through a chatbot or messenger app.
Personal finance management. Consumers no longer have to rely on banks for their personal finance information. Using a platform like Mint or Personal Capital can give you insight into your spending habits and help you understand how you can make better financial decisions. By linking your debit card or checking account to the service, you can categorize your transaction data and gain insights into your spending without having to be upsold by a banker.
Digital currency. While consumers aren’t jumping at the opportunity to take advantage of the digital currency Bitcoin, it’s certain something banks should watch as it continues to gain traction. Bitcoin’s price has hit close to all-time highs twice this year, and other digital currencies are seeing price increases as well. Expecting the price increases to continue, many consumers are including Bitcoin in their investment strategies.