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From traditional banks to financial consulting companies – the evolution of the financial sector

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Although the financial market mostly evolved with the industrialization, the history of banking existed at the age of empires

Old civilizations such as the Greeks and Egyptians had temples that were seen as the financial centers of cities and used to lend money and protect it. Rich merchants were the first lenders with interest, and they handled smaller loans while temples were responsible for the bigger loans. However, the first real bank, separated from the temples, appeared with the Romans.

It is only around 1990, that a stable banking system appeared following the Asian financial crisis and nowadays the financial sectors play a crucial role in the modern economic world. It participates to the country’s economic growth by providing new capital.

In Switzerland, the banking and financial sectors are among the main sectors of activity

With a GDP of 9.4%, the banking industry represents an important sector of activity in Switzerland. According to the bank statistics of the Federal Statistical Office, from a total of 246 banks, 229 generated a profit of CHF 10.3 billion in 2017.

With more than 220,000 employees in 2019, the financial sector continues to generate significant value-added in the overall Swiss economy.

Traditional banks, insurances and financial consulting companies play important roles in the financial industry

The financial industry is not only composed of traditional banks but also of insurances and financial consulting companies such as MultiCredit. The existence of insurances is crucial for the financial stability of the companies and households.

The advantage of the services consulting firms offer are mainly in the customer support from his need for financing to the realization of his project. The financial expert has an in-depth knowledge of the entire financial system and can therefore offer a tailor-made advice at the best market conditions. Consulting firms can be seen as the intermediaries between the banks or financing companies and individuals looking for the best financial solution: credits, loan refinancing, debt consolidations

There are multiple financing solutions such as personal loans, real estate loans and even car loans

Thanks to the evolution of the financial sector, its services and solutions have also diversified. It is not always easy to target the type of funding that is needed. This is where financial consulting plays a big role. Financial consultants will not only propose the best solutions but also will make the application process faster and easier. The repayment modalities that a financial consulting company offers are flexible in opposite to traditional banks. The bargaining power that a client has towards his bank is rather low whereas with a financing consulting company, it is possible to choose among several offers from different banks and financial institutions.

With MultiCredit, for example, it is possible to choose between fixed or flexible rates. The first option provides security and is simple to follow and understand. The monthly amount is defined and has to be paid until the whole loan is repaid. In opposite, flexible rates are adapted to the current situation of the client. This is very helpful if a client is expecting a large cash inflow and wants to pay a part of the loan off schedule.

Before determining the type of interest rate, it is important to select the most suitable type of credit

Among the credits, we find Personal loans that are used for all types of projects: to start a new business, to invest in your career, to face an emergency, for occasions or even a travel. The advantages of such loans are mainly in the low interest rates and other favorable conditions such as zero fees.

Then, there are more specific solutions that correspond to a project in particular. A concrete example would be the home/renovation loan, this solution offers a faster and simpler solution than a mortgage with the best interest rates on the markets.

Even though leasing is a common financing method, auto financing also called car loans are alternatives proposed by the MultiCredit experts. This can be explained by their rapidity, relevant advice, and the few restrictive conditions. Another solution for a particular lifetime project is the student loan that can respond to important unavoidable costs.

To face emergencies, one can take out a personal loan. However, some emergencies are very specific such as the need of a medical treatment. In this case, an advisor would rather recommend a medical loan to provide the most adapted conditions.

Many Swiss households have taken out a loan or have chosen an external financing solution

In Switzerland, loans, leasing, and credit cards allow an important percentage of the expenses. The Federal Statistical Office published an overview of the Swiss household debts in 2019 which indicates that 56% of the population has a loan, a leasing contract or unpaid credit card bills. The majority have leasing contracts for cars. The personal loans has a great importance also, since 9 % of the population are concerned.

With all these debts, having a financial advisor by your side makes sense because he will analyze the client’s situation in detail and propose a loan refinancing that consists of the refinancing of existing loans or leases, or a debt consolidation that offers advantages in terms of amount but also interest rates and other conditions. This last option is the perfect way to optimize the budget and to save up to 40% of the monthly payments and current loans.

Beside the expansion of the services and offers in the financial sector, today the innovation of the technology is shaking up the whole industry

Traditional financial services are little by little being replaced by what we call ‘’Financial technology’’ or more commonly ‘’Fintech’’. The innovation of the technology leads to the apparition of algorithms, software and applications that financial companies use to facilitate the demanding processes and the customer management. The first traces of Fintech appeared already in 1860 with the signature technologies but it is only in the last decade that it started to impact important traditional banks. These technological advantages transform processes that required weeks and months such as the demand for a credit score report.

Since the Pandemic, digital platforms become a very practical solution to process in different fields. This also concerns the financial industry. More and more companies or banking customers are seeking financial solutions through fintech. Therefore, the field grows rapidly and will certainly impact the future of the economic landscape.

Author : Arij Kamel, marketing trainee at MultiCredit, Fribourg

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