Story of Fintech

Moving from the barter system to physical coins and notes to bitcoin, the history of the financial system will give us a brief idea about the evolution of the word ‘finance.’

Fintech 1.0 was about the infrastructure (1886–1967)

This period was the first phase when we saw the implementation of financial globalization. The emergence of new technologies, such as the telegraph, even as transportation systems improved with railroads and steamships. It, for the first time, allowed rapid transportation of financial information across borders. The era also saw the first transatlantic cable in 1866. Fedwire in the US was the first electronic fund transfer system in the year 1918; it was developed with technologies like the telegraph and Morse Code.

The year 1950 saw credit cards coming to the forefront to ease the burden of carrying cash, introduced by Diner’s Club. American Express introduced its credit card in 1958.

Fintech 2.0 was about banks (1967–2008)

This period marked the shift from analog to digital and was led by traditional financial institutions. We saw the emergence of the first handheld calculator and the first ATM installed by the Barclays bank in 1967, and it was the first beginning of modern-day fintech in 1967. Various significant trends took shape in the early 1970s, such as the establishment of NASDAQ, the world’s first digital stock exchange. In 1973, the Society For Worldwide Interbank Financial Telecommunications (SWIFT) was established, and to this day, it’s the most commonly used communication protocol used by financial institutions to improve cross-border transactions.

The 1980s saw the rise of bank mainframe computers, where the world was introduced to online banking that flourished in the 1990s with Internet and e-commerce business models. By the beginning of the 21st century, a bank’s internal processes, interactions with outsiders, and many retail customers became fully digitized. In 2008, we saw a global financial slowdown leading to recession.

Fintech 3.0 is more about start-ups from 2008 to present

The global financial crisis soon led the general public to develop a complete distrust toward the traditional banking system. Consumers led the shift in financial businesses from traditional-based services to digital-based services. Fintech 3.0 saw the emergence of new players alongside the existing ones, such as banks. In 2009, we saw the first release of Bitcoin of v0.1, which led to a major impact on the financial world, and then within a few years, we saw the bitcoin boom.

Mobile phones have led the combined effect in improved fintech penetration. In 2011, we saw the introduction of Google Wallet, followed by Apple Pay in 2014. Mobile phones have changed the way consumers deal with banking systems. Developing economies such as China and India are leading in fintech development with 69% and 52% growth rate, respectively. Most developed economies had a stable traditional economic system, so breaking into their set system was a challenge, while developing economies were hungry for a banking solution. The average global adoption rate for fintech is 33% while the adoption for the emerging marketers is 46%.

What is fintech?

Fintech aka financial technology is used to describe new technology to improve and automate the delivery and use of financial services. Fintech is utilized to assist individuals and businesses to better manage various financial operations, processes, and lives of consumers by using specialized software and algorithms that are used by computers and smartphones. Fintech led the development of modern-day currency technology, which includes bitcoin and various lending technology.

Fintech now depends on different sectors and industries, including education, retail banking, fundraising, and non-profit and investment management. Fintech ecosystem is improving the traditional banking service by providing a better and synched environment. Fintech makes banking reach millions of people without the need for traditional banking services.

Fintech emerged in the 21st century; the term was initially more inclusive of the technology that is employed at the back end systems for established financial institutions. However, now we see the shift toward more of the consumer-oriented services.

The tools provided by fintech are changing the way many consumers track, manage, and use their finances. According to the Prosper Marketplace Financial Wellness Survey from 2016, people are currently using between one and three applications to manage their finances. The companies are currently bullish for the investment, and according to CNBC, fintech investment soared up 18% in 2017 alone.

It’s estimated that around 2 billion people worldwide are currently without bank accounts; hence fintech provides an opportunity for the businesses to gain both on revenue and needs. Fintech gives a developed solution to consumers with direct access to their financial lives through easy-to-use technology.

Understanding fintech

Financial technology can apply to any innovation that deals with how people transact with any business. From the invention of digital money to double-entry bookkeeping, fintech has changed the world. Both mobile technology and the internet have been responsible for the growth of fintech, which has grown explosively. Fintech was originally applied to the back office of the banking or trading firms, with now describing the broad variety of technological interventions into personal and commercial finance.

A process without any assistance from a personnel gives a complete view of the fintech. According to EY’s 2017 Fintech Adoption Index, one-third of consumers utilize at least two or more fintech services, and those consumers are increasingly aware of fintech as part of their daily lives.

Key takeaways of fintech

1. Fintech offers better integration of technology with offerings for the financial services businesses with improving the use and delivery to consumers.

2. The fintech provides new services and creates new markets for businesses, with the expansion in financial inclusion and using tech to cut down on operational costs.

3. Fintech funding is on the rise but currently is marred by technology.

The fintech startups share the same characteristic: they are designed to be a threat to, challenge, and eventually provide relatable financial services to providers by being nimble, serving an underserved segment, or providing faster and better service.

Let’s give you an example—of a short term loan provider collaborating with various etailers—where you can understand fintech with a better perspective. So any consumer logging on the retailer website will now have the option of paying via credit card or personal loan; however, with credit card would need a better credit score to deal with. With personal loan offering, it can solve major challenges of the need for credit.

The consumer has always faced various unpleasant factors when interacting with the banking systems, where fintech is now trying to bring automation and bringing answers to various banking challenges. For example, Upstart wants to make traditional lenders and fintech obsolete by using different data sets to determine creditworthiness. It includes employment history, education, and whether the borrower knows his credit score to decide to select whether to underwrite and how to price the loans.

Recent developments in fintech

Fintech has been an exciting solution not only for the consumers but even for the businesses. The sector’s overall growth rate has been impressive over the past five years. However, one challenge remains with cross border fund transfer—REGULATIONS.

A number of regions are joining the trend to create regulatory pipelines for the fintech. In order to accelerate innovation in their business sectors and turn themselves into international hubs regulation, regulatory pipelines are on the rise. An innovation point, support from the authorities, or concentration of knowledge are some of the factors that can make the country become the nerve center of a certain sector.

A report by Deloitte analyzed 44 key cities in the world fintech ecosystems based on the regulations. One of the key regulations that affected many European fintech businesses is GDPR. The data breaches need to be reported within 72 hours to all the consumers. Supervisory agencies are being appointed by businesses to improve security around sensitive user data.

The current leaders in fintech regulations are ASIC for Australia, the Financial Conduct Authority (FCA) in the UK, and the Bank of Italy. The inevitable commercial result of this, Regtech, is currently consuming about 5% of fintech venture capital investment.

The most worrying and decisive area for the regulatory concern, it has been suggested, are the new banks that can actually be better at security and prevent fraudulent behavior than their sedate, long-established peers and need for more intelligent analytics capabilities. To improve jurisdictions, countries like Australia have introduced CCR (Comprehensive Credit Reporting) with more to follow. Lenders, including fintech, will be obliged to follow AMARP due to diligence on clients with deep and rich data to mine in determining credit status.

The new role of the International Organization of Securities Commissions (IOSCO) in fintech regulations is now widely recognized. IOSCO has been combinational developed by the European Securities regulator, the SEC, and the China Securities Regulation commission, along with other major regulators coming together to provide a coordinated effort solution to the business. Already in 2018, following IOSCO report, the regulators around the world have agreed to develop Fintech Network to facilitate the sharing of the information, knowledge, and experience related to fintech among other IOSCO members as well as the other support networks for cross-border implications of Initial Coin Offering (ICO).

For the agreement on joint regulation, the case with state regulators in the US is working together and will eventually be the next step. The importance of organizations such as IOSCO and FSB can only increase, with international regulators will be pushing for the constructive use of fintech to internalize regulation and compliance.

Top 5 trends associated with fintech

All current economic indicators foretell that the new technology is all set to improve and automate the financial services; it’s all set to skyrocket and to exceed by $30 billion by 2020. The investment is expected to translate into more core value engagements to improved offerings from the financial institutions. Here are the top five trends in fintech we might see in 2020:

1. Robotic Process Automation (RPA)

RPA will continue to impact various financial institutions in 2020 that will assist them in being more efficient and effective. RPA will set the fintech ecosystem in place to meet federal and state compliance requirements. RPAs comparatively provide better solutions to perform tasks that humans can do and then automate or suggest improvements to processes. It includes various processes such as customer onboarding, verification, credit assessments, data analysis, security check, and compliance processes. Fintech is looking to reduce the administrative activities for the businesses completely.

2. Personalization with AI and big data

Personalization is a certain way to attract customers for any new product or service. When combined with Big Data and AI, we see the intelligence coming to the business to better process data, store, and drive insights from the data. Hyper-personalization has emerged as the new domain explored by fintech to attract customers requiring new innovative products. Fintech businesses are using customers’ behavior after analyzing both social and browsing history. AI facilitates the omnichannel integration of these insights to deliver more personalized one-to-one marketing experience for the customers when the information is most relevant and useful.

3. Blockchain

Blockchain is a decentralized system and distributed among many systems and is distributing the financial world because of its ease of no storage unit. Blockchain makes many things more efficient in the financial services industry.

Currently, fraud and identity theft cost the financial institutions billions of dollars annually, so with the blockchain experience, the shift would become easier. Investment in blockchain fintech is expected to reach $6,700 million by 2023 in the US. Financial institutions will use blockchains for many types of small contracts, trading shares, identity management, and digital payments.

4. Conversational interface

According to Gartner, by 2020, chatbots will be interacting with customers for the first few steps for 85% of banks and businesses. It will be eliminating human involvement when it comes to interchanges, productivity, and to improve speed. According to one of the reports, financial chatbots save up to four minutes on every interaction.

With the improved natural language processing and speech generation, customers of financial institutions can a more conversational interface to provide better service, with 24/7 service, and instant responses to inquiries. The conversational interface even offers easy and economic steps for organizations to implement customer feedback.

5. Mobile payment innovation

Mobile payment will be the place where more and more fintech businesses will be focusing on in the coming decade. Mobile payments technology became better over the last decade; consumers want the payments to be instant, visible, and free. Big things in fintech are leading the mobile payment industry to become inclusive. Mobile payment innovations might replace the current traditional wallets as global consumers are becoming less reliant on cash.

Alibaba, Google, Apple, and Tencent already have their payment platforms and continue to roll out new features such as biometric access control, including facial recognition and inducing fingerprint.

China has developed a digital payment system in parallel with other fintech businesses, which has hundreds of millions of users everyday. WeChat Pay and Alibaba’s Alipay are some of the prime examples in China, bringing about the fintech revolution. Alipay, an online and mobile payment platform, which is not even a bank, is now the world’s largest mobile payment platform.


Fintech is evolving in the space of application with an increased impact on mobile and connectivity. Businesses around the world are pursuing fintech to increase the inclusiveness of tech with the already set process of traditional banking; it’s a business opportunity and improved process for traditional banking. To know more about what is fintech and fintech trends, you can download our latest whitepapers on Fintech.