A Brief History of Fintech
The global fintech market represents huge business in the current climate, having peaked at a value of $110.57 billion at the end of 2020. What’s more, this sector is set to be worth a staggering $698.48 billion by 2030, achieving a CAGR of 20.3% over the course of the next nine years. But what exactly does the term fintech refer to, and how has this innovative technology evolved over the course of its history? Here is a brief history of fintech :
A Brief History of Fintech
What is Fintech?
Fintech combines the words ‘financial’ and ‘technology’, while this innovative and fast-growing technology aims to enhance, streamline and automate the delivery of financial services across a broad range of applications.
It achieves such objectives through the deployment of algorithms and bespoke software, which increasingly incorporate artificial intelligence (AI), machine learning and similarly advanced concepts into products and services.
At its core, fintech has potential applications across both commercial and domestic settings, while it also has the potential to revolutionise banking across the globe.
Most importantly, it’s already helping to drive financial inclusion in developing economies, bridging the gap between financial services and Africa’s unbanked population of around 95 million people.
So, When Did it All Start?
According to most experts, the term ‘fintech’ first came into being after the 2008 financial crash, at which time larger financial institutions were compelled to obey more stringent regulations and space was created for innovative startups to enter the marketplace.
This also embodies fintech’s inherently disruptive nature, as it has since continued to reshape concepts such as commerce, digital payments, investment and asset management.
It’s now also impacting the historically tech-shy insurance industry, with AI a rapidly growing driver of risk-assessment and financial decision making in the digital age.
If we take the definition of fintech as referring to financial innovation, however, we see that the concept has actually been around much longer.
Certainly, the evolution of the ATM can be seen as an example of fintech, while the same can also be said for the shift from paper to digitisation that took place between the 1960s and the noughties.
The Three Ages of Fintech
If we accept that 2008 saw the official emergence of fintech, we can surmise that the history of this technology can be told in three distinct stages.
The first of these is competition, when innovative startups first emerged in the wake of the financial crash and began to target low-entry, underserved segments with their cutting-edge technology.
As numerous firms rushed to market, the idea was that each one could take a small slice of the lucrative financial marketplace, creating huge market disruption and combining to do battle with traditional banks and institutional lenders.
The fallout bled into a second age of collaboration, which followed a period where some startups struggled to scale successfully and larger players began to realise the power of financial technology.
This saw a number of big and small players collaborate, paving the way for the third (and current) phase of cooperation.
This has not only followed regulatory headwinds from the East and the West, but also the rising influence of banking data and the shift of major players like Google, Amazon and Apple into the digital payments sector.
This has encouraged cooperation and a shift towards open banking solutions, where existing banks and fintech startups can share datasets securely while simultaneously leveraging digital wallets and technologies like AI to assist with fraud detection and credit risk assessments.
Founder Dinis Guarda
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