Understanding Fintech and its Expanding Horizons
Technology has always played a key role in the financial sector. Coming from the combination of the words “financial technology,” Fintech is a term used to describe new technology that seeks to improve and automate the delivery and use of financial services. In a broad view, the term “financial technology” is a catch-all term referring to software, mobile applications, and other technologies created to improve and automate traditional forms of finance for businesses and consumers alike.
Fintech Companies
“Fintech companies” are firms that use technology to modify, enhance, or automate financial services for their businesses or consumers, while competing with traditional financial methods in the delivery of financial services.
Fintech-companies, businesses, and consumers utilize financial technology to better manage their financial operations, processes, and lives through the use of specialized software and algorithms that are used on computers and digital platforms.
Evolution of Fintech 1. Beginning with infrastructure
The period between 1886-1967 can be identified as an era when the avenue of financial globalization was first idealized. Starting with technologies such as the telegraph as well as railroads and steamships, the innovations of that time allowed for the first time rapid transmission of financial information across borders. The key events on this timeline also includes the world’s first transatlantic cable (1866) and Fedwire in the USA (1918), the first electronic fund transfer system, which relied on now-archaic technologies such as the telegraph and Morse code. Credit cards came to light in the 1950s bringing ease the burden of carrying cash.
2. Towards digitalization
After the 1960’s towards the early 2000’s, Fintech marked the approach to a modern period by its shift from analog to digital predominantly led by traditional financial institutions.
The period marked the launch of the first handheld calculator, the first ATM, world’s 1st digital stock exchange, which marks the beginning of how the financial markets operate today. In 1973, SWIFT (Society for Worldwide Interbank Financial Telecommunications) was established and to the present day is the first and the most commonly used communication protocol between financial institutions facilitating the large volume of cross border payments.
With the rise of internet and e-commerce business models,banks in the world began to use computers, leading to ‘Online banking’ to flourish in the 1990’s. Online banking was observed bringing a major shift in how people perceived money and their relationship with financial institutions.
The world being introduced to online banking, which flourished in the 1990s with the Internet and e-commerce business models.
By the beginning of the 21st century, banks’ internal processes, interactions with outsiders and retail customers had become fully digitized. But this era ended with the Global Financial Crisis in 2008.
3. About start-ups
A startup or start-up is a company or project undertaken by an entrepreneur to seek, develop, and validate a scalable business model. With the Global Financial Crisis leaving many financial professionals out of work, the era marked the emergence of new players, particularly fintech startups, alongside the already existing ones (banks).
An important factor that shaped these smart ups and thereby the entire Fintech industry is the mass-market infiltration of smartphones that enabled internet access for millions of people across the globe.
Smartphones today have also become the primary means by which people access the internet to use different financial services.
In today’s world digital banking, with improvements in fintech technology is now primarily focused on consumer behavior and how they access the internet in the developing world.
4. A trend towards ‘disruptive technology’
Disruptive technology, in business, refers to an innovation that has the potential to replace existing technologies and systems.
Such technology can drastically change market behavior, operations, and social or economic norms, which is why they are disruptive. Smartphones for example can be identified as a disruptive technology.
In the Fintech industry Blockchain technologies and open banking can be seen in continuing to drive the innovation of the future of financial services. Neobanks are gamechangers here. Neobanks, sometimes referred to as “challenger banks,” are fintech firms that offer apps, software and other technologies to streamline mobile and online banking. These fintechs generally specialize in particular financial products, like checking and savings accounts. These firms are challenging the pricing and complexity of traditional banks, while earning customers’ trust through simplified, digital-only experiences and low-to-no fees.
Further, adding to the trend of disruptive technology are avenues such as,
■ Machine Learning, which is transforming the way people interact with banks and insurance companies, receiving bespoke offers, support along with security applications.
■ A new wave of integrated payment providers, with platforms that can offer payments as an additional strand to an already comprehensive business management system.
And lately,
3.Mainstream use cases for NFTS- “NFT” stands for nonfungible token. An NFT is a unique non-fungible digital asset/token that cannot be directly replaced by another digital asset.