Fintech

Fintech, a combination of financial services and technology, is a new way of delivering financial
services to customers. The origin of the term can be traced back to 1990s when Citi group set up
the ‘Financial Services Technology Consortium’ to enable technological co-operations for the
financial services industry (Schueffel1, 2016).Originally designed to empower financial services
with new technologies to enhance the speed and connectivity for better customer experience,
fintech has seen dramatic shift in its evolution process with its present focus on building new
business opportunities. Although many people links fintech to the mobile based payment
process, the history of using technology to streamline and ease the banking process goes back to
fifties and sixties and continuously evolved thereafter from one form to another (Desai, 2015).
History and Background
In 1950s, fintech gave us the early credit cards enabling tourists travel across the world without
the burden of carrying cash. The next big innovation came in the form of automatic teller
machine [ ATM], which gave customers the freedom to withdraw cash anywhere without visiting
branch (Arner, n.d.). Between seventies and nineties, we witnessed the introduction electronic
trading account, electronic interbank payment followed by the big-bang, internet. The world-
wide popularity of internet revolutionized the banking and travel industry in the late twentieth
century thereby prompting a huge interest and investment for fast, convenient and secure
payment services. Finally, the invention of smartphone and huge development in network
infrastructure gave birth to a new type player in the market such as PayPal, apple pay who gave a
new direction to build an alternate payment mechanism traditionally been controlled by the large
banks.
Why it matters
However so far in this journey the need for extensive compliance was not realized until global
financial crisis that shook the banking industry in 2008. The bad lending practices and non-
compliance had a reforming effect on fintech necessitating the need for cost reduction,
establishing secure services and building customer trust. Moreover, the tightened compliance
process by the government and regulatory authorities on large banks post financial crisis gave the
industry the needed traction to come up with alternate and secure financial services and products.
As a result, fintech has been able to deliver variety of benefits both to consumer and business at a
cheaper rate due to increased competition and innovation.
Today’s fintech industry is not just an enhancement of banking process but rather a substitute for
the banking process. For example, in large part of Asia and Africa more than 50 percent of the
population are still unbanked and many individuals maintains their life-savings in the form of
cash. Fintech startups are providing solutions to these unbanked customers. M-Pesa in Kenya
launched in 2007 is one such successful story. In a similar fashion rather than approaching a
bank, new businesses are increasingly relying on crowdfunding through which funds can be
collected from people, completely unknown, from other corners of the world (Morse, 2017).
Modern customers want fast onboarding, instant loan approvals and rapid single click payment
options and all these solutions are provided by fintech (Mearian, 2019). According to Deloitte
the other influencing factors helping to flourish fintech business are ending monopolies of large
banks, meeting customer needs, optimizing workforce by means of technology and eagerness to
embrace the latest technology. (Peter Pearce and Wilson Zhang , 2017).Finally the trends of
using powerful smartphones and remain online for 24 hours gave fintech the confidence to use it
as a point of sales, services and information access-point.
Future strategies
Seeing the scope of fintech business many people have started to predict a gradual demise of
banks. Although it may not result in complete demise, but the reliance on fintech would certainly
take some key businesses which were traditionally considered a mainstay for the banks.
Hence banks have started showing interest into technologies and in last two decades many have
opened a dedicated IT or R&D division. Furthermore, they are also not hesitating to offer new
products and services to pick new revenue streams such as payment gateways or even-
ecommerce platforms. FinTech industry which used to be a disruptive force for banking are now
being continuously disrupted by the banks (Mearian, 2019). Both fintech and financial services
companies should be prepared to adopt to these changes. Moreover, they should also be open to
diversify the business. Hence each financial service institute must have its own fintech strategy
and vision as fintech is here to stay and will continue to change the business process (Raza,
2018).

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References
Arner, P. D. W., n.d. FinTech: Evolution and Regulation, Hongkong: University of hongkong.

Desai, F., 2015. The Evolution of Fintech. [Online]

Available at: https://www.forbes.com/sites/falgunidesai/2015/12/13/the-evolution-of-
fintech/#555a487b7175
[Accessed 21 January 2019].

Mearian, L., 2019. What is FinTech (and how has it evolved)?. [Online]
Available at: https://www.computerworld.com/article/3225515/financial-it/what-is-fintech-and-how-
has-it-evolved.html
[Accessed 24 Jan 2019].

Morse, M. L. T. a. J. N., 2017. FinTech—Origins and Prognosis. National Association of Certified Valuators
and Analysts.

Peter Pearce and Wilson Zhang , 2017. Beyond fintech: Eight forces that are shifting. [Online]
Available at: https://www2.deloitte.com/global/en/pages/financial-services/articles/beyond-fintech-
pragmatic-assessment-disruptive-potential-financial-services.html
[Accessed 24 Jan 2019].

Raza, S., 2018. Fintech – The Evolution Of Modern Financial Technology In The 21st Century. [Online]
Available at: https://www.valuewalk.com/2018/03/fintech-evolution-financial-technology/
[Accessed 24 January 2019].

Schueffel1, P., 2016. Taming the Beast: A Scientific Definition of Fintech. Journal of Innovation
Management, 4(4), pp. 32-54.