Fintech (Financial technology )

Financial technology (abbreviated fintech or FinTech) is
the technology and innovation that aims to compete with traditional
financial methods in the delivery of financial services. It is an emerging
industry that uses technology to improve activities in finance. The use
of smartphones for mobile banking, investing, borrowing services,
and cryptocurrency are examples of technologies aiming to make
financial services more accessible to the general public. Financial
technology companies consist of both startups and established financial
institutions and technology companies trying to replace or enhance the
usage of financial services provided by existing financial companies. A
subset of fintech companies that focus on the insurance industry are
collectively known as insurtech or insuretech companies.
When fintech emerged in the 21st Century, the term was initially applied
to the technology employed at the back-end systems of
established financial institutions. Since then, however, there has been a
shift to more consumer-oriented services and therefore a more
consumer-oriented definition.Fintech also includes the development and
use of crypto-currencies such as bitcoin. While that segment of
fintech may see the most headlines, the big money still lies in the
traditional global banking industry and its multi-trillion-dollar market
capitalization.

Understanding Fintech
Broadly, the term "financial technology" can apply to any innovation in
how people transact business, from the invention of digital money to
double-entry bookkeeping. Since the internet revolution and the mobile
internet/smartphone revolution, however, financial technology has
grown explosively, and fintech, which originally referred to computer
technology applied to the back office of banks or trading firms, now
describes a broad variety of technological interventions into personal
and commercial finance.

Fintech now describes a variety of financial activities, such as money

transfers, depositing a check with your smartphone, bypassing a bank
branch to apply for credit, raising money for a business startup, or
managing your investments, generally without the assistance of a
person. According to EY's 2017 Fintech Adoption Index, one-third of
consumers utilize at least two or more fintech services and those
consumers are also increasingly aware of fintech as a part of their daily
lives.

Evaluation of Fintech
History of Fintech
Technology has always played a key role in the financial sector, so
from which point onwards can we talk about fintech? According to a
paper by Arneris, Barberis & Ross  the key periods in the timeline of
fintech are:

Following this table of eras, we can identify the key events of each
period.

Fintech 1.0 (1886-1967) is about infrastructure

This is an era when we can first start speaking about financial
globalization. It started with technologies such as the telegraph as
well as railroads and steamships that allowed for the first time rapid
transmission of financial information across borders. The key events
on this timeline include 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.
The 1950s brought us credit cards to ease the burden of carrying
cash. First, Diner’s Club introduced theirs in 1950, American Express
Company followed with their own credit card in 1958.
Fintech 2.0 (1967-2008) is about banks
This period marks the shift from analog to digital and is led by
traditional financial institutions. It was the launch of the first
handheld calculator and the first ATM installed by Barclays bank that
marked the beginning of the modern period of fintech in 1967.
There were various significant trends that took shape in the early
1970s, such as the establishment of NASDAQ ,  the world’s 1st digital
stock exchange, which marked the beginning of how the financial
markets operate today. In 1973, SWIFT (Society For Worldwide
Interbank Financial Telecommunications) was established and is to
this day the first and the most commonly used communication
protocol between financial institutions facilitating the large volume of
cross border payments.
The 1980s saw the rise of bank mainframe computers and the world
is introduced to online banking, which flourished in 1990s with the
Internet and e-commerce business models. Online banking brought
about a major shift in how people perceived money & their
relationship with financial institutions.
By the beginning of the 21st century, banks’ internal processes,
interactions with outsiders and retail customers had become fully
digitized. This era ends with the Global Financial Crisis in 2008.
Fintech 3.0 (2008-Current) is about start-ups
As the origins of the Global Financial Crisis that soon morphed into a
general economic crisis become more widely understood, the general
public developed a distrust of the traditional banking system. This
and the fact that many financial professionals were out of work, led to
a shift in mindset and paved a way to a new industry, Fintech 3.0. So,
this era is marked by the emergence of new players alongside the
already existing ones (such as banks).
The release of Bitcoin v0.1 in 2009 is another event that has had a
major impact on the financial world and was soon followed by
the boom of different cryptocurrencies (which, in turn, was followed
by the great crypto crash in 2018).
Another important factor that shaped the face of fintech is the mass-
market penetration of smartphones that has enabled internet access
for millions of people across the globe. Smartphone has also become
the primary means by which people access the internet and use
different financial services. 2011 saw the introduction of Google
Wallet, followed by Apple pay in 2014.

Fintech Today
As technology is becoming ever more central in the finance industry,
we tend to consider banks and fintech startups as opposing forces
fighting for their share of the market. The reality is that both sides
need each other just as much as they need to compete with each
other.
On the one hand, fintech startups have taken funding from banks and
often rely on banking, insurance, and back office partners to deliver
their core products. Banks, on the other hand, have acquired fintech
startups or invested in them to leverage new technology and ways of
thinking to upgrade their existing operations and offerings.

Hopefully, this retrospective look into the evolution of fintech will help
to sum up the long way we’ve come until today and put into
perspective the busy times ahead of us.

Evolution of Fintech In India

India has the highest FinTech adoption rate of 87%,

significantly higher than the global average rate of 64%.

India is rapidly evolving and is one of the fastest-growing Fintech

markets globally and has also emerged as Asia’s biggest destination for
Fintech deals, leaving behind China. Advanced technologies and a
customer-centric approach are what bring this thriving industry its
profound growth in this decade.
Having witnessed this flourishing industry and its achievements, let’s
look back on its evolution rather a revolution. So, gear up as this article
throws light on how the fintech industry has steadily evolved over the
years.

Factors that led to India’s immense FinTech growth

The quick adoption of new solutions and financial services made India, a
country with the highest fintech usage. The factors which drive India’s
fintech growth to the next level are listed below.

Painless Payments

Easy digital payment is the key player in the fintech ecosystem, gaining
trust and pulling many users in. Since its beginning, the merchants and
shoppers have enjoyed this and made it even popular during the
coronavirus outbreak. People were concerned about making a physical
payment for safety reasons and quickly adapted to these digital payment
modes in a jiffy. The demonetization drive in 2016 made every Indian
switch to digital payments and online transactions, which was a green
flag for fintech entrants at that time. People now make their digital cash
flow without any second thoughts as they feel secure and safe more than
handling physical cash.

Payment Wallets & UPI Apps

This is one of the services which transformed the way people carry cash.
Multiple digital payment apps like Google Pay, Apple Pay, Amazon Pay,
PhonePe, etc., are definitely a booster for ‘Cashless India’. Features like
easy transaction, secure, fast, multiple options benefit these payment
wallets to make waves in the Indian fintech industry. Moreover, Artificial
Intelligence (AI) and Big Data help users personalize their payments and
store multiple bank accounts in a single digital wallet.

Digital Lending & Insurance

FinTech is the cherry on the cake when it comes to market-based lending.

When already banks were doing their great job in lending and insurance,
fintech collaborated to make it even more feasible by giving enormous
options, online availability, customer-centric loans, and speedy approval
for businesses and customers.

Wise Finance Management

After the fintech boom, people witnessed many changes in the way they
handle their finances. As every Indian has started managing finances
digitally, it is easy to keep track of their expenses and make a calculative
move. Robo-guides or Robo- advisors also help in wise finance
management by providing automated, algorithm-driven financial
planning services.

Remittances

FinTech's eases the way banks were making international transfers for
decades. The remittance was considered an arduous task in the past,
involving high fees, tons of paperwork, no tracking of money, multiple
players, and a great deal of time. But now, fintech defines it as a flexible
real-time payment with transparent fees, end-to-end payment tracking,
multi-currency payments, and so on.

References
1. Wikipedia
2. https://www.investopedia.com/terms/f/fintech.asp
3. https://www.e-zigurat.com/innovation-school/blog/evolution-of-fintech/
4. https://medium.com/m2p-yap-fintech/evolution-of-the-indian-fintechverse-48b327faa7f1