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 (2008-2014) 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 3.5 (2014-2017) is about globalisation
Fintech 3.5 signals a move away from the western
dominated financial world and contemplates the expansion
in digital banking around the globe.
It puts the focus on consumer behaviour and how
they access the internet in the developing world. For
example, in China and India, markets that never had time to
develop Western levels of physical banking infrastructure
and so were open to new solutions more quickly.
This era is marked by an increasing number of new
entrants and their last mover advantages.
Fintech 4.0 (2018-today) is about disruptive technologies
Blockchain technologies and open banking are continuing
to drive the innovation of the future of financial services.
The game changers here are neobanks that challenge the
pricing and complexity of traditional banks, while earning
customers’ trust through simplified, digital-only experiences
and low-to-no fees.
Machine Learning, on its part, is transforming the way
people interact with banks and insurance companies,
receiving bespoke offers and support. Germany’s N26, for
example, relaunched its premium account in 2019 to cater to
the specific needs and tastes of its subscribers, such as
discounts in coworking spaces and in online travel booking
sites.
ML also has security applications: British Revolut, for
example, unveiled a new AI solution in 2018 to combat card
fraud and money laundering, developing deep insights and
predictions around customer behaviour to dynamically
identify new card fraud patterns without human intervention.
Another major event in this period is the 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, mainstream use cases for NFTs, like creators
strengthening their earning power with digital
representations of their contents, or artists ensuring royalty
distributions, or NFTs as tickets or membership cards.
Financial Services are Pretty Cost-Effective
Of course, you are well-versed with the fact that global payment services have proven as a
pure blessing for a plethora of communities. But what you may not know is that global
remittance is a costly venture and not every business has the potential to afford it.

Moreover, each time you transfer the money the processing fees automatically fluctuate.
Using Fintech services, businesses could save from charging these unnecessary fees.
There are a plethora of financial tools available. So, one no longer has to worry about any
cancellation fees or any other hidden charges, they can send or receive money across the
world instantly in different currencies through mobile devices.

Lastly, can anything think of integrating physical and digital payments? Well, now this is a
reality where multiple bank accounts are using a single interface. And you know what is the
best part? This fintech software is beneficial for consumers as well.

Atom is the best example I could think of as of now.

3.2 Compliance + Security = Fintech

Many of you might not agree that Fintech is highly safe in regards to security. Fintech is much
safer and more secure than traditional banks.
According to several sources, traditional financial services companies have lagged way
behind in regard to security. Unfortunately but that’s true! Now since Fintech’s fundamentals
include the effective use of tech, compliance and security won’t be such a problem.

3.3 Upgraded Payment Systems

After security comes the upgraded payment systems. We are living in a dog-eat-dog world,
if you want to raise a cut above using fintech software turns out to be a must-do thing. As a
result, nothing can stop your business from being effective. Which is possible only by using
upgraded payment systems. Also, this leads to enhanced business-client relations, and
increased ROI.

3.4 Speed and Convenience is Best for Companies as well as

Customers
Since we mentioned this earlier, offering instant results and taking care of your customers
has become a priority for every industry and fintech is no exception. Now it has become
possible to offer payments or lend money right away digitally in no time. For example, let us
assume that you want short-term loans or some money just for a day. We know you will
come across a wide range of potential businesses who would like to offer. These are the
ones making the most of the tech and maintaining the economy.

3.5 Say it Like You Mean It – Transparency

With the rise of Fintech in the traditional banking and financial services sector, the term
transparency is no longer just said. In fact, it is being meant and implemented by the
vendors. Several new benchmarks have been set by vendors all across the globe. Other
than just sending or receiving money everyone is kept in a tight loop featuring full
transparency. A win-win situation for the banking industry as well as their valued
customers.
Of course, you do get all the other perks such as 24/7 dedicated customer support, real-
time updates and tight security measures and whatnot!

4. How Fintech Is Beneficial For Economic Growth!

Till now, you must have realized the fact that how fintech innovations can make everything
around so easy and effective. On that note, a recent IMF report entitled The Promise of
Fintech: Financial Inclusion in the postCovid era reveals that those countries often have high
annual GDP growth and believes in investing in higher levels of digital financial inclusion

Fintech ecosystems are collections of organisations working

together to reach a common goal. In financial services, this usually
refers to the development and adoption of new technologies to
improve or disrupt the traditional banking sector. It can also mean
improving economic growth and social inclusion for more people
worldwide.
“Fintech ecosystems provide playgrounds for testing entirely new
ways of operating. The impact of one ecosystem - formed by
Provincial or Federal regulators, fintech and financial services
companies - can serve as a model for other jurisdictions to monitor
and emulate if successful,” said Raphael Bouskila, President &
CEO, Mako Financial Technologies.
here is also a second type of fintech ecosystem in the form of
machine to machine (MtM) ecosystems. MtM ecosystems consist of
computer networks that can connect through APIs or other digital
interfaces, which allows them to share data and services. “We are
in a unique time where the fintech ecosystem is blossoming,” added
Andrew Hoag, CEO of Teampay.
Types of Fintech Business Models
As the financial needs of the American population are evolving, the need for coming up
with innovative financial service business models is on the rise. As investors and
entrepreneurs strive to synthesize revolutionary ideas, the following list of leading fintech
business models may advise some direction.
1. Alternative Credit Score System
Anyone whose loan application has been declined knows the significance of maintaining
a healthy credit score.
However, the process that it requires isn’t often the easiest for everyone. Whether it’s a
late EMI payment or a short credit line, a wide range of factors can negatively impact
your credit score.
Which is why, an alternative credit scoring system can make one of the great financial
services for startups and individuals.
Many fintech companies are already analyzing social signals and percentile scoring
methods to rate their potential borrowers and decide suitable credit limits for them.
2. Smarter Insurance Plan Designs
In 2019, the overall valuation of the health insurances owned by 179 million Americans
(55% of the US population) accounted for $1,195 billion. This indicates that from
business owners to 9-5 employees, a large part of the American population is still relying
on insurance as a safety net for unexpected emergencies.
But, are the existing insurance plans efficient and just towards their users and the
insurance companies?
Considering the currently active insurance plans, two individuals who don’t smoke or
drink and have the same BMIs will probably be paying the same premium.
But what’s wrong with that?
The problem starts when one of the individuals works out regularly and has a healthy
lifestyle, while the other one spends most time lying around with a bag of chips and soda.
Certainly, the latter individual is making unhealthy lifestyle choices that may be a
problem for the insurance company. While, on the other hand, the first person is health-
conscious and still paying the same premium as someone who isn’t mindful about their
health.
This scenario is unjust for the insurance company and their users.
A solution for optimizing these flaws can be a great example of fintech business model
innovation.
3. P2P Lending
Here’s yet another solution to the low credit score problem.
P2P, a.k.a peer-to-peer lending, is the process when two individuals indulge in a lending
and borrowing transaction without the monetary involvement of any third party.
While this concept has long been popular inside our personal groups, present-day P2P
lending platforms (such as Funding Circle) take this to a new level by connecting
borrowers to potential lenders, ensuring a trustworthy transaction.
This makes borrowing easier for people with low credit scores. Also, in the fintech
lending business models, lenders get to earn decent interest on their money — a clear win
for all the parties.
4. Smaller Loans Sanctioning Services
In an age where data is valued like gold, the financial service business ideas can prove to
be one of the best fintech business models.
Most of the banks and major lenders avoid offering smaller loan amounts to their
borrowers. The primary reason being the low profits that are further diminished by high
processing and recovery costs.
However, several fintech businesses are cutting down the challenges for the small
borrowers, accelerating the change in fintech industries.
These lenders allow users to easily and quickly pay for the services they avail or the
products they buy online, in one click (after a one-time setup). As a result, the users are
saved from the effort of waiting for OTPs or recalling their CVVs at the point of
purchase.
This fintech payments business model makes the payment procedure super-easy. The
loans are sanctioned at low interest rate, so anything can be bought in one click and paid
for in multiple installments. And most importantly, the business enabling these
transactions gets access to the valuable user data (of course as and when permitted).
Speaking of how the money is made, the data accumulated in the process can be traded to
a number of businesses in your niche.
5. Asset Management Platforms
A recent Gallup study reports that 56% of the US population owns at least one stock and
a large chunk of this proportion invests actively in the stock market.
Additionally, as per a study published by NORC, a research group at the University of
Chicago report, in 2020 over 13% of the Americans started investing in cryptocurrencies,
and the number is set to grow further in the coming years.
Certainly, the digital asset industry is on the rise, and it’s the right time for entrepreneurs
to place their bets on this fintech business model category.
The simplest idea is to develop cryptocurrency exchange and promote it adequately
across the target audience.
How will this model make money?
Like all asset exchanges, your business can also charge brokerage for every trade that a
user executes. You can also offer users a referral commission for each referral user that
they bring on board.
There’s a world of assets that can be traded over a smartphone these days. Check them
out, explore your best bets and make a smart decision.

6. Payment Gateways
All the online transactions across eCommerce, food ordering, or other product/service
websites require payment gateways.
However, it costs companies heavily to set up and maintain these payment gateways. This
fee goes to banks, developers, and many other resources, making payment gateways an
expensive transaction option.
Fortunately, the issue can be resolved by integrating these transactions into apps that
online merchants can comfortably afford. Ideally, the user base of these apps will include
businesses selling their products or services through their own website.
7. Digital Banking Applications
Another fintech business plan brings the conventional brick and mortar banks to the
customers’ smartphones.
According to Statista, as of August 2021, there are 290 million smartphone users in the
USA.
Another report from the FDIC Survey of Household Use of Banking and Financial
Services, states that, as of 2019, 124 million American households had bank accounts
(accounting for 95% of the US population).
Clearly, banks and smartphones are destined to make a great match, and companies
leveraging their potential can do great in the fintech space.
Moving further, it’s important to note that your lack of expertise at application
development should not limit you from launching a fintech startup. Appinventiv is a
reliable financial software development company that can help you overcome this hurdle.