“Technology is anything that wasn’t around when you were born” – Alan Kay
Financial Technology or Fintech is an industry that evolved for the spontaneity of financial activities with the help of the most powerful tool we have i.e. technology. The technology can be used for new software applications as well as processes and business models. In a short span of time the companies that use this technology have characterized the direction, outline and pace of change across almost every financial sector.
Fintech is a very vast field. With everything made so easy by just a click on an app, people have started to think about ways to even pay for their morning French toasts without having to swipe a card or use actual currency notes. Upon exploring the timeline of the fintech developments, the past years have showed newness and a chain of innovations.
If we travel back a little in our minds we can recall that 1950’s gave the world credit cards solving the problem of carrying large amounts of cash around.
1960’s saw the greatest invention in the form of ATM machines saving the need to go to bank branches.
In 1970’s electronic stock trading began on exchange trading floors.
1980’s saw the rise of mainframe computers and a more secure way to save and record data.
In 1990’s the internet wave surprised the world and e commerce models evolved. This paved the way for online stock brokerage.
These past few decades have created a fintech groundwork which most people don’t think about, but use daily. In a span of 50 years it can also be noticed that fintech were creating more complex risk managements, trade processing, treasury management and data analysis tool at the institutional level for banks and financial firms. These systems might not be obvious to the banking customers; they do make up a multibillion industry pointing at fulfilling the needs of the financial services sector.
What can amaze you is that in these 65 years of development, as the fintech technology became familiar and was adapted by banks and their clients, the banking sector did not suffer at all. In fact banks grew. If you look at the U.S’s FDIC data from 1950 to 2014, the bank branches grew from 18,000 to 82,000!
Today in the early phase of the 21st century, the financial services are being continuously computerized through mobile wallets, payment apps and even a robot giving you advice for wealth and managing your retirement plans. The services can also offer crowd funding platforms for the customers to approach private and alternative investment shots. These services are not helping the banking services but rather are replacing the services completely. So you can think of the fintech industry as two major sections. One, consumer facing and the other is institutional. It is the former that is posing a threat by scoring customers competing with the banks.
At this point of time, our country has created an ecosystem that caters start ups with an opportunity to expand into big businesses The Indian fintech software market is expected to reach USD 2.4 billion in the next three years from the current state of USD 1.2 billion. In the recent years the Indian economy, which is particularly driven by cash has taken an advantage of the fintech opportunity. With a variety of options available kike e wallets, the range of services are immense and have changed the way that customers deal with their day to day transactions. Fintech in India is beneficial because we boast in inimitable youth demographic which is constantly growing. Additionally the Smartphone business has grown from 53% in 2014 to almost 64% in 2018. The financial services in India are introductory with almost 40%population having no relations with the banks and 80% of the transactions carried out through cash. This creates an opportunity for fintech to spread its wings.
“If banks don’t provide their customers with a more relevant, more insightful experience, then someone else will”. – George Ludvikkson
With the rapid growth in the fintech industry, several people have questioned whether banks will be a part of our future or not. I guess only time can answer this question.