FinTech is the amalgamation of the words finance and technology and refers to the use of technology into the services offered by financial service companies with the aim to improve their usage and ease of access to the client.
The modern period in the financial industry, therefore, can be divided into two eras: before FinTech and after. The widespread adoption of financial technology has radically changed the financial service sector and made it easily accessible for both consumers and businesses.
According to a Global FinTech Adoption Index study by Ernst and Young in 2019, financial services companies in China and India lead the world in adopting FinTech.
Evolution of FinTech
While the amalgamation of finance and technology may be perceived as a new development, FinTech has grown over several eras and can be divided into four periods:
FinTech 1.0 – 1886-1967
The first era of FinTech was all about building technological infrastructure. This era introduced financial globalization and introduced steamships and railroads which led to quicker transmission of financial data across borders.
The main events during this period were the transatlantic cable, the first electronic wire system, the Fedwire in the United States and credit cards in the 1950s.
FinTech 2.0 – 1967-2008
The second era brought a shift from analogue to digital technology in banks and other traditional financial institutions. This was marked by the introduction of the first hand-held portable calculator and the installation of the first-ever ATM machine by Barclays in London.
Other notable events that happed during this era were the launch of the first digital stock exchange NASDAQ, the rise of mainframe computers in banks, digital banking, ecommerce, and the launch of the Society for Worldwide Interbank Financial Telecommunications (SWIFT).
FinTech 3.0 – 2008-Present
The Global Financial Crisis in 2008 ended the era of FinTech 2.0 and led to the public losing their confidence in the conventional banking system. This, coupled with most finance professionals becoming unemployed, resulted in a total change in the consumer’s mindset.
This led to an advent of new technologies. The rise of Bitcoin in 2009 led the way to a boom of blockchain and cryptocurrency in the financial world. Moreover, the mass-market penetration of smart devices has enabled millions of people around the world and has also led to digital wallets like Google Pay that make financial transactions even more convenient.
FinTech 3.5 – The Future
Fintech 3.5 points towards a shift from the West-dominated financial world and gives a nod to the advancements that are being made in global digital banking.
It accounts for the evolving consumer and how these consumers access the internet in the developing world. The top 2 countries where businesses are adopting Fintech, China and India, both fall under developing countries.
Conclusion
In the broader definition, FinTech is referred to as any innovation that affects how the consumer transacts business. From the advent of cryptocurrency, the double entry bookkeeping system to business finance automation, any new technology that impacts the way financial services can be delivered is therefore called FinTech.
Zaggle is one of the leading FinTech companies in India and offers financial automation for several processes like employee expense management, payroll, rewards and also serves as a leading neobank for startups, SMEs, and corporates.