Fintech is a rapidly-growing industry with the potential to impact the lives of almost everyone. That means it’s important to provide readers with a broader perspective on the topic.
A wide range of companies, services, and products could be classified under the heading of fintech. Understanding what exactly this term applies to, and how the industry will evolve in the future, requires knowledge of a little bit of its history. It’s easier to appreciate the field from the right vantage point.
The Roots of Fintech
Generally speaking, fintech refers to any technology designed to offer a financial service to users. Banking apps are an example of fintech. So is an app like Robinhood, which allows users to easily buy and sell stocks from their mobile devices without any broker fees.
However, those two examples are just from the last few years, when fintech emerged as a field primed for massive innovation. The roots of this industry – depending on who you ask – actually date back well over a century. Some consider 1865 to mark the introduction of the first fintech product, the pantelegraph.
This device was used to help bank employees verify signatures. These technologies have evolved significantly since that time. However, given the nature of the device, it is fair to say that it was one of the main predecessors of today’s fintech industry, even if it would be a long time before similar innovations became widespread.
The Evolution of Fintech
During the next several decades, other developments in the industry started to take shape. In the late 1800s, people began purchasing and selling items on credit. True, there were likely other instances of this practice earlier in history.
What made this time period different was that it marked the beginning of accepted and standardized systems for using credit, with consumers and sellers using charge plates and credit coins. This is a far cry from the technologically-advanced credit cards of today. However, it is another example of an early fintech service.
Such developments essentially served as the roots of fintech. The industry wouldn’t truly begin to take off until the 1950s, though. That’s when the first major credit cards were introduced. In subsequent years, ATMs also became more commonplace, allowing consumers to avoid carrying cash. In the 1970s, another major innovation took the form of electronic devices that allowed for more efficient stock trading.
The major turning point for fintech, of course, wouldn’t arrive until the 1990s.
The Internet and Its Impact on Fintech
The internet opened the door for a much wider range of fintech services and products. Early on, brokerages took advantage of the internet by offering what some considered to be a more convenient means of buying and selling investments.
While brokers previously communicated with their clients over the phone, this new model of doing business allowed clients and brokers to communicate primarily virtually. Websites associated with brokerages could also provide users with important information about the stocks they were buying and selling. This allowed them to make more informed decisions.
Similarly, the rise of ecommerce also led to demand for fintech services that enabled users to conveniently and efficiently conduct transactions over the internet. Although it’s easy to take them for granted now, the technologies used in online shopping carts are examples of fintech. So are sites like PayPal, which facilitate these transactions.
Mobile banking was soon to follow. It’s easy to understand why. Going to a physical bank branch is time-consuming. People want maximum convenience. Banking via computer or mobile device eliminates a major chore from the day-to-day routines of most people. That’s why, as of 2015, more people opted to use mobile banking technology than people who choose to do their banking at an actual branch.
The Future of Fintech
As is often the case, these developments have disrupted numerous industries, from banking to retail. There is no indication that fintech won’t continue developing and offering consumers newer, more effective services. To survive, existing companies and organizations will have to adapt.
Luckily, they can. There is still plenty of room for developers to partner with traditional banks and institutions, creating fintech solutions for their customers in collaboration with the established companies.
The history of fintech is just beginning. With smartphones nearly ubiquitous now, more and more people will seek more and more options for conducting their financial transactions and similar tasks through apps and websites. It’s an exciting time for the industry, and it will be very interesting to see what sort of developments will emerge in both the short term and the long term.