Financial technology, also known as Fintech, has been around since the 7th century BC when the abacus was first used. It is the marriage of financial services with the latest technology developments and ever since those early days, innovation in the financial sector has continued to result in new tech and ways of working. It is responsible for some of the major trends which have shaped the financial services industry in recent years and have transformed the sector into a fast-moving, digital environment.
When the first transatlantic cable was laid in 1886, the foundation for electronic payments was set. The subsequent introduction of Fedwire, in the US, in 1918, provided an accessible method of electronic money transfer. Moving forward to the 1950s, the introduction of credit cards marked a departure from using cash to pay for goods and services.
Introduced in the UK in 1967, the ATM represented a way that individuals could input information electronically to access cash when they needed it. Previously, cash could only be obtained during banking hours.
The 1970s was the decade that the stock market really began to adopt fresh technology. The Nasdaq stock market launched in the US in 1971 and provided the first opportunity for electronic securities trading. Other developments included the introduction of SWIFT Business Identifier Codes (BIC)s. These allow institutions to be quickly identified, facilitating digital messaging and transfers.
The 1980s and 1990s
In 1984, Eftpos technology began to be used in Australia. Initially adopted in BP garages, Eftpos allowed customers to pay for their goods electronically at the point of sale.
In 1994, Microsoft Money personal software provided the first facility for users to access their bank accounts electronically. This development was a pivotal one, with other providers quickly bringing online banking into the mainstream.
Technology for enabling electronic payments continued to develop. In addition to the introduction of PayPal in 1998, the development of chip-and-pin technology in 2005 contributed to improving the security of electronic financial processes.
2009 was the year which saw a significant advance in the digital banking world: Bitcoin, the world’s first cryptocurrency, was launched. Other crypto offerings followed although Bitcoin remains the most well-known digital currency for Australian investors.
Burgeoning demand for digital currency, alongside increased digitisation of the banking industry, was complemented by the development of apps for trading shares in 2013. As the second decade of the 21st century continued, apps were developed for everything from making payments through to mobile banking.
Recent Fintech innovations include neobanks, introduced roughly around 2017. These banks, such as UBank, ING and EasyStreet offer a complete digital banking solution. Trials in China of a new digital Yuan are bringing digital currency technology which is needed to move towards an entirely cashless society, one step closer to the mainstream.
In early 2020 Qoin was launched as a progressive digital currency. A utility coin, it has an ecosystem of merchants and consumers who use Qoin as an alternate payment method for goods and services.
FinTech has opened the door for a new wave of start-ups to disrupt the financial services industry, providing more efficient and convenient offerings to customers while retaining their profitability. This has caused the institutional ‘big fishes’ to stay on their toes by changing their own offerings in line with FinTech trends.
Fintech is literally all around us – from payment apps such as PayPal or Apple Pay to Insurtech and digital currencies like Qoin.
So let’s bring FinTech to life by throwing a spotlight on some of the most prominent examples:
Digital banking is a brilliant example of how FinTech has brought about the change in the wider banking sector. From innovative features to dematerialised products, digital banking is a concept which is characterised by the absence of physical branches and advisors. Instead, client interactions are done digitally, and everyday transactions can be facilitated through digital payments and mobile banking. Traditional high street banks have also joined the party, bringing out their own banking apps and making it as easy as possible for customers to access services. Click here for a full report from the OECD on how digital banking is disrupting the sector.
A couple of decades ago, fledgling businesses had far fewer avenues when it came to finding funding for their ventures. FinTech has given start-ups a whole new outlook, thanks to crowdfunding platforms such as GoFundMe and Kickstarter. Now, entrepreneurs and companies in their infancies can seek funding from investors around the planet, multiplying their opportunities, and allowing them to spread the word of their idea or business strategy. There are several types of crowdfunding. Perhaps the most popular among start-ups is equity crowdfunding, which asks a large number of investors to put a small amount into a business and receive an equity share in return.
FinTech has certainly made an impact in the insurance industry, in which it has become known as Insurtech. Technology such as big data, consumer wearables and smartphone apps has disrupted the insurance sector, increasing convenience for consumers and offering potentially lower rates, while also providing new ways for insurance companies to attain profitability. Then there is the P2P, or peer to peer insurance model which also comes under the Insurtech umbrella. This offers a way for social groups – of family members or friends – to support each other in the event of a loss, driving down the premiums associated with traditional insurance policies.
For many of us, this might be the most recognisable form of FinTech. Mobile payments, through apps such as PayPal or Apple Pay, are allowing us to make payments with just a tap of a smartphone, negating the need to carry cash around, enter in card details, or even carry a bank card at all. Contactless payment, as it is also known, incorporates the use of near field communication (NFC) technology, and is now easier than ever from both Android and iPhone handsets. There are also apps designed for speedy transactions between bank accounts – including accounts in different countries – such as Xoom and Circle Pay. Qoin offers easy, secure contactless payment with transactions taking place via a QR code being scanned with a mobile device.
Digital currencies such as Bitcoin, Ethereum and Qoin are paving the way to a cashless society, offering a new way to pay and be paid for goods and services. It is based on blockchain technology and decentralised networks which makes it almost impossible for the currency to be counterfeited.
Stock trading apps
Investing in stocks can now be done by ‘the man on the street’ with unprecedented ease. You don’t have to go to a stock exchange directly to buy and sell stocks, as it can now be done through a variety of stock trading apps. Irrespective of your location or budget, there are now ways to trade on the stock market from your smartphone, and this type of FinTech has opened the door to a whole new generation of investors – from casual traders to those who wish to earn a primary or secondary income. The BTX Exchange offers people the ease of trading Qoin using their phone or via the website.
Riding on a wave of technology, FinTech has changed how financial services are offered and used. It is fair to say there is no turning back.