The Evolution of Fintech Services Now and Then…


When you hear about Fintech most of us will think about the latest mobile app which can help them pay for their morning coffee without ever swiping a card or touching currency. But this technology has always played a key role in the financial sector in ways that most people take for granted and might not ever see. Financial Technology came into play some decades ago around 1886, most researchers called it the Fintech 1.0.

To explain more on Fintech, we will walk you through the evolution of the technology:

Fintech 1.0 (1886-1967) was about infrastructure which was the first level/stage of Fintech. According to some reports, 1.0 was 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 the first Transatlantic Cable in 1866 (a submarine communications cable connecting one side of the Atlantic Ocean to the other) 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.

Fintech 2.0 (1967-2008) was about banks 2.0 marked 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 the 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-Current) 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).

To capture this distinction more broadly, in developing countries, banking penetration is approximately 41%, compared to 89% in developed countries. In India for example, the country has approximately 102,000 bank branches for a population that is roughly four times that of the U.S., which has approximately 82,000 bank branches.

Fintech 3.0 now offers Millenials with secure mobile wallets and payment apps are allowing these unbanked populations to safely store their money and make purchases without having to worry about storing or carrying large amounts of cash. M-Pesa is probably the most successful example of such an app. In Kenya, the company touts a very strong user base, and the mobile wallet has become a daily used utility for purchases.

Ecocash is trying to cut some branches being the used platform in Zimbabwe where it has more than 96% market share in its space. Ecocash took advantage of the cash crisis which hit the country since 2008 and the platform has successfully managed to interoperate with almost every Zimbabwean bank.

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 which is ow at 4.39 billion internet users.

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.

It’s also important to note that throughout that 50 year period, Fintech developments were also creating more sophisticated risk management, trade processing, treasury management, and data analysis tools at the institutional level for banks and financial services firms.


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