Did you know that bank spending on new technologies in North America was projected to reach $17 billion in 2015 and increase to $19.9 billion in 2017? Fintech investing in the United States far outpaces that of every other country, combined.
The world has more than 25,000 operational and Active banks presently. As Mobile payment systems and other Financial institutes have innovated ways which substitute banking, it has become challenging for banks to offer all possible services to its customers with more comprehensive and viable ways. Considering this scenario, Fintech is going to be the most booming and innovative region in upcoming years.
Fintech has turned out to be successful in balancing the financial business field for big enterprises to small businesses, giving equal access to resources and funding and giving more power to the consumers.
So how did we get to this point? Let’s take a look below to see how the journey started:
1950s- Credit cards were launched to ease the burden of carrying cash.
1960s- The first period of financial globalization started when ARPANET (Advanced Research Project Agency Network) entered. This became the basis of the internet, giving the idea of accessing programs at any site, from anywhere. This year also brought ATMs to replace tellers and branches.
1970s- Electronic stock trading began on exchange trading floors.
1980s- The online banking system came into play, first introduced in New York using VideoTex Systems.
1990s- Considered to be a game changing revolution in the financial technology world with the introduction of:
- World Wide Web
- Microsoft Money Personal Banking
And the best game changer of all, the arrival of Smartphones, enabling access in finance technology from mobile phones.
These five decades of developments have created a financial technology infrastructure which most people use almost every day.
Fintech services in the 21st century
2005– The first P2P lending platform in the world was launched. By the end of 2016, P2P lending was projected to have a global worth of $40 billion.
2008– A new era of FinTech has emerged in both the developed and developing world.
2014– Easy transfer of money and directly into the bank account via:
- Google Wallet
The Chinese e-commerce giant Alibaba, led by Jack Ma, announced “smile to pay” in 2015, which enables consumers to authenticate mobile payments by scanning their face with a smartphone.
What is fascinating about the last 60 plus years of development in fintech is that while they became mainstream and widely used by banks and their customers, the banking sector was not jeopardized. On the other hands, banks grew. The U.S.’s FDIC data, from 1950 to 2014, shows the number of bank branches in the country grew from approximately 18,000 to over 82,000.
But with financial technology growing like a weed, the next generation of disruption is in banking services. The future of an industry like fintech that quickly adapts, develops and has such a disruptive impact on the financial sector, is uncertain.
From Silicon Valley and New York, to London and across Asia and Australia’s financial hubs of Singapore, Hong Kong and Sydney, startups offering tech-enabled payments, currency exchange, online lending and wealth management services are challenging the traditional retail banking and financial services firms.
Fintech investment has grown by 27% globally per year since 2008. This is compared to Silicon Valley growth of 13%. Bank spending on new technologies in North America was projected to reach $17 billion in 2015 and increase to $19.9 billion in 2017. On a global scale, the value of investment in financial technology ventures amounted to approximately $3 billion in 2013 and is projected to grow around $8 billion dollars in 2018.
This latest evolution of FinTech, led by start-ups, stands challenges particularly in balancing the potential benefits of innovation with the possible risks of new approaches.
However, it is more likely to be thought of in two broad categories, customer-facing and conventional. It is these customer-facing fintech services which are quickly gaining customers and competing with banks. These fintech services are not simple enhancements to banking services, but rather replacing banking services completely.
Sudeshna Nepal is a researcher with Frost & Sullivan. She can be reached at email@example.com
Sapan Agarwal drives content and marketing for Frost & Sullivan. Sapan is based out of Kuala Lumpur Malaysia and can be reached at firstname.lastname@example.org | +603 6204 5830