What is Fintech? - Fintech Review

Let’s start from the beginning. What do we really mean when we talk about Financial Technology, better known as Fintech?

You will have obviously noticed that it is a very trendy topic these days. You will have read all about it in the press or elsewhere for sure. So what is it then?

Fintech is the combination of the words Financial (Fin) and Technology (Tech). As straightforward as that. We use it to describe technology that improves or automates the delivery of financial services. It is a very broad topic indeed, although not so complex when broken down.

When you think about it, this is not particularly new. And it has happened in many other industries as well: the introduction of new technology has been continuously changing the way industries work for hundreds of years. Financial services are not an exception, rather the perfect example of it happening.

For as long as financial services have existed, technology has played a big part. From Automated Teller Machines (ATM) to computer spreadsheet calculation (good old financial modeling on Excel!), and more recently artificial intelligence (AI) and blockchain technology (a term you should not use interchangeability with cryptocurrency, but that’s another story). Financial services have been and will be continuously evolving with new technologies.

However, the adoption of new financial technology all across the financial services industry has greatly accelerated in recent years. There are three main factors that contributed to that.

Firstly, the Great Financial Crisis of 2007–2008 (The Big Short, either the book from Michael Lewis or the movie adaptation, is a great summary). There is a lot to say about the huge mess that banks created, but what it really did is to push other companies to build alternatives. Banks were weak post-crisis, a gap in the market was created and in a very logical market dynamics movement, startups and companies alike seized the opportunity to fill the void.

Secondly, the advent of the smartphone. The first smartphone dates back to the early 90s but the real game-changer was the introduction of the first iPhone in 2007. What happened is that suddenly digital interactions exploded. You could do almost anything from anywhere. Customer and digital experience improved massively. Since then, new business models that are app-based and mobile-first have emerged, startups have flourished, and there are so many more exciting things to come! Think about the massive shift from going to your bank’s branch to do anything to being able to self-service remotely in minutes. Revolutionary.

Thirdly, which is linked to the second point, the advances in other industries. This is your Uber, Netflix, Amazon, Facebook. They made digital look easy. All these digital and often mobile-first businesses (thank you smartphone) have an effect on the way personal customers look at banking. And by extension, any business customer is made of one or many personal customers. Customer expectations therefore shifted massively because of other services we use every day. If it is super easy to order a cab, watch a movie or have something delivered at the press of a button, why would it be so complicated to manage your money? Or buy some stocks?

So why should we care about it then?

Because it is now more than ever changing every aspects of the financial services industry. And you need to remember that finance rules the world. More like money, doing business, that's what people do and that is unlikely to change. Therefore, fintech is also changing your everyday life.

From how people manage their personal finances to how banks organize their operations and back office. Fintech is everywhere.

Fascinating topic indeed… stay tuned!

Fintech Review