Financial services and technology have teamed up over time to change the world. Where did fintech start? Where is it today? Here is a brief history each fintech period to date:
The evolution of the telegraph, as well as transportation devices such as railroads and steamships, marks the beginning of fintech. This period is known as Fintech 1.0 where financial services begin their connection with technology while they are mostly still analog.
The first real milestones for fintech were in 1886 with the first transatlantic cable being laid between New York and London and 1918 with Fedwire — the first electronic fund transfer system — being created. This system relied on morse code and the telegraph for its success.
In the 1950s the first credit card was created by the Diner’s club, paving the way for non-cash payment systems. With credit cards becoming more common, the first ATM was installed in 1967 by Barclays Bank. This year is also the year that the first handheld calculator was created, making life a lot easier for bankers. Just 6 years later, the Society for Worldwide Interbank Financial Telecommunications (SWIFT) was established as the first communication protocol between financial institutions facilitating large volume international transactions.
The 1980s consisted of the rise of mainframe computers along with the introduction of online banking. The development of the internet and e-commerce business models in the 1990s is one of the biggest turning factors for fintech. This came with a great shift in the way that people perceive money and financial institutions.
Throughout the early 2000s banks fully digitized their services and the global market officially began. With the startup of the global market comes the emergence of global trade platforms. Coming at the end of the Fintech 2.0 period, MetaTrader (MT) was created in 2005 to be one of the most well-known trading platforms.
In 2008, the world entered the period of Fintech 3.0, which is what we currently are in today. The Global Financial Crisis leads to the district of traditional banking, startups beginning all over the place, and established technology companies beginning to deliver financial services to both businesses and banks.
Throughout this period, smartphones are the main source of internet access. In 2009, Bitcoin was created, becoming the first cryptocurrency and showing the world that it is possible to have a currency system that is not backed by major banks. In the following years, many other cryptocurrencies and digital wallets were created including Google Wallet in 2011 and Apple Pay in 2014.
While a lot of good has happened in this period, the great cryptocurrency crash of 2018 was a turning point for fintech. The world was just learning the ins and outs of cryptocurrency when the terrible market crash happened. 2 years later the Covid-19 pandemic shocks the world, forcing the government to shut down and investors to take stock. The crypto world took a big hit in 2020. Today, things are looking up. Blockchain and cryptocurrency are increasingly popular and being adopted by more countries as the world recovers from the pandemic.
Some parts of the world are entering what we could consider Fintech 3.5, more specifically developing countries. These are the markets that did not have the time to develop Western levels of fintech structure, leaving them more open to new solutions. Currently, the countries with the highest fintech usage are China and India.
Aldoma, Cristina. “Evolution of Fintech – Innovation & Technology Blog.” ZIGURAT Innovation School – Transform the Way You Do Business!, ZIGURAT Innovation School – Transform the Way You Do Business!, 5 Nov. 2020, www.e-zigurat.com/innovation-school/blog/evolution-of-fintech/.
GateHub. “How Did Finances and Technology Evolve into What Is Today Known as FinTech?” GateHub, GateHub, 13 Feb. 2020, gatehub.net/blog/history-of-fintech/.