Fin Tech involves the use of information technology to transform the way finance is being done in global markets, developing countries, and across startups and tech firms. -Douglas Arner
Finance and technology are transforming the world of finance and the world beyond faster than we have ever seen before.
In the future finance will be an experience not a product and this is why it is important for everyone to understand how the industry is changing.
In this article, we are going to be looking at the fundamental question. What is Fintech?
Because, Fin Tech not only transforms the financial services industry but also enables financial inclusion. And, the opportunity to help more than 2 billion people with no access to financial services.
The Real Face of Fin Tech a Thousand Years Ago
Looking at finance dating back thousands of years ago, the initial impact of technology was in the context of building systems of keeping records of government finances or payments for taxes and agricultural production or building facilities.
And one of the physical technologies to develop was money. The simple coin or thousands of years later, Paper money.
Money is a form of technology that allows us to physically handle the ideas embedded in finance. So, if we think about financial technology, the history is very, very long indeed. From coins, paper money, systems of writing or accounting, major points include the evolution of the joint stock company or the corporation. Or more recently, stocks, bonds, things that we would call securities or derivatives.
Derivatives are financial instruments that derives it`s value from some underlying financial instrument.
The Victorian internet- The start of Fin Tech
Just because fintech is buzzy does,nt mean it is brand new. Although the phrase was added to the Merriam-Webster dictionary in 2018, the concept dates back decades.
If we think of today`s Fin tech, which is the portmanteau for financial technology, the modern period of fintech and financial technology began around 150 years ago. And, we generally mark the date as 1867. Why 1867? 1867 was the date of the establishment of the first transatlantic telegraph cable.
That transatlantic telegraph cable made instantaneous communication between the major markets. Markets of NewYork and London, and Paris, or eventually several decades later, Shanghai, and made Honk kong and London possible.
This was the the basic infrastructure that underlies all of today
s, not only financial technology, but much of todays communications and media development as well and it`s somewhat ironic that in the past five years; more undersea cable has been laid than in the entire previous 150 years combined.
Because more physical cables are necessary to handle the ever greater flows of data speeding around the world leading the development of finance.
The period of Financial and Economic Globalisation
Economists define the period from the 1860s upto the start of the First World War as a first period of financial and economic globalisation.
Much like the past 30 years or so from today. That period of financial and Economic Globalisation was underpinned by technological infrastructure like the transatlantic telegraph cable; also known as the Victorian internet.
The Second World War and Technological developments in financial services.
During the Second World War, significant effort was spent in the context of developing codes for secure communication. Particularly of military and intelligence operations as well as , significant efforts to develop systems to break those codes.
It was this process of encoding and breaking codes that led to some of the groundbreaking thinking in computer technology. In fact, artificial intelligence or AI which is one of the most exciting developments happening in financial technology today.
But it wasn`t until the period after the Second World War as the economy is rebuilt , we begin to see progressive development. The early computer technologies to eventually lay the ground work for the sorts of Fin tech and Reg tech.
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Reg Tech is the short form of Regulatory technology may as well be a game changer as it will allow financial institutions to deal with compliance and regulatory burdens not only effectively but also more efficiently. Fintech has evolved over 3 eras from infrastructure to finance, to banks to startups enterpreneurs today are building the B2B solutions that will be powering the financial system tomorrow.
In recent years however, fintech has morphed from being associated with scrappy startups to becoming a major facet of established and legacy financial institutions. In the wake of the COVID-19 pandemic, more and more businesses are turning to fintech to enable features like contactless payments and other tech-based transactions.