FinTech-What, When & How?


The world of FinTech has seen tremendous growth since the turn of the century, especially with the emergence of startups. Business planning for startups, especially FinTech startups, has to be more diverse than ever to survive the competitive market.

Initially, the term FinTech was used for the back-end systems of banks and such financial institutions. In the present times though, it serves a variety of businesses and companies across different industries ranging from banking to trading services and most recently, even in the education sector. 

Let’s look at what exactly FinTech is and how it all started!

What is FinTech?

The word FinTech is essentially a combination of the two words ‘finance’ and ‘technology’. It refers to the innovative technology that enhances the deliverance of financial services. FinTech is employed by both companies and consumers alike to streamline their financial functioning and process. FinTech uses specialized software that can be easily accessed on computers and smartphones by users. 

In these fast-paced busy lives, everything is desired to be done within a snap of fingers. FinTech caters to this desire for ease of operations and thus assists the traditional methods of financial services. 

One of the key reasons for this expeditious expansion of FinTech is the feature that it provides specialized services to consumers and businesses alike. Unlike banks, FinTechs focus on one aspect. Whether it be wealth management, or trading, or insurance, or digital payments, etc.

But, along with unsettling certain aspects of traditional finance methods, FinTechs have also proved to enrich the finance world to a great extent. Like bringing banking to the fingertips, digital payment apps, and aiding the birth of cryptocurrency and blockchain technology, FinTech has been instrumental in all.

After gaining some understanding of FinTech, let’s have a look-see at how it came into existence.

When It All Started

Contrary to popular belief, FinTech isn’t a new industry. It has been around for quite some time, the decade following the dawn of the internet and e-commerce to be precise. 

Technology has been a part of finance even before the inception of credit cards and ATMs. This confirms the presence of FinTech to be over a century and a half in a supportive role. However, with the changing times, it has assumed the lead role, front and center, alongside finance and is leading the FinTech industry to new opportunities.

According to the paper by Arner, Barberis, and Ross which talks about FinTech and its evolution among other topics, the progression of FinTech is divided into 3 phases. Let’s see what these are! 

FinTech 1.0

The first phase spanned over the years 1866-1967. During this period, the infrastructural development aided the growth of FinTech. The financial globalization enabled by the transatlantic telegraph cable in 1866 marks its initiation. The post-world war inventions and innovations fuelled the fire of growth.

FinTech 2.0

The second phase ranged from 1967-2008 and was marked by digital shifts in the procedures of banks and financial institutions. The establishments of NASDAQ (the world’s first digital stock exchange) and SWIFT (Society for Worldwide Interbank Financial Telecommunications) were the highlights of the 1970s. Online banking in the 1990s following the rise of the internet and e-commerce also contributed largely to this phase.

FinTech 3.0  

This phase ranges from 2008-present times, which means it’s the era of startups and cryptocurrencies. It was observed that the people’s trust in banks had been shaken after the Global Financial Crisis in 2008. This led to the rapid growth of FinTech startups and apps of e-wallet and such. 


How FinTech Industry Works

Now that we know the history of FinTech, let’s familiarize ourselves with the ins and outs of the industry as well. 

Talking about the players in the FinTech field, as discussed above, startups and financial institutions actively participate here. In contrast to being a soup-to-nuts solution for all financial needs like banks, FinTech startups provide specific focused services/solutions.

It may seem that the banking industry and FinTechs compete with one another. But in reality, both parties need each other to grow and scale new heights of innovation in the finance and technological world.

Moving on to the role of regulators of the FinTech industry, owing to the varying complexities of FinTechs around the world, there is no one-size-fits-all regulatory framework. 

Despite being supportive of the innovations, the financial regulatory bodies around the globe are apprehensive about the risks that come along with them. They should, thus, strive to build the framework in a way that ensures the protection of customer information and minimizes the chances of fraud and other malpractices. 


So here was a comprehensive piece that explained the structure of FinTech and its industry. FinTechs are the way forward owing to the rapid digitization the world is moving on to.

In the next edition, we will talk about FinTech in India and how the Indian FinTech industry fares in comparison with the world. So stay tuned!