Articles

THE HISTORY OF FINTECH

Mar 03, 2021


Fintech used to be the trendy term to describe Financial Technology. Now, it is commonly

used and understood around the world.


Digital adoption has taken a quantum leap forward and the global pandemic has reinforced

the importance of fintech. In some cases the pandemic has forced businesses that may have

been putting off their evolution to digital, to invest more time and money, faster.


There’s no question that fintech is the future of financial services but where did it all begin?


The term fintech is said to have been coined in 1993 but did not become a household name

until internet banking became mainstream. Fintech in the 1990s simply meant new

technology that enhanced financial processes.


Let’s look at some key dates that have shaped where we are today;

1918: US Federal Reserve Bank launches its ‘Fedwire’ service to enable funds to be moved

electronically

1958: Bank of America launches the first BankAmericard, which is regarded as the first ever

credit card

1966: UK’s first credit card (Barclaycard) is issued by Barclays on June 29th

1967: First ever ATM is launched at a Barclays bank in Enfield, London

1971: Nasdaq launches electronic trading and it becomes possible for companies to sell

shares to the public via an Initial Public Offering (IPO)

1990: Shoppers can request cashback on debit card transactions

1995: Amazon launches its online shopping site, initially only selling books

1997: The first UK internet banking service is introduced by the Nationwide Building Society

1998: Paypal is launched (originally called Confinity)

2011: Google introduces Google wallet

2015: The first digital only bank, Atom, launches in the UK

2017: LOQBOX launches offering UK consumers the ability to grow their credit score while

they save

2021: The Government commissioned, Kalifa Review is released setting out a series of

proposals for how the UK can build on its existing strengths, create the right framework for

continued innovation, and support UK firms to scale.


Financial technology has powered almost every advancement in the banking world and is

now regarded as one of the most innovative and exciting sectors to work in with over 40% of

workers in London employed in Finance or Technology roles.


According to independent research conducted last year, there are estimated to be over

1,600 fintech firms in the UK and estimates suggest this will more than double by 2030. Of

those 1,373 companies that are still active and operating in the private market, 71% are

based in London. Most of these 1,139 fintechs are in the seed (45%) and venture (34%)

stages of evolution, indicating that this is a burgeoning sector with plenty of room for growth.


The global fintech market was worth $127.66 billion in 2018, with a predicted annual growth

rate of ~25% until 2022, to $309.98 billion. It is still very small compared to the global

financial services market. The largest value of investments happened in the third quarter of

2019, when investment into Fintech companies in the UK reached a value of approximately

$45.13 billion. These numbers were released as part of the “State of the Fintech Industry”

report 2018.


So what’s next? The underlying technology that will drive the next fintech era, namely

blockchain and open banking, will continue to drive the innovation of the future. Machine

Learning is set to evolve the way we interact with banks and insurance companies, designed

to strengthen the customer relationship. By doing this, financial institutions can target

individuals with bespoke offers and support that match their behaviour and will create a more

relevant experience for them.


This innovation isn’t just restricted to the banking sector. Insurance companies are set to

turn to Machine Learning to speed-up how they deal with insurance claims. This is already

happening in places like China, with an insurer developing a system that automatically

settles claims using an algorithm that assesses what type of car is involved and how

significant the damage is, before sending over an offer to settle the claim straight away.

The UK has around 10% of the global market of fintech companies worth more than £11

billion a year to the UK economy. There is so much opportunity for the fintech industry to

create more highly skilled jobs, boost trade and extend our competitive edge on a global

scale.


The next chapter of fintech is nearly upon us and we are very excited to be a part of this

story

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Katy Ringsdore - Head of Media Relations

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