Fintech is gaining popularity among financial institutions, bringing modern technology, innovation, and convenience to the traditional banking system. FinTech technology is transforming how we manage our finances, from online and mobile banking to artificial intelligence (AI) and blockchain technology.
Most financial transactions worldwide have taken place online in 2023. The fast-growing fintech sector is expected to reach $174 billion in 2023. It is expected to reach $188 billion by 2024. Today, almost all transactions are made using an online payment method. That is why the fintech industry is now in the spotlight.
What Is Financial Technology?
Financial Technology is the deployment of modern technologies to revolutionize income and make them quicker, simpler, and more secure. This has accelerated, simplified, and increased the security of financial transactions.
FinTech is formed by merging the words “finance” and “technology“. It refers to the development of new technology use cases for more conventional-looking financial tasks.
Brief History of Fintech Technology
Fintech technology is frequently seen as a relatively new invention. However, this is not true. Financial Technology (FinTech) has changed a lot in the previous ten years and most of that can be explained by advances in technology that are now being used in the banking industry.
Fintech 1.0 (1866-1967)
The first period of financial globalization occurred in the late 19th century as a result of the combination of finance and technology.
The installation of transatlantic cables in 1866 started the period of building global network infrastructure and linkages.
The first baby step towards the digitization of money was the establishment of Electronic Fund Transfer through Telegraph & Morse Code by Fedwire in 1918.
Credit cards were introduced in the 1950s to relieve the discomfort of carrying cash. Diner’s Club was the first to introduce one in 1950, and American Express Company followed suit in 1958 with their own credit card.
Fintech 2.0 (1967-2008)
This was an era when the world started converting from analog to digital technologies. Fintech 2.0 is thought to have started with the launch of ATM machines by Barclay’s in 1967.
The first computerized stock exchange, NASDAQ, was formed in the 1970s, laying the groundwork for the operation culture of modern financial markets, which is still used today.
PayPal was founded in 1998, previewing the new payment methods that would arise as the world moved more and more online.
Internal processes, interactions with other people, and interactions with retail clients for bankers had all been entirely digitalized by the turn of the century. This era comes to an end with the 2008 Global Financial Crisis.
Fintech 3.0 (2008-2014)
The general financial tech lost its strong reputation following the 2008 Global Financial problem, which made the general economic problem more acknowledged on a global scale.
Following the financial crisis, a loss of trust in banks, combined with legislative change, introduced the market to new providers. In 2009, Bitcoin was the first cryptocurrency that used blockchain technology, and it was shortly followed by other cryptocurrencies.
Since then, the Western world has been moving out fresh fintech development and hundreds of new unicorns.
Fintech 3.5 (2014-2017)
Fintech 3.5 has been designed to take into consideration consumer behavior and the ease of use of the internet in developing nations. China and India are the two countries with the most fintech usage.
This, along with Fintech advances in Africa, has been recognized as the 2014-2018 growth engine. This is being driven by SaaS advancements such as fintech software development by Indian IT firms, m-Pesa in Africa.
Fintech 4.0 (2018-today)
Blockchain technologies and open banking are driving the future of financial services innovation. Neobanks are game changers in this space because they challenge traditional banks’ pricing and complexity while earning clients’ beliefs with ease.
Machine Learning on the other hand is changing the way people engage with banks and insurance businesses. It allows them to receive personalized offers and support.
Tech Trends in Fintech Industry
With the development of new technology, fintech finance has been delivering new and inventive answers to conventional financial challenges, as well as changing the way we handle our financial affairs. Here are some of the most recent fintech advancements and new technologies making stories in the financial industry.
1. Artificial Intelligence and Machine Learning
In the tech industry, the terms artificial intelligence (AI) and machine learning (ML) are used as constantly as cutting-edge and inventive. It might be said that AI is the fastest-growing industry in the FinTech market.
AI chatbots used in banking are predicted to save approximately 862 million hours of work.
AI and ML assist in the monitoring, quality assurance, and processing of massive amounts of financial data in a fraction of the time.
AI and machine learning assist financial organizations in developing new products while tapping into new revenue models.
The usage of data can be improved over traditional methods with the use of AI and ML. This is what will make these financial services trends so useful in 2023 and beyond.
2. Blockchain Technology
Blockchain provides innovative, more affordable, and faster-scaled financial solutions. It’s being used to build decentralized financial apps like cryptocurrency exchanges, remittances, and digital wallets.
Blockchain with its distributed, decentralized, transparent, and unchangeable digital ledger technology, helps the FinTech industry by enabling a new level of freedom and security. There is no single authority responsible for handling the information.
By the end of 2028, the fintech blockchain market is predicted to be valued at $36.04 billion.
3. Metaverse in Fintech
Customers can experience virtual banking through the fifth stage of innovation in the banking and fintech industry, known as Metaverse.
The metaverse enables the return of customized banking through the use of virtual or augmented reality (VR/AR).
By 2030, it’s predicted that 50% of banks globally will use AR and VR as an interface for client transactions and employee engagement.
Final Thoughts
The rise of fintech has transformed the way we manage our finances. With innovative tools and technologies, we can now access financial services and manage our money more conveniently, quickly, and securely than ever before.
The fintech industry continues to grow and evolve, we can expect to see even more innovative solutions that will make managing our finances easier and more accessible than ever before.
