Where was the birthplace of the term FinTech?
Does FinTech refer to the technology used to provide financial services or the industry of new firms using technology to provide financial services?
The word “FinTech” was added to the Merriam-Webster Dictionary in 2018 and defined as “products and companies that employ newly developed digital and online technologies in the banking and financial services industries”.
The origins of the term “FinTech” can be traced to the 1990s with the establishment of the “Financial Services Technology Consortium” by Citicorp (the predecessor to Citigroup) to bring together financial services firms and technology companies to explore the potential of emerging technologies and collaborate on technology-related issues.
However, It wasn’t until the early 2000s that the term “FinTech” gained popularity to describe the increasing convergence of financial services and technology. This was primarily due to the growth of the internet and the proliferation of digital technologies, which were transforming how people interacted with financial services.
Once upon a time, the world of finance was dominated by traditional institutions like banks and credit unions. But with the rise of new technology, a new player has entered the game: fintech. But what exactly is fintech?
Opinions differ on whether fintech includes only new, technology-based financial companies or if existing institutions can be considered fintech if they produce new technology-based services. However, there seems to be a general agreement that fintech refers to companies that develop financial services by relying on cutting-edge technology.
While there are dozens of definitions of fintech online, none are the best or entirely correct. Fintech is involved in everyday financial activities, such as depositing a cheque through a mobile app, using Apple Pay to pay for a meal, or locally using Mpesa to send money or pay your bills. It’s also involved when people transfer money from your bank through an app or even make payments through PayPal. These are examples of modern technology being used in finance.
On the other hand, there are also examples of traditional technology being used in finance, like paying with a credit card online or withdrawing cash from an ATM located far from a bank branch. Defining fintech is challenging, as it encompasses many different financial activities.
At its core, fintech is all about using technology to provide financial services in new and innovative ways. It can be considered as the underlying technology, an industry consisting of fintech companies, or a whole new way of providing financial services.