When you hear about Fintech, you can easily get swept off your feet. Buzzwords like blockchain, e-wallets, digital remittances, and Insurtech contribute to this. Yet, before it became this colossal movement in the financial industry, it had fairly humble beginnings. Let’s explore the growth of the Fintech industry from its origins.
Did you know?
FinTech can be traced back to the first international electronic transfer across the transatlantic ocean, using telegraph technology, in 1886.
The Roots of Fintech
The world changed the way transactions were made in 1967. Moving away from traditional banking norms, cashier’s cheques, and long lines at the bank, the ATM was invented. The ATM, revolutionised the modern Fintech revolution. It introduced an accessible and convenient way for people to make international electronic transfers. If the ATM is the seed from which Fintech grew, globalisation would be the root. Functioning as the foundation of Fintech, globalisation brought about the necessity of using technology to improve efficiency and relations.
Did you know?
The first ATM in Malaysia was launched by Maybank in 1981, at their Ampang Park outlet.
Sprouting from Traditional Banks
As traditional banks attempted to branch into internet banking in the 1990s, they understood that digitising banking would greatly reduce costs. It would also make integration of services easier and improve ease of interaction between banks and customers. However, it was initially met with consumer resistance, mainly distrust, unfamiliarity, and the newness of the internet. Although growth was slow in this period, banks were still insistent on implementing online banking.
Sapling during a Financial Storm
Fintech grew when financial times were at its hardest. When the 2008 financial crisis led to mass layoffs and a weakness in the banking industry. The gap that was produced was filled when those former banking employees founded tech start-ups. They ran financial services and created a boom in Fintech.
Similarly, the COVID-19 pandemic was a devastating time for the economy but this was the push Fintech needed to thrive. In Malaysia, the government gave out stimulus packages using e-wallets among other financial digitisation initiatives. By 2020, online banking transactions surged by 49% within a year. E-wallet transactions increased by 131%. QR code payments grew by 164%.
Did you know?
In April 2022, five digital bank licenses were awarded to qualified applicants under the Financial Services Act 2013 (FSA) and Islamic Financial Services Act 2013 (IFSA). One of the qualified applicants is the consortium led by KAF Investment Bank, which includes Moneymatch, Carsome, and Jirnexu.
What Fruit will Fintech bear?
According to Mckinsey & Company, 73% of the world’s interactions with banks now take place digitally. Expansion of Fintech has had a positive impact, so far. Accessibility to financial services for SMEs and people living remotely has greatly improved. The growing demand for generative AI and hyper-automation is causing rapid technological expansion. The advocacy of financial inclusivity is bringing in more participants. All of which greatly contribute to the growth of Fintech.
The digital revolution has made Fintech a central and transformative force in the financial industry. However, its evolution is not without significant risks, which extend far beyond traditional fraud. The very interconnectedness that makes these systems efficient also creates systemic vulnerabilities. A single point of failure can have widespread consequences. Regulation struggles to keep up with fast-changing technology, which adds to the problems of cybersecurity and data privacy. Ultimately, the future of Fintech lies in its ability to build resilient and well-regulated ecosystems. To navigate these risks and create a more stable financial world.
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