FinTech Primer 1 — What is FinTech?
114 mn search results in Google today for this word “FinTech”.
Are you curious to know about this multi billion dollar Industry?
What happened to FinTech in 2020?
Are you preparing for a FinTech Company interview?
Here is a FinTech Primer for you…
Over 100 bn @ investments in this Industry last year. Are you curious to know about this game changer industry?
Are you sitting on the fence to decide if this Industry is right for you next? Do you want to prepare for FinTech company interview or for promotion within FinTech?
Then this article is for you…
Once I was interviewing a Technical lead. I was almost convinced to hire him. Then I asked him to tell about FinTech industry for which he had come. He said that it may be related to some Manufacturing Industry and had come for interview just because the recruiter called him on Sunday evening based on his online profile.
I rejected him as he didn’t bother to know anything about the Industry / company he was applying…
Recently I had many queries from leaders wanting to know about FinTech from different Industries esp Banking & IT Services. Hence wrote this article as a primer.
What is FinTech
FinTech is an abbreviation for “Financial Technology”.
Here are 2 formal meanings from dictionaries:
- Oxford Dictionary : “Computer programs and other technology used to support or enable banking and financial services”.
- Merriam Webstar dictionary: “Products and companies that employ newly developed digital and online technologies in the banking and financial services industries”.
FinTech is also in Top 13% words on Look up Popularity as of today …
According to this dictionary, 1971 was first year when this word was used.
Are you using FinTech as a customer?
We pay money, buy products online, pay from e-wallets and social media channels. Have we thought what is working behind these platforms / apps?
Yeah, you got it right…
FinTech is driving our world from how we buy, borrow, save, shop and use everyday services. As per EY report, here are some interesting facts of FinTech penetration:
Worldwide, 96% of consumers know of at least one alternative FinTech service available to help them transfer money and make payments
In India, FinTech adoption has grown to 87% in 2019 as compared to 52% in 2017
Evolution of FinTech
FinTech has existed in many forms over decades — For example innovation through ATMs, Signature verifying technologies.
This word was officially added to Merriam Webstar dictionary in 2018.
Having worked in the BFSI sector in multiple roles across organizations for over 2 decades, I personally found this FinTech jargon gaining significance after 2008 Financial Crisis.
After this crisis, banks focused lot more on Compliance, Paying fines, Risk management while Innovation took the back seat. It was the same time, when many technology break through was changing lives of consumers — Uber, Whatsapp, iPhone, AirBnB, WeChat … These created gaps in User experience between banks and new tech platforms. This is when FinTech companies came in to bridge the “Digital Experience Gap” and various forms of FinTech companies emerged.
Now FinTech revolution is happening in various areas like Artificial Intelligence, Person 2 Person (P2P) lending, Big Data, Block Chain, Robo advisors …
Rapidly growing Global FinTech Ecosystem
Over decades, fintech has morphed from being associated with start ups to becoming a major facet of established and legacy financial institutions. Through collaboration, various forms of FinTech Ecosystem is emerging week on week.
Yes, I said weeks because that is the pace at which this Industry is changing. It’s an Agility game.
FinTech is changing economies of the world. Here are some interesting facts from last 3 year reports from various sources:
- The overall global fintech funding across mergers & acquisition, private equity and venture capital was $105 billion in 2020.
- VC investment in fintech globally also increased year-over-year to over $42 billion investment from over 2000 deals.
- Global investment in cyber security quadrupled — from $500 million in 2019 to over $2 billion in 2020.
- Emerging markets are leading the way in both China and India, the adoption rate is 87%. Close behind are Russia and South Africa, both with 82% adoption. Among developed countries, the Netherlands, the UK and Ireland lead in adoption, reflecting in part the development of open banking in Europe.
- There are around 140+ FinTech Unicorn Companies which are valued at US $1 billion or more. Check out the list here.
- More than $1 billion was sent and received in the form of remittances globally every month via mobile money in 2020. Number of registered accounts grew by 13% to 1.2 bn more than forecast done for 2020.
These are indicative numbers to understand the pace and depth of change. Refer to detailed reports in links provided in comments section or latest reports.
Summary:
While FinTech companies started as a threat for the banks, today they have emerged as the complementing partner, game changer partner for bank’s digital transformation dreams.
After the pandemic, given the demand for contactless payments, ecommerce, Government payments, FinTech investments would increase also reaching out to the unbanked population.
Fintech is a major player in the global economy, business landscape and fabric of modern society at large. The field is rapidly growing and is here to stay for the long run creating huge impact.
What do you love about FinTech?
Do you want to know if you would fit into FinTech culture and more interesting details. Await next FinTech Series …
