The word fintech refers to financial services whose provision is linked to technological innovations.
The term fintech comes from two English words: finance (finance) and technology(technology). The translation would be something like financial technology. That is, offer financial services through new technologies.
The origin of the word fintech
Although this word may seem relatively recent, the truth is that it emerged more than 25 years ago. According to Marc Hochstein, in an article written on the American Banker website . The term arises in the early 1990s thanks to a project led by Citicorp. That is, by the financial company that is known today as Citigroup.
It would be at the nascent annual ‘Smart Card Forum’ conference, where Citicorp, trying to overcome its bad reputation for resisting technological collaboration with other companies, would reaffirm its position. They went from refusing to collaborating with the new technologies to affirming: «Citicorp is collaborating because times have changed» would say Catherine Allen, executive of Citicorp at that time.
The project that would lead the company from that moment would bear the original name of fintech (Financial Services Technology Consortium). It is at that precise moment, and not in another, when the term is born whose use has been exponential in our society and in the financial industry.
Fintech company or Fintech service
Since it is a term whose precise definition is still in its infancy, it is widely debated whether fintech is a type of company, a type of service or a series of people. Hence, the plural term ‘fintechs’ is beginning to be used to refer to a set of services, to a number of companies or to the people who lead these companies.
Despite the above, the evidence shows us that these meanings are not incompatible. There are companies, specifically start-ups , whose services are exclusively fintech and traditional companies that provide some fintech services. Therefore, the term refers to an open idea. Open idea that perfectly matches the word that appears in its own definition: innovation.
Types of fintech companies
Next we will see a series of services that apply technological innovations to provide financial services:
- Loansand credits: Through the internet some companies offer financing services such as crowfunding and crowlending . This type of services also includes the granting of online credits. The latter grant credits or not according to the decision of automatic algorithms.
- Payments and transfers:It is no longer necessary to go to a bank branch to make such arrangements. Payments and transfers can be made from a computer. What’s more, you can even get money at an ATM without a card. Only one bank mobile application is needed. Many fintech transfer companies are expediting and lowering the payment of money.
- Investment:From new and advanced trading platforms, through robots that manage assets , to personalized financial advisors. Some services of this type are attracting a lot of capital and traditional investment funds already see them as a threat to the sector.
- Personal finance:Through mobile applications, new services are offered that make personal finances more intelligent, transparent and simple. These types of services help users to plan, control their expenses and save.
- Currencies: Especially when we travel to countries with a different currency we need to change our payment currency. This process has traditionally been done through banks. Today, thanks to the development of technology, we can exchange currencies with other users through the internet.
- Blockchain: The technology through which Bitcoin workscould be the future of financial transactions worldwide. Currently, a broker is needed to make a transfer. For example, a bank. But what if intermediaries were not necessary? Blockchain technology creates a public, digital and decentralized registry. This record is safe, anonymous and not falsifiable.
Causes and consequences of fintech expansion
The causes undoubtedly have to do with the new possibilities offered by technology. Society moves towards new horizons and investigates new ways of developing.
In fact, the business world has tended to advance historically in the direction of efficiency. That is, getting the same or better faster, cheaper and more transparent. That said, the high prices of certain financial services have been a cause of fintech development.
At the same time, fintech development is resulting in a continuous lowering of the costs of certain financial services. Improvements that also extend to speed, transparency and security.