Technology has always played a key role in the financial sector in ways that most people take for granted and might not even notice. In examining the timeline of FinTech developments, the last 65 years paint a picture of continued innovation and evolution.

In the global FinTech space, the 1950s brought us credit cards to ease the burden of carrying cash. The 1960s brought ATMs to replace tellers and bank branches. In the 1970s, electronic stock trading began on exchange trading floors. The 1980s saw the rise of bank mainframe computers and more sophisticated data and record-keeping systems. In the 1990s, the Internet and e-commerce business models flourished. And now in the 2000s we are seeing virtual or branches banks.

 

Clearly, the sector has come a long way even as more opportunities continue to emerge. What was once seen as a ‘Utopia’, an ideal financial system with digitized operations, seamless transactions and maximum reach, now seems like a reality!

Over time, the above transformation has seen the FinTech sector move from using cash machines to fully-fledged online banking systems, remote access capabilities as well as digital currencies just transcending the mere transactions into a complete gamut of digital financial services.

Financial inclusion has always been a concern in most countries of the world. It has been more so in India due to the demographic and geographic conditions of the country. It has always been a challenge to reach out to the underbanked rural areas. Opening bank branches is an expensive way of providing financial services. As per a study commissioned by the World Bank, banking penetration was 45% among the middle and high-income groups while only 5% among the low-income group in emerging markets of the world, before the launch of branchless banking.

 

This issue was a major problem. The telecommunications industry, on the other hand, was booming. Around this time, it was observed that mobile ownership was going up at a steady rate across all geographies of the world since 2000. There has been the addition of 3.3 billion unique mobile users in the decade between 2000 and 2010.

The Government of India has been smart in recognizing the potential in the branch less banking model and have been supporting the movement for quite some time now. In 2006, the banking industry was opened to agents as a method of financial inclusion. These agents were called Banking Correspondents.

Correspondents bridged the gap between the banking institutions and the unbanked masses located in the rural areas. They act as representatives of banks and play a crucial role in promoting the financial inclusion in India. These BC’s charge a small commission value for every client onboarding, transactions or deposits done by them, thus acting as an additional source of income helping in their prosperity.

Though this model was initially started as a “not-for-profit” initiative, the banks went on to relax the strict norms to include “for profit” organisations to widen the horizon of outreach and offer banking services like accepting deposits, allowing withdrawal, collecting loan repayments and checking balance etc.. in the remote locations of the country. Thus providing access to the lowest rung population and including them in the main stream finance with a chance at equal opportunities.

FinTech of the future

Gone are those days when a customer had to run to the bank early in the morning, stand in long queues or wait for his/her turn with a token in hand. Gone are the days when countryside folks travelled hours to visit a bank just to check their balance. Today, all one needs is a device, and an internet connection and banking transactions can be done within minutes by yourselves or with help of correspondents.

2018 was a stellar year for FinTech with over 1,700 deals worth nearly $40 Billion.

Key highlights from 2018 FinTech Scenario:

  • FinTech is growing on a global scale with deals outside of core markets (US, UK, and China) accounting for 39% of deals.
  • The US remained the top market for deals with 659 investments worth $11.89B funding, both a new annual high.
  • There are now 39 VC-backed FinTech unicorns worth a combined $147.37 Billion.

Branchless Banking

Convenience all the way, be it urban based tech savvy customers or customers who are located in a rural area, there are a number of opportunities open today to access banking services right from the comfort of their home or hometown.

The Blockchain Technology

Blockchain was invented and launched in 2008 by Satoshi Nakamoto, a seasoned and anonymous Fintech enthusiast. The tech has in the last decade alone evolved so much as to giving rise to what many know today as cryptocurrencies (virtual money), such as Ethereum and Bitcoin. If fully adopted, it will enable banks to process payments more quickly and more accurately while reducing transaction processing costs and the requirement for exceptions.

Mobile Payments Technology

Mobile payments are not new to many consumers. They have been around since the 90s when PayPal came to existence, and since then, many other similar services have continued to emerge, including Apple Pay, Android Pay, PayTM, Google Pay, just to name a few. Going forward, seamless payments across multiple digital channels will make the user experience quicker, smoother and hassle-free.

Cloud Technology

This is one of the most recent forms of technology in the FinTech industry. Cloud technology is characterized by a decentralized storage system that can be accessed by users from anywhere around the world.

From the look of things, FinTech is here to stay, and we are just beginning to feel its impact in all the sectors of the economy. Thanks to FinTech, today anyone can send or receive money around the world instantly, without forgetting how convenient the tech has made it for buyers and sellers alike to make transactions freely.

Evolute with its 30 years of hands on expertise is ready to ride the FinTech ‘Tsunami’ with ingenious products and solutions that will not only converge various payment platforms but also ensure finclusion by Techpowering the world with innovative solutions.

 

Sources:

https://www.cbinsights.com/research/report/fintech-trends-2019 

https://www.finsmes.com/2019/01/fintech-the-evolution-of-financial-technology.html

Image Credits:

Grameen Foundation

Banking Branchless