After the financial collapse of 2008, many young dynamic startups entered the Finance industry with disruptive technologies in their arsenal and they completely changed the landscape of the finance sector a decade later by 2020. These new breeds of startups spun off a new industry FinTech that were the fast movers to capitalize on scientific, technological, and digital advancements of the 2010s.
The scale at which the FinTech industry caused disruption can be seen from the fact that even traditional financial institutes followed the FinTech startups to stay relevant in the market flooded with tech-savvy millennial users.
Let us take a journey of how various technological advancements of the last decade converged together to disrupt the world of finance.
The Mobile Revolution
In 2007, Steve Jobs introduced the first touch smartphone iPhone and a year later in 2008 the first commercial Android touch smartphone was launched. It was the first of their kind touch devices which caught the user’s imaginations worldwide with the potential of its use.
Both Apple and Google created their own app stores and invited lots of developers to build their own apps and host them on their app stores. The excitement of having such a variety of apps including games on a touchphone attracted lots of users to either iPhone or Android devices by the start of 2010. It was also the time when 3G was penetrating in all the prominent countries globally and it was becoming more affordable
So, soon by the early 2010s smartphone user base started to outnumbered the traditional phone users. It is not a coincidence that Fintech startups also started appearing on the scene around the same time. These startups could foresee that the future belongs to mobile. To begin with, they created their platforms keeping mobile in mind. They not only created apps but also designed their websites that were responsive to small devices like mobile and tablets.
With the mobile-first platforms, they gave users the convenience of banking anytime anywhere which was really welcomed by the millennials dominated market.
According to Deltec Bank-Bahamas - “The ease of accessing banking facilities on their smartphone is just the beginning. The smartphone revolution created a ripple effect that directly and indirectly culminated in the emergence of Big Data, IoT, Artificial Intelligence that opened a new gate for FinTech industries.”
Big Data and Artificial Intelligence
Big data is the name given to the huge amount of insane data that internet devices are generating, of which personal devices like smartphones are the major contributors. These data are so huge that traditional databases could not support it and between 2012-2015 big data technologies like Hadoop, Spark started becoming popular for its ability to process big data easily.
Around the same time, by mid-2010s the technological advancements in computational hardware had enabled some success stories in the field of deep learning, a branch of machine learning. This resulted in a whole new interest in Artificial Intelligence and soon the enterprises realized that they can mine big data by applying data science and machine learning techniques to extract hidden valuable information.
Riding this wave of digital and technological advancements, financial companies quickly capitalized on Big Data and Artificial Intelligence. They started using data science and machine learning techniques to detect financial frauds and anomalies, do risk prediction and analysis, create personalized investment plans for users, create chatbots for customer interactions, analyze and predict market growth or crash, etc.
It is worth noting that even Cloud Computing’s emergence in the 2010s played a crucial role to allow small and medium FinTech companies to focus on their innovation and not worry about procuring expensive servers. The virtual storage and computing hardware offered by likes of AWS, Microsoft Azure became the most cost-effective option to deploy their applications.
Blockchain
The origin of Blockchain dates back to the year 2008 when it was used to create cryptocurrency Bitcoin. At its core, the blockchain is a decentralized and distributed system of ledgers across a network of computers that can be used to save transactions. Since the transaction records are distributed over a network it is impossible to tamper this transaction in isolation without making changes in all the ledgers.
During the early days, blockchain was synonymous with cryptocurrencies especially the bitcoins. But soon people realized that the principle can be used in any industry and without a surprise the finance industry was quick to embrace it since the blockchain database promises a single version of truth for transactions. This adoption of blockchain in finance ensured more secure transactions, reduction of financial frauds, fast settlement of transactions without reconciliations, In fact, financial institutes are also implementing blockchain for the KYC process that can be shared across the banks, thus enabling fast onboarding of customers.
Internet of Things (IoT)
Internet of Things is referred to huge numbers of smart devices that are connected to each other over a network (usually internet) and they exchange information with each other or cloud platforms to create an intelligent ecosystem.
With the increase of smartphones, smart wearables and sensors, IoT opened a new possibility of innovation for financial companies. The biggest revolution came in the form of POS payment by smartphones either by digital wallets or by NFC enabled phones.
Health insurance companies are offering discounts based on fitness data obtained by smart wearables or smartphones. IoT in FinTech is still in a nascent stage and companies are coming up with various innovations.
Conclusion
As we can see that there was a simultaneous rise of many technologies in parallel in the early 2010s. All these technologies converged to create a disruption in the world of finance and became a new industry in itself known as FinTech. Currently, there are so many advancements being made in the area of Quantum computing and it would not be surprising to see the FinTech industry capitalizing on in at the best possible opportunity.
Disclaimer: The author of this text, Robin Trehan, has an Undergraduate degree in economics, Masters in international business and finance and MBA in electronic business. Trehan is Senior VP at Deltec International www.deltecbank.com. The views, thoughts, and opinions expressed in this text are solely the views of the author, and not necessarily reflecting the views of Deltec International Group, its subsidiaries and/or employees.
About Deltec Bank
Headquartered in The Bahamas, Deltec is an independent financial services group that delivers bespoke solutions to meet clients’ unique needs. The Deltec group of companies includes Deltec Bank & Trust Limited, Deltec Fund Services Limited, and Deltec Investment Advisers Limited, Deltec Securities Ltd. and Long Cay Captive Management.
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