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  • Writer's pictureNisha Sashidharan, Head of Marketing

The Evolution of the Fintech Space

Fintech, a combination for 'financial technology,' refers to technology-enabled financial solutions used to improve the delivery of financial services. For both online, offline, or bricks-and-mortar companies, whether they are enterprises shops, gyms, or plumbers, fintech is set to revolutionize how money is collected and managed through a wave of integrated payment providers. Many still believe that fintech stands for the replacement of traditional banking, but, it is now proven that some of the most successful fintech companies have brought greater efficiencies to traditional financing and are innovating in the same space each day.

Fintech refers to software, algorithms, and applications for both desktop and mobile-based tools and at times includes hardware. Fintech platforms are designed to perform run-of-the-mill activities such as depositing checks, transferring money among accounts, paying bills, or requesting financial aid. In recent years, they have performed technically intricate actions like peer-to-peer lending or crypto exchanges.

But how far back does fintech go?

The phrase fintech was added to the Merriam-Webster dictionary as recently as 2018, but, its concepts and ideas date back decades. Now the term reminds us of cryptocurrencies and start-up banks, but its roots can be traced to the late 19th century when people could move money around by telegrams and morse codes. Right after that, followed a cutting-edge innovation at the time, ATMs in the 1860s. The evolution of fintech has been gradual, but, each innovation in this area has been distinctive and has changed the way consumers interact with their money.

Current fintech landscape

Today the new-age customers are all about speed, comfort, and ease of access. All fintech firms with the means of their apps and digital systems have hit the right nerves of this fast-paced generation and automated the tedious traditional processes, providing great ease to the customers. For instance, today's consumers can avoid visiting bank branches for applying for a loan or even to get a mortgage. Moreover, portfolio management has become easy as investors can pursue their investment options online or even take the help of chatbots to make decisions without having to meet a financial expert face-to-face. Fintech is so effective because it is based on algorithms and not human skills or opinions and yet has the expertise of a traditional broker/advisor, a financial expert, or an investment banker. It helps users navigate financially complex tasks seamlessly without interaction with an actual human.

Fintech in 2021 has gained wider acknowledgment because of the lack of options due to the pandemic. We see many firms aligning their focus on offering high-quality customer service and experience to their customers. Moreover, the pandemic showed how beautifully capable fintech is to bridge the gap between cutting-edge technologies and the financial industry to accelerate transactional processes beyond territories. It has established itself as one of the fastest-growing sectors, with companies now integrating technology in all sub-domains of finance. Fintech has been a part of our everyday lives, if not in our vocabulary. But it has started being a part of our conversations since the transformation of society into a more technologically modern one.

In the words of Bill Gates,

“Digital technology provides a low-cost way for people in developing countries to send money to each other, buy and sell goods, borrow and save as long as the financial-regulation environment is supportive.” Proving Gates' statement correct, the following sects came into action by aptly transforming conventional financial services to today's digital era.

  • Government bodies (central banks, regulators, wealth funds, etc.)

  • Traditional financial services firms

  • Tech companies offering financial services

  • Firms providing technology for financial transactions

The evolution of fintech in India has also been extremely promising. According to the recent KPMG Pulse of Fintech H1'21 report, the fintech sector attracted over $2 billion in investments in the first half of 2021. This shows that the total investment into India's fintech sector has already crossed 90 percent of the 2020 figure. It is maturing rapidly, and with the buoyancy in the IPO market in 2021, fintech unicorns will be able to tap into the strong capital market by going public. This amount of growth in the sector also confirms the understanding, acknowledgment, and acceptance of the various domains where fintech has marked a significant difference. Therefore, it's an excellent sign to possibly say that the remaining three months of 2021 may see the continuation of the fintech boom, positively modeling future businesses.

In our upcoming posts, we'll be exploring the COVID-19 pandemic and the fintech industry and how the latter was and will be seen in the light of the pandemic. Stay tuned!

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