Back in high school, I hated studying math and anything science-related. I have once even failed a physics final exam. Fun times. With all due respect to people in STEM, science is colorless (at least for me). I guess I am not wired to solve long division or be fascinated by how plants get their food (aka photosynthesis). And, guess what, Monsieur Amir? I don’t use integrations or derivatives in my day-to-day life. Yet, I have always enjoyed humanities. Classes like philosophy, French literature, and history were thought-provoking. Hence, I decided to combine my two favorite things in one piece: history and writing. Ladies and gents, today’s topic is the history of Fintech. To understand the development of Fintech throughout the years, we will break it into four stages, kind of like the stages of making a club sandwich (Yes, I’m hungry). Let’s get to it.
🍞The First Layer of Bread- Fintech 1.0 (1886-1967)
With its catchy portmanteau, most people believe that Fintech is a relatively new industry. Yet, it dates back to the late nineteenth century. A guy threw a cable in the ocean, and it shaped the banking we know today. Let me give you some context. In 1886, the first transatlantic cable was successfully laid, revolutionizing the way institutions communicate beyond their local area. Almost three decades later, in 1918, Fedwire enabled the world’s first electronic fund transfer by using the Morse code system and telegraphy. Then, in 1950, credit cards made a debut. Frank McNamara was sick of forgetting his wallet while dining at a restaurant. So, he decided to create the first multipurpose charge card, the ‘Diners Club’. Plastic cards then slowly began to replace cash. This era is the infrastructure that laid the groundwork for today’s Fintech. We can call this the first layer of bread.
🍅🧀Turkey, Tomato, and Cheese- Fintech 2.0 (1967-2008)
The second stage is extremely crucial. How can we make a club sandwich without turkey, tomato, and cheese? It is a pivotal era for Fintech too. It started with Barclays’ installation of the world’s first ATM in 1967, which shifted the financial industry from analog to digitalization. The 1970s were also super eventful. It witnessed the establishment of NASDAQ, the first digital stock exchange in the world, and SWIFT (Society for Worldwide Interbank Financial Telecommunications), a network facilitating communication and cross-border transfers between financial institutions worldwide. Then, the internet joined the group chat and changed the rules of the game. The 1980s and 1990s were marked by the emergence of online and digital banking. This era includes the launch of PayPal, which paved the way for online payment solutions. Yet the good days didn’t last for long. The 2008 global financial crisis put an end to this era.
🥬Lettuce and Mayo- Fintech 3.0 (2008-Today)
The post-financial crisis era is marked by an appetite for innovation. Mistrust in the banking institution made room for new players to join the game (aka startups) *the Nexta card blushes*.
It started with the birth of the cryptocurrency, Bitcoin, in 2009. And let’s not forget the key player that shaped the Fintech industry: smartphones. The mass-market penetration of smartphones paved the way for digital and neo banks. I know at this stage we have only added lettuce and mayo (smartphones and Bitcoin), which might be add-ons, but the sandwich wouldn’t be complete without both.
🍞Last layer of Bread- Fintech 3.5
The last layer of bread isn’t really the last. There are endless possibilities for innovation. Technological advancements continue to revolutionize finance. Fintech 3.5 is shifting the financial sector from a Western-dominated industry to a truly global one.
From banknotes and plastic credit cards to digital apps and neo banks, banking is ever-evolving. The question is: what’s next? Are we going to add new ingredients to the club sandwich? Or will the recipe completely change?