FinTech—The Future of Finance is Already Here

Lukasa Insights

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The Future of Finance is Already Here  

FinTech, short for Financial Technology, is a topic that’s getting lots of buzz right now—but for many people the concept is still somewhat mysterious. They may associate it exclusively with slick Silicon Valley start-ups or cryptocurrencies. They may not realize that they’re using fintech all the time in their modern daily lives.

So first, what is fintech? 

FinTech is a broad term that refers to any technology applied to improve, enhance, streamline, digitize, or automate processes and services within the financial industry—on both the business and consumer sides. It encompasses hardware, software, algorithms, applications, AI and machine learning, computer and mobile platforms, and more. FinTech tools can make financial processes and transactions faster and more efficient, as well as safer and more secure, while enriching user experience.

A fintech company is any firm that provides fintech tools to businesses and/or consumers. For businesses, this can mean technology to manage back-end financial processes and/or consumer-facing transactions. B2B “core fintech” services began with payments and banking-as-service, and have expanded into lending, ecommerce infrastructure, data services, insurance, digital wealth management, as well as tools for adjacent industries such as real estate and HR benefits.

FinTech’s forms and uses are expanding rapidly and exponentially, and will continue to do so because its possibilities are almost endless.

Traditional banks—not the most agile sector, historically—have embraced fintech to keep pace with their digitally-minded customers who demand simple, quick transactions and a sleek experience at every touchpoint for even their most sensitive, private financial business. Therefore, even the titans of old-fashioned banking have rebranded themselves like exciting start-ups, and are operating more like them too. 

Every time you pay the babysitter over Venmo, upload a check to your bank with a snapshot on your smartphone, order a product or pay a bill online, summon an Uber or Lyft, or manage investments with a service like’re using fintech tools. Though relatively new, these technologies have become so ubiquitous so quickly, we can hardly imagine life without them anymore. 

In fact, the first real fintech tool to enter the hands of the public, the regular consumer, was the credit card in 1950.

But the origins of fintech actually date back to the mid-19th century, and the installation of the first transatlantic cable, which began the globalization of finance. The history of fintech can be divided into three basic eras:

FinTech 1.0 began in 1886 with the transatlantic cable and lasted until 1967, when Barclay’s invented the first ATM. 

FinTech 2.0 spans 1967-2008 and includes the beginning of NASDAQ, the first digital stock exchange, in the 1970s; the aggressive Wall Street era of 1980s when banks began using mainframe computers; and the 1990s when customers started banking digitally and PayPal was launched. 

FinTech 3.0, the current era, began in 2008. The loss of faith in the big banks that followed the financial crisis opened the market to new technologies and providers. Smartphones, especially, have transformed the way we engage in transactions of all kinds, including banking. Key features of fintech 3.0 include the general move away from the big established banks, and the hunger for innovation and enhanced customer experience that new technologies can both fulfill and arouse.

Current fintech trends:
One aspect of fintech seeing enormous growth right now is digital banking. “Neobanks” like Chime, Varo, and Current are the digital disrupters of the banking sector. Though many of them partner with traditional institutions to insure their products, these mostly-digital or digital-only enterprises can streamline many services; they’re transparent, nimble, and typically low-fee. 

Another big trend is in AI and machine learning, which can harness data science to provide valuable insights and enhance decision-making, improve security, reduce operational costs, and provide modern customer support services like chatbots. Machine learning can also help financial businesses adapt to the individual customer, providing products and services that anticipate and meet their exact needs.

The uses of blockchain technology in the financial sector are also accelerating rapidly. Beyond cryptocurrency, blockchain can enable super-fast, lower-cost financial transactions with no middleman needed, and offer total transparency and exceptional security, facilitating peer-to-peer networks. 

At Lukasa, we know that the array of available fintech tools can seem overwhelming. We’re here to help. Our experts partner directly with your team so we understand your company and your needs intimately. We customize innovative, integrated, future-focused solutions for your unique business—including the fintech tools that will supercharge your organization for optimal effectiveness and growth.

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Lukasa empowers small-to-medium-sized businesses by designing and implementing custom business and technology solutions that drive efficiency, productivity, and innovation, enabling them to stay ahead in today’s rapidly-changing competitive landscape.