22 Oct The evolution of Fintech: A new post-crisis paradigm?
“Financial technology” or “ Fintech ” refers to technology enabled financial solutions. FinTech is often seen today as the new marriage of financial services and information technology. However, the inter-linkage of finance and technology has a long history and has evolved over three distinct eras. Fintech 1.0, from 1866 to 1987, was the first period of financial globalization supported by technological infrastructure such as transatlantic transmission cables.
This was followed by Fintech 2.0, from 1987-2008, during which financial services firms increasingly digitized their processes. Since 2008 a new era of Fintech has emerged in both the developed and developing world. This era is defined not by the financial products or services delivered but by who delivers them. This latest evolution of Fintech, led by start-ups, poses challenges for regulators and market participants alike, particularly in balancing the potential benefits of innovation with the possible risks of new approaches.
This paper analyses the evolution of, and outlook for, the Fintech sector and considers the regulatory implications of its growth. It does so by first considering the interlinked evolution of financial services and technology, in particular information technology. The Fintech environment is then explored in the broader evolutionary context, which is necessary to understand its current status and possible future development. The evolutionary analysis is then used to develop a topology of the Fintech landscape today, focusing particularly on the impact of the Global Financial Crisis of 2008 and related post-crisis regulatory developments.
