History and Evolution of Fintech
Financial technology, or more commonly known as Fintech, have come a long way from being simple banking tools into transformative forces that are reshaping the global financial landscape. While the term has gained immense popularity in recent years, it is often misunderstood or narrowly associated with trendy innovations like cryptocurrencies, digital-wallet and online banks. In reality, Fintech has a much broader scope, encompassing a range of technologies that have been integrated into financial services for decades. In general it can be any element that uses technology to facilitate a financial process. From the advent of ATMs and the introduction of credit cards to online banking and mobile payment solutions, Fintech has been quietly revolutionising how we interact with money. These innovations have not only made financial services more accessible and efficient but have also disrupted traditional financial systems, democratising finance in ways previously unimaginable. As we dive into the history of Fintech, we’ll explore its origins, evolution, and the critical role it plays in the modern economy.
1. Origins of “Fintech”
The term “Fintech” was coined back in the early 1990s and became more prominent by the 20th century, initially referring to the use of technology in the back-end systems of banks and financial institutions. It wasn’t until the early 2000s, with the rise of Internet-based financial services, that the term gained broader recognition.
The rise of peer-to-peer lending, mobile payments, and blockchain technology during the 2010s helped popularise the term “Fintech” globally. As startups like PayPal, Stripe, and Square exploded and disrupted traditional financial systems and processes, thus “Fintech” became a buzzword, often associated with Silicon Valley’s innovation culture.
Today, many people associate Fintech almost exclusively with digital-payment methods and cryptocurrencies. However, Fintech encompasses any technology-driven solution in finance. This includes older, widely-used technologies such as ATMs, credit card processing systems, and even banking apps. These technologies may not seem as disruptive as blockchain, but they have been central to the digitization of banking and finance.
2. Early Fintech Innovations
One of the earliest breakthroughs in Fintech was the creation of credit cards in the 1950s. Cards like Diners Club and American Express allowed consumers to make purchases without cash, a concept that revolutionised consumer finance. By the 1970s, Visa and MasterCard had introduced magnetic strips, allowing for digital processing of transactions.
The Automated Teller Machine (ATM), introduced in the late 1960s, was another pioneering Fintech innovation. As it allowed consumers to access cash or perform banking transactions at any time, breaking the rigid banking hours and expanding access to financial services.
Then by the 1990s, with the rise of debit cards and electronic payment systems, financial transactions became even more streamlined. These technologies may seem mundane today, but they laid the groundwork for future innovations, enabling faster and more secure payments while integrating more users into formal banking systems.
3. The Internet’s Impact on Fintech
The advent of the Internet in the 1990s led to a boom in online banking. By 1994, many banks began offering online services, allowing customers to transfer money, check balances, and pay bills from their computers using the internet. Meanwhile, the rise of e-commerce platforms like Amazon and eBay pushed the demand for secure online payments, which led to the growth of payment processors like PayPal.
Fun Fact: One of the early payments made on Amazon, back when e-commerce was not popular, was delivered by placing cash inside a floppy disk and mailing it to the seller.
The dot-com boom of the late 1990s also laid the foundation for Fintech’s rapid development. Despite the subsequent bust, companies like PayPal survived and became central players in the Fintech ecosystem. The introduction of mobile banking apps in the early 2000s further expanded access to financial services, allowing customers to bank on the go.
4. The Post-COVID Fintech Boom
The COVID-19 pandemic triggered a significant shift in how consumers and businesses interact with financial services. With physical stores forced to be closed, online transactions and contactless payments surged. Platforms like PayPal, Venmo, and Online banking in general saw record breaking growth as consumers avoided cash and in-person transactions.
The use of mobile wallets such as Apple Pay and Google Pay also skyrocketed, with more businesses adopting contactless payment systems to accommodate pandemic-related safety concerns. These digital payments became the new norm, driving the adoption of Fintech across a wider demographic.
This wave of financial inclusion highlighted Fintech’s ability to bridge gaps, especially in times of crisis, by offering low-cost, accessible financial solutions to underserved populations.
5. Pakistan Fintech Industry
The first ATM machine in Pakistan was installed in the mid 1980’s. In fact it is one of those innovations which Pakistan immediately adopted. And in terms of Financial Technology, Pakistan has come a long way since then. Today every bank offers the ability to open a bank account from the comfort of their smartphones, or transfer funds to any one within seconds using online banking. But Pakistan has also made its own stride in innovations.
In 2009 Telenor Launched Easy Paisa, Pakistan’s first mobile wallet, which also offered payments on the go, and branchless banking. Followed by Jazz’s launch of Jazz cash in 2012 (then known as MobiCash), which offered the same facilities. These 2 companies came into the market with a unique go to market strategy which didn’t require to have as many branches as a bank. But more so it allowed them access to a more broader market which was unbanked before. EasyPaisa and JazzCash with their approach were able to solidify their position in the rural areas, due to low presence of banks, and easy convenience branchless banking, whilst also targeting financial inclusivity. Today their business model is referred to as Mico Financing. Both Easy Paisa, and Jazz Cash are also now knows as “Telenor Microfinance Bank”, and “Mobilink Microfinance bank” respectively.
But that wasn’t the end of financial innovations in Pakistan. Since 2019 Pakistan has also witnessed a growth in popularity of Digital Wallets like SadaPay and NayaPay, further making banking more accessible to the masses, and further growing the economy. SadaPay had raised $10.7 M in seed round and NayaPay $13 M. And due to their infrastructure solely being dependent on technology, they were able to cut countless costs. It also targeted the financial inclusivity by targeting the younger generation by their amazing and simplistic User experience. And Just this year SadaPay was acquired by Papara, a Turkish fintech company for $50M, after approval from State Bank. Making Sada Pay one of the biggest successful startups of Pakistan.
Today we witness the growth of new fintech innovations startups every once in a while. We can now use NFC on our phones to transfer money, clear a check into our bank account via an app. But despite all this the potential of the fintech industry still remains untapped not just globolly but also locally.
In 2021, 28.2% of men had access to an account with a bank or financial institution, while only 13.5% of women did, according to the World Bank. And in total more than 53% of the population is banked, showing the huge potentials for new fintech companies to take advantage of.
Conclusion:
The fintech market is experiencing unprecedented growth and transformation on a global scale, with projections estimating its value to be projected to grow to USD 882.30 billion by 2030. This evolution is reshaping traditional financial institutions and fostering a wave of startups that are disrupting the status quo, with notable examples like digital banks and payment solutions gaining rapid adoption. Additionally, the global shift toward regulatory frameworks that promote innovation is encouraging greater financial inclusion, with an estimated 1.7 billion adults still lacking access to basic banking services.
From credit cards and ATMs to mobile wallets and decentralised cryptocurrencies, Fintech has been an integral part of transforming the global financial system. While newer technologies like blockchain and AI dominate headlines, it’s crucial to remember that many of the most impactful Fintech innovations—such as card transactions, ATMs, and online banking—have been in place for decades.
The COVID-19 pandemic accelerated the adoption of digital financial tools, pushing Fintech further into the mainstream. As Fintech continues to evolve, its ability to enhance financial inclusion, efficiency, and security will play a vital role in shaping the future of global finance.
As we look ahead, the interplay of innovation, regulation, and consumer demand will continue to define the trajectory of the fintech landscape, presenting both challenges and infinite opportunities for stakeholders worldwide.
Author
Uzair Feeroze
With 4 years of experience, I have learned plenty of things from different sectors. To be more precise corporate communication, marketing strategy, business development, fundraising, business intelligence and others. I love to connect with other individuals who are passionate about things as I am. Things like philosophy, wisdom, seeking out a purpose to life greater then themselves, to defy limits, to defy heights. Such are the people I love to meet and love to work with.