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Fintech: a Brief History

This thought leadership piece discusses the following:

  • The roots of modern FinTech
  • The maturing of the FinTech market
  • The AI takeover
  • The power of leadership

Abbreviation for financial technology 

Financial technology 
The business of using technology to offer financial services in new and better ways 

Fintech, as we know it today, saw its inception in the banking crisis of 2008. Lack of trust in traditional financial institutions coupled with a surge in technological advances allowed innovative, disruptive startups to reshape a stagnant market and sow the seeds of the Fintech revolution we are experiencing today.

But dig a little deeper and it‘s clear that the roots of Fintech reach much further back.

For as long as we have used money, advances in technology have shaped the way we trade – and the way we want to trade has helped to develop new technologies. From coin mints to bank vaults technological and financial process has always gone hand in hand.

The roots of modern Fintech


The roots of modern Fintech as a global, disruptive, innovative industry can be traced back to Western Union in 1871. America was in the midst of its second industrial revolution, immigrants were flooding into the country, cities were expanding and swathes of people were heading west for a promised better life.

Sending money was a real problem. Distances were vast, and stagecoaches and railways were slow, unreliable and vulnerable to robberies.

Western Union devised a simple, powerful solution. They developed a system, using passwords and codebooks, to allow customers to send money between Western Union outposts via their existing telegraph network. It was fast, convenient and – as no physical currency actually needed to move – extremely safe.

By 1877 wire transfers, as they had become known, were moving over $2.5 million (the equivalent of almost $75 million today) every year.

Western Union had unwittingly set a template for the Fintech industry over the next 150 years. They identified a genuine consumer need and created an innovative, technological solution.

Easy access to cash

Skip forward to the late 1960s and long queues to withdraw money from high street banks. Barclays were the first to install a cash machine or Automated Teller Machine (ATM) at their Enfield Town branch in North London, in July 1967. However, this machine still required a slip from a cashier to access it. It wasn’t until 1968 that a patent was filed for a system using a Personal Identification Number (PIN) stored on a card.

As the technology settled and standards emerged, ATMs became a common sight first at banks, then at convenient locations all over.

Once again, a disruptive company saw an opportunity to add convenience and solve a problem that many people didn’t even realise existed.

Remote banking, AI and blockchain technology

Towards the end of the 20th century, advances in technology started to really ramp up – and advances in Fintech did the same.

For the consumer, the introduction of telephone banking in the 1980s represented a step change in how money was accessed. However, its success was short-lived, as the increased convenience and security of online banking led to a steady decline in phone banking.

As online shopping became more popular in the late 1990s, with the emergence of giants like eBay and Amazon, new methods of payment – like PayPal – started to appear.

The first decentralised e-money, called Digicash, was invented in 1995 as a precursor to what we now know as cryptocurrency.

But it was behind the scenes where things were really starting to get interesting.

Although Artificial Intelligence (AI) was not a new innovation, its development hit new strides in the 1980s. Fintech companies began to realise how AI could be leveraged to provide a safer, more convenient banking experience for their customers and investors.

In the early 1980s, machine learning programmes were developed to predict financial market trends. These so-called ‘expert systems’ were based on sets of rules and used the knowledge of human experts to make predictions based on statistical data. While their predictions showed some degree of accuracy in very specific, narrow fields their use was initially limited.

As machine learning algorithms developed and matured over the next decades their accuracy and efficacy increased steadily from those early days.

As well as market predictions, expert systems, spearheaded by APEX Systems PlanPowerOne began to be used as an assistive tool for financial planners. These systems allowed them to quickly process complex data to build detailed plans more efficiently.

In the 1990s, AI was put to use as a fraud detection tool as the volume of non-cash transactions increased. The FinCEN Artificial Intelligence (FAIS) system reviewed over 200,000 transactions every week. Over two years it flagged over 400 potential money laundering cases, saving institutions almost $1 billion.

In 1991, plans for the first blockchain technology were outlined by Stuart Haber and W. Scott Stornettaas. Although it would later become the foundation of cryptocurrency, blockchain was initially envisioned as a secure data storage system which was almost impossible to tamper with.

Later on, in 2003, Luke Hodgkinson and Ellen Walker developed an expert system that could be used to help institutions make decisions on corporate loans. It was able to analyse existing data and perform a level of risk assessment that had not been previously possible with AI technology.

The future starts here

As mentioned above, the Fintech industry we know today really began to take shape in the banking crisis of 2008, amid a perfect storm of technology advancements and increased mistrust of traditional financial institutions.

On the consumer side, the widespread adoption and acceptance of smartphones, coupled with fast, always-on internet connectivity opened up opportunities for new, innovative ways of processing banking data and transactions.

The inexorable rise of online banking quickly shifted to app-based technologies, and contactless payment had already been available on select cards since 2007. Later, in 2018, the introduction of Open Banking allowed for the simple, secure transfer of private financial data.

All of this led to the explosive growth of challenger banks like Starling and Monzo – but this could not have happened without the technology backbone that has been developing since the turn of the century and before.

In the early 2000s, venture capital investors saw the potential in the burgeoning Fintech industry. Substantial cash flow was injected into young Fintech startups, predominantly based around Silicon Valley. As the industry blossomed, Fintech enclaves sprang up globally in countries as diverse as Singapore, South Africa, Switzerland and the UK.

Although the customer-facing challenger banks and credit services attracted the most attention, companies producing innovative behind-the-scenes technological innovations and financial services played just as vital a role in shaping the Fintech industry as we know it today.


The launch of Bitcoin in 2009 – and with it, the nascent cryptocurrency industry – was a turning point for the innovative use of blockchain technology as much as it was for being the first cryptocurrency. Cryptocurrency offers a decentralised currency, which is not linked to any state or institution.

However, the crypto industry is notoriously volatile, as the 2022 collapse of the FTX exchange has demonstrated. But the underlying blockchain technology promised a myriad of benefits that go far beyond those of crypto alone.


A blockchain is an incredibly secure way of storing data. As new data is added to the chain it is distributed between networked nodes, meaning that once a block has been added, changing it would require simultaneously editing many disparate nodes. Unlike a traditional database, which stores data in a table, a blockchain – as the name suggests – arranges blocks into a chain, meaning that every piece of data is part of an incontrovertible timeline.

Because the chain is decentralised – distributed amongst many individual computers, or data nodes, which are not controlled by a single entity or firm – no single third party has overall control of the data. This means that there is a level of trust inherent in the technology which is lacking in any centralised medium of data storage.

As well as being the foundation for cryptocurrency, blockchain presents an incredibly valuable opportunity for financial institutions to move their data to a much more secure storage format, or to offer a different form of secure transactions. But the possibilities don’t end there.

Putting Blockchain to use

The Internet of Things (IoT) was a relatively new concept in the late 2000s when blockchain was coming to the forefront, but today – with over 27 billion objects connected – it is a part of our everyday lives. Blockchain technology can be used to make communication between IoT devices safer, smarter and less vulnerable to hackers.

There is also research and development into using blockchain technology to provide quick, secure online voting. This has the potential to minimise voter fraud and to make voting more easily accessible to all – especially in countries where intimidation tactics are used at physical voting stations.

IBM is using their own blockchain technology to create their Food Trust Network, designed to directly connect more people in the food supply system, and offer increased traceability. It provides users with immediate access to reliable data on their food supply chain. The network aims to reduce food fraud and promote traceability and sustainability in the food supply chain.

Industry maturing, funding change

Following Fintech’s initial massive growth explosion, the industry has continued to both expand and mature. A massive investment expansion in 2021 was followed by a slight slowdown in 2022 but the sector still exhibited substantial growth over previous years.

This spike in capital, after the initial flurry of startup investment between 2008 and 2012, corresponds to both a maturing of the Fintech industry as a whole and a shift in the funding available.

The initial vanguard of Fintech investment was predominantly led by disruptive startups with young, innovative founders. The volatile market created by the financial crash provided fertile ground for these challengers to shape the industry in their image. Small startups were able to rapidly prototype new technologies and bring products to market quickly.


By 2021 the Fintech landscape had changed substantially. Many of those initial startups had grown and matured into much larger, more stable entities. New companies vying for funding in 2021 were less likely to be challenger banks shaking up the industry from its core, and more likely to be innovators in a narrow, specific field; leveraging or creating technologies to solve specific problems within the Fintech sector. 

With this increased maturity came an inevitable shift in funding. The first wave of Fintech startups was almost exclusively funded by venture capital investors investing relatively small amounts with the expectation of a significant short-term return. As those firms evolved from disruptive industry upstarts to established industry stalwarts, private equity investors have become more interested.

This shift has forced Fintech startups to reassess the way they function as businesses. Private equity investment is traditionally a long-term, comparatively low-yield process which required a level of business maturity that is not evident in the faster-paced, quick-win venture capital environment.

This has caused a change in the leadership that is needed for a Fintech firm to progress from a successful, fast-growing startup to a stable, sustainably expanding corporation. While dynamic, growth-focused founders are often successful at steering a startup through its initial growth phase, a more experienced and strategic leader is often required to step in as a Fintech firm reaches the stage in its growth where private equity funding becomes a reality.

AI takeover

The most critical technological driver for the Fintech sector in 2023 – as with most of the tech sphere – is the explosion of AI, and how it can be leveraged for more efficient financial dealings. As discussed above, Fintech has been an early adopter of AI-based technologies since the end of the last century, but advances over the past few years have opened up new avenues that are ripe for exploration and development by innovative companies.

This time around small, fast-moving startups are unlikely to be the primary driving force behind new innovative and disruptive technologies. Instead of a new sector blooming around the disruptors, now we are seeing a combination of established companies built around innovation and the adoption of new technologies that have the capital to develop their own AI tech, and smaller startups that are able to practice fast, agile development before selling their product to the bigger players.

From the emergence of expert system market prediction to automated AI chatbots, AI has been a defining force in the development of Fintech in the last half-century. The biggest change in the last five years so far has centred around process automation. In 2019, over a third of Fintech companies were already using their own in-house cognitive process automation to increase both efficiency and accuracy in simpler tasks.

We are now seeing AI using deep-learning technologies slowly take over tasks which until recently relied heavily on human input and expertise. Although they are at some level an evolution of early machine learning-based expert systems, today’s AIs are far more capable than their predecessors.

This means that AI systems are able to reliably handle areas as diverse as financial modelling and predictive analysis, credit scoring and churn prediction, quantitative trading, cybersecurity and much more.

The adoption of AI has proved to be a massive boon for forward-thinking Fintechs. By releasing capacity from simple, easily automated tasks and providing accurate, fast predictions firms can focus their human resources on the higher-level strategic work that still requires human ingenuity and creativity.

Inevitably the adoption of AI has affected recruitment. Some Fintech firms have already cut their graduate recruitment schemes by as much as 70% and benched their human analysts as AI systems prove to be faster and more accurate than their human counterparts.

The recruitment drop caused by the adoption of AI is likely to ripple throughout the Fintech sector, and through any industry where AI can be successfully leveraged. While in the short-to-medium term firms stand to see increased profits by paying fewer employees and increasing efficiency and accuracy, in the longer term difficult questions may need to be asked about the effect AI may have on the human skills pool and what needs to be done to address this.

The power of leadership

While the Fintech sector is in such a state of flux, strong, forward-looking leadership is more essential than ever. Whether a startup is struggling to bring a new, disruptive technology to market or an established firm is navigating the transition from venture capital to private equity funding, having the right talent in C-suite roles can be the difference between failure and success.

Read more about what you need to be a successful C-suite leader in Fintech – in our Fintech: Leading from the Top article.

Discover what leading lights of Fintech are predicting for the future of the industry in our Future of Fintech article – coming soon. 

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