FinTech in the 1950s?
A recent article in Forbes argues that FinTech is not nearly as new a concept as we assume. They first point to the birth of credit cards in the 50s which brought efficiency and convenience — two staples of FinTech culture. In the decades that followed the industry would be introduced to ATMs, electronic stock trading, and computers being used to store massive amounts of stock and transaction data. Then with the growth of the internet remote banking became a reality and individuals were given the power to buy and sell stocks online without the needing a broker.
One interesting point Forbes makes about this 65-year evolution is that none of these developments harmed banks. In fact they note that the number of bank branches in the U.S. has grown from 18,000 in 1950 to 82,000 in 2014. However in all of these cases the technology not only became mainstream but was embraced and utilized by the banks.
Perhaps that’s where the disconnect between the 21st-century FinTech and that of yesteryear begins. Today’s technologies improve upon banking functions such as lending but leave the banks themselves out of the equation (for the most part). So is it reasonable to think that these new innovations could topple the banking industry?
At this point it still seems unlikely that FinTech will overtake traditional banks. As we’ve indicated before, a more reasonable scenario would find the banks forming more partnerships with FinTech firms. After all many start-ups still require banks to be a central player in their service offerings, including mobile payment companies as well as savings and investment apps. When you think about it even those using peer to peer lenders, such as Lending Club, to get a loan still require a traditional bank to deposit the money in.
When put in a greater perspective that expands beyond the past 10 years, it seems to make more sense that the current crop of FinTech companies would find their place among the big banks in time. While technology is moving at a more rapid pace in this century than in the last, it’s important to remember that innovation itself is nothing new. With that in mind perhaps FinTech did start way back in 1950 but it’s only getting stronger as each year goes by.