From mobile banking apps to cryptocurrency, FinTech is everywhere. And the industry is growing bigger and bigger every day. But what exactly is FinTech, where did it come from and how is it shaping the future of the finance industry?
What is FinTech?
In its simplest form, FinTech is just an amalgamation of finance and technology. It’s where companies use technology to make the delivery of financial services and processes safer, faster and more efficient for both financial businesses and their customers.
Where did FinTech come from?
FinTech has been around for longer than you might think. For instance, back in the 19th Century, people used FinTech in the form of telegrams and morse code to transfer money to different locations - although it wasn’t referred to as ‘FinTech back then! But, with the introduction of credit cards and ATMs, it wasn’t until the 1950s and 60s that FinTech really started to gain traction. Then came the electronic trading floors in the 90s and of course the online banking and personal finance apps that we see today soon followed.
So the FinTech industry is not a new one, it’s just evolved incredibly quickly over the last few years and is one of the fastest-growing tech sectors. In fact, it’s estimated that the industry revenue is expected to reach £10.7 billion by the end of 2021.
Some examples of FinTech
FinTech companies are heavily investing in R&D to create innovative products and services for almost every area of finance: from mobile banking and payments to credit scoring and stock trading.
Take a look at a couple of common Fintech products and services for example:
Whether it’s a mobile-first website that allows customers to access their bank accounts easily or a dedicated mobile app that enables them to make transactions securely, most banks now offer some form of mobile banking. And the arrival of the Neobank takes this concept one step further. Neobanks are banks that have no physical presence and instead serve their customers using a completely mobile and digital infrastructure.
Machine learning is now being used to predict where the financial markets are going. Artificial Intelligence models can translate massive amounts of data into algorithms which then spot trends, opportunities and risks. Machine learning is also allowing financial organisations to create targeted customer experiences and offer products and services that match their behaviour.
What does the future of Fintech look like?
FinTech is a key industry for the UK because it harnesses the power of innovation. Financial companies are continuously investing in FinTech solutions to stay competitive, and FinTech companies are continuously innovating to deliver bigger, better and more efficient solutions to meet those demands.
And, as we’ve seen, the industry is booming as a result; FinTech is now considered to be one of the central pillars holding up the UK economy.
The UK government recognizes this and recently announced three new initiatives to support the growth of the UK FinTech industry.
The 3 new FinTech initiatives that are set to bolster the UK economy
Back in April 2021, Chancellor of the Exchequer, Rishi Sunak, set out three proposals to enhance the UK’s FinTech industry:
FinTech initiative #1: To launch ‘scale box’ and a Centre for Finance, Innovation and Technology (CFIT)
The FCA will be launching a scale box, which is a digital sandbox that mimics market conditions. This is so that upcoming FinTech companies and start-ups can test and demo their innovations and propositions in a safe but like-for-like environment. This will help secure investment and encourage collaboration from the bigger financial institutions.
Alongside the scale box, they’ll also be creating an industry-led organisation, called the Centre for Finance, Innovation and Technology (CFIT), to support the implementation of future FinTech initiatives.
FinTech initiative #2: To develop a Central Bank Digital Currency (CBDC) task force
The CBDC is a digital currency that’s set to replace traditional paper notes and coins. To support the strategic development of this new currency, the Bank of England will set up a CBDC task force which will include experienced members from the Bank of England and HM Treasury.
FinTech initiative #3: To consult on reforms to capital markets
To make sure the FinTech industry remains competitive on a global scale, is meeting the highest possible regulatory standards, supports economic growth and is fair and proportionate, the government will consult on reforms to capital markets. The reform recommendations so far include:
- The prospectus regime
- Forward-looking financial information
- The ‘efficiency of rights’ issue
To find out more about these new FinTech initiatives and discover what the FinTech industry thinks about these proposals, read this post: The Chancellor Launches 3 New Initiatives for FinTech…But Are They Enough?
With robo-advisors in stock trading, blockchain in anti-money laundering and the decentralization of global payments coming to us soon, FinTech is an industry that is driving the innovation of the future.
This article was brought to you by Myriad Associates
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