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Behind the Buzzword: What is fintech?

What do Starling Bank, Checkout.com, Klarna and PensionBee have in common? They’re all fintechs of course.

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It might seem strange that a publication like AltFi, which extensively covers the world of fintech, would need to ask the question: what is fintech? 

But, in the first of a new weekly series, we are going behind the buzzword to unpack the jargon and phrases that often obscure what we’re really talking about… starting with “fintech”.

Fintech as a phrase has been around for so long and now there are so many iterations of the word and incumbent financial firms are trying to muscle in too. So, that begs the question: what is fintech?

Humble origins

Now, let’s go right back to basics. Fintech is a mash-up of the words ‘financial’ and ‘technology’ and encompasses all the firms that operate across both sectors.

The word was first uttered as early as the late 1990s as financial firms and technology firms began to bleed into one another, however, fintech as we know it really came to the fore around the time of the last financial crisis in 2008.

Some observers would argue it’s slightly earlier—Zopa, which is widely regarded as one of the first fintechs, was launched all the way back in 2005.

After the fall out of the 2008 recession, consumers lost trust in traditional, incumbent financial institutions and begin to turn to the new, up and coming firms raising through the ranks.

What’s in a name?

Over a decade after fintech as we know it began to gain real prominence, we’ve seen many other iterations of the word emerge.

Basically, if you put something in front of the suffix ‘tech’ it probably means it’s a branch of fintech.

For instance, we have proptech, which encompasses anything to do with renting, home buying, mortgages and so on, or regtech, which are fintechs that operate within the compliance and regulation space. 

Branching out

As well as adding the ‘tech’ suffix to words, there are also branches of fintech that can’t really be shortened. Most famously, digital banking.

Digital banking emerged in the mid-2010s and has grown to dominate much of what we call “fintech” today. 

The likes of Monzo,Revolut and Starling Bank encapsulate much of what the industry stands for—taking on the incumbent firms to make financial services better and easier to access for all.

Outside of digital banking, there’s also sectors like alternative lending, which covers things from buy-now-pay-later to peer-to-peer lending, which today can all be included under the fintech umbrella.

To fintech, or not to fintech?

Now that fintechs have demonstrated their staying power, big financial institutions are increasingly buying instead of building their own fintech solutions.

We’ve seen payments giant Visa hoover up several fintechs, first a failed merger with financial API provider Plaid, followed by the successful acquisition of open banking fintech Tink and digital remittances platform Currencycloud, all to bolster its own offering rather than building its own fintech platform.

Will we reach a point when fintech is no longer fintech, it’s just simply the way it is? We’ll just have to stick around to see.

Is there a buzzword you want us to investigate? Send us an email at editorial@altfi.com

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