Financial Technology

Financial technology, or fintech, uses modern tools to improve financial activities and design new applications, processes and products related to financial services. The term can be applied to any innovation that incorporates technology into the finance industry, including payment systems, investment advice tools, accounting software and global money transfers.

The first wave of fintech came in the form of systems that enabled electronic transfers across larger distances. It began with the first transatlantic cable (1866) and the Fedwire (1918), and it continued into the modern era with NASDAQ (first digital stock exchange) in 1967 and SWIFT (international banking communication protocol) in 1979.

A second wave of fintech came in the form of companies that offered a more convenient way to engage in formerly time-consuming and costly activities. Mobile-only stock trading app Robinhood, for example, offers low fees on trades, while online robo-advisers like Wealthsimple and savings apps such as Acorn offer streamlined ways to manage investments and savings. P2P lending platforms like Prosper Marketplace, LendingClub and OnDeck make it easier for consumers to find lenders and negotiate rates, while crowdfunding sites such as Kickstarter enable businesses to seek financing.

The latest wave of fintech has seen a shift toward open banking, in which incumbent financial institutions and startups collaborate to provide new and improved products and services. For example, banks use fintech for fraud monitoring and to streamline accounting processes; credit unions use it to provide digital banking; and large investment firms partner with fintechs to assess the potential of new ideas and opportunities.

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