Back in my days of financial journalism, I was interviewing a banking bigwig about the speedy rise of fintech, and he told me something I’ve yet to forget: “The abacus was fintech, once.”
The more I contemplated it, the more I thought he might just be right.
The term wasn’t coined until the 90s, and the first Google search of ‘fintech’ wasn’t until 2005. And it might not have taken off as a trend until 2014 or even later.
But, if we’re thinking about fintech in its pure, linguistic form, then financial technology has certainly been around for much, much longer.
Financial innovation dates back to the introduction of eftpos, back to the dawn of international bank transfers, and back, yes, to using beads on wires to count your coins.
A new computing tool helping people manage their finances more quickly and efficiently than ever before? The Ye Olde SmartCompany headline practically writes itself.
After a frankly unsettling trip down a financial history rabbit hole — at least as far as Google and Reddit would allow — the jury is out on the first recorded use of the Abacus as an early fintech tool.
So I’m inclined to fall back on Keith E Sudgen’s 1981 paper, History of the Abacus, peer-reviewed and published in the Accounting Historians Journal.
“Its formal western origins lie with the Greeks and the expansion of trade in the seventh century BC,” Sudgen writes.
“Its design and application showed remarkably little change over the following two thousand years.”
So, for all intents and purposes, that clears that up.
My point is that fintech is not new. Far from it. We tend to forget that an ATM was once revolutionary; that you couldn’t always pay with a debit card, let alone with your mobile phone.
Unthinkably, just a few short years ago it was imperative to remember your pin number in order to buy that last, ill-advised drink.
Between the digital revolution, COVID-19 and open banking, the financial world feels like it’s changing faster than ever.
But how did we get here? What happened after the abacus burst onto the scene? And can that history help us understand where we’re headed?
This list is by no means exhaustive. So if I’ve missed a crucial, game-changing moment in financial tech history, let me know.
A brief history of fintech
Circa 700 BC
The abacus was invented.
Circa 1300: Banks and lending
Again, no one is quite in agreement as to when the first bricks-and-mortar bank popped up. But, in ancient India, there is evidence of loans dating back to 1750 BC. Modern banking is typically dated back to Renaissance Italy, and the 14th century. In fact, the Banca Monte dei Paschi di Siena is the oldest bank still operating today. Its doors have been open since 1472.
1872: Wire transfer
Western Union introduced the first method of electronically transferring funds from one account to another.
An Ohio saloon installs the first cash register.
American Express launches the first travellers cheques.
1900s: Store credit
By the early-1990s, department stores in the US had cracked the concept of buy-now-pay-later, with store credit cards to foster customer loyalty.
1920s: Payment cards
By the 1920s, Western Union was issuing an early form of credit card. American Express launched its first ‘charge card’ in the 50s, and BankAmericard, which would become Visa, appeared in 1958, followed by Mastercard in 1966. By the early-70s, there were more than 100 million credit cards in circulation in the US.
The first ATM is installed in a North London branch of Barclays.
The NASDAQ stock exchange is formed, allowing securities to trade electronically.
SWIFT introduces standard Business Identifier Codes to identify different institutions, globally, allowing for international transfers and messages.
In the early-80s, eftpos technology — allowing consumers to pay for products by debit card at the point of sale — was rolled out in the US. In 1984, it was trialled at BP Service stations in Australia.
The Bank of Scotland launched its long-forgotten ‘Homelink’ service, which allowed customers to connect to their bank using a telephone and a TV set, to send transfers and pay bills. This laid the foundation for online banking as we know it.
Microsoft launches its Microsoft Money personal finance software, allowing customers to access their accounts online.
Stanford Federal Credit Union offers website-based internet banking to its customers.
PayPal was founded in 1998, initially using the business name Confinity, and allowing for low-cost, digital, peer-to-peer payments. In 2000, demand arose for faster payment options on commercial sites, and Confinity partnered with eBay. Later that year, it passed the one million user mark.
In 2001, Confinity rebranded to the PayPal we all know and love, and in 2002, it was acquired by eBay, cementing the iconic marriage between the two e-commerce pioneers that would last until 2014.
Yodlee launches account aggregation tech, allowing users to manage all their accounts from one screen.
2005: Chip and pin
The UK introduced ‘chip and pin’ payments, modernising point of sale payment technology in a bid to reduce card payment fraud.
2006: Budgeting apps
Founded in 2006, Mint.com was one of the pioneering financial wellbeing apps, allowing users to manage their spending and their budgets online. Now, such tools are commonplace, while smartphones mean we can keep them in our pockets.
Apple launches the iPhone, perhaps unknowingly heralding the era of banking-in-your-pocket.
2007: Contactless payment
Contactless card payments became available in the UK for purchases of less than £30 in 2007 — but didn’t really take off until some 10 years later.
In 2009, Kickstarter launched, introducing the idea of pledging funds to back a project. At that time, it was mainly used for funding for artists making music or movies. But, it paved the way for sites such as IndieGoGo and GoFundMe, and ultimately equity crowdfunding platforms, allowing backers to take a stake in businesses they believe in.
Jim McKelvey and Twitter founder Jack Dorsey launch Square, a tool making it easier for small vendors to accept card payments and track sales.
Venmo was also founded in 2009, allowing friends to transfer funds to each other via text message. The startup was acquired by Brainstree in 2012, which was acquired by PayPal in for $800 million in 2013. In the present day, the fintech has achieved that coveted ‘verb’ status. ‘Venmo me.’
Enter Satoshi Nakamoto. In January 2009, the mysterious master of Bitcoin mined the first block, and effectively created the first digital currency. Cryptocurrency exchanges popped up in 2010, and the first purchase using Bitcoin was made in May 2010. A swathe of alternative cryptocurrencies emerged soon after.
One of the earliest robo-advisor services, Betterment, was founded in 2008, but launched to the public in 2010, using algorithms to serve up investment and wealth management advice.
2013: Share trading apps
Robinhood launched in 2013, making trading in stocks and shares more accessible to everyday retail investors. Such tools have only increased in popularity since, with competitors and niche versions emerging all over the world.
ApplePay is released.
AfterPay is founded, paving the way for the buy-now-pay-later boom.
Etherium networks introduce smart contracts to the cryptocurrency world.
The first-ever initial coin offering took place in 2015, allowing a company to raise funding through selling crypto assets or ‘tokens’.
Google releases the technology that will become Google Pay.
Although several European neobanks were founded earlier, they started to secure banking licences in 2017, which is also when the term ‘neobank’ came into popular use.
Banks such as Monzo, Revolut and Starling offer branchless banking and instant digital access to various financial products, in a bid to marry banking with modern life.
In Australia, 2019 saw a swathe of neobanks securing their full banking licences and rolling out products, while Revolut is also making an international play in the market.
And finally, just last year, Aussie Domm Holland launched Fast, a startup intending to make Amazon-style one-click checkout payments to all e-commerce businesses. Watch this space.
You can help us (and help yourself)
Small and medium businesses and startups have never needed credible, independent journalism and information more than now.
That’s our job at SmartCompany: to keep you informed with the news, interviews and analysis you need to manage your way through this unprecedented crisis.
Now, there’s a way you can help us keep doing this: by becoming a SmartCompany supporter.
Even a small contribution will help us to keep doing the journalism that keeps Australia’s entrepreneurs informed.