There is a reason why financial technology startups are taking off now instead of 20 years ago.
Still, it is important to remember that financial innovation is by no means a new phenomenon; one could argue that the revolution in financial technology started with the installation of the first ATM in 1967,1 when banks began to automate away some of their traditional functions such as cash withdrawals and deposits.
Banks themselves led this innovation to cut costs, and customers learned that visiting bank branches was less important for them than they thought. This realization laid the foundation for the proliferation of online banking. Because the first psychological barriers had disappeared to engage in financial transactions without a teller, new entrants in the online lending space had an easier pitch to attract lenders and borrowers. In a sense, banks themselves opened the door for FinTech entrepreneurs to compete with them head on.Since the 1970s, much has changed in banking. Thebulkoffinancial innovation happened behind the scenes in the form of faster computers, stronger analytics, and financial engineering. With the mainstream proliferation of the internet, financial technology innovation became more visible to retail banking customers. However, there is more to this story than the internet alone. The most noticeable factor that empowers technology startups to challenge the traditional monopoly function of banks is technology. However, social and structural factors are equally important. Table 3.1 summarizes these factors.
3.1