In 1967, the world’s first ATM appeared on a London high street. Two years later, the first iteration of the internet was born, writes Richard Ambrose, CEO, Azimo.
Easier access to money and global connectivity were ready to collide. The stage was set for a financial revolution, but why did it take so long for the benefits to reach consumers?
The early internet powered significant innovations in the 1970s. These included the SWIFT system of international payments and the NASDAQ, the world’s first digital stock exchange. Credit card payments were digitised and the flow of global transactions between international banks increased.
Yet these were the toys of financiers, brokers and corporations, and they reaped most of the benefits. Banks dominated the world of finance and dictated terms to consumers, who saw little improvement in the financial services they were offered. With large profits and few challengers, financial institutions saw little to gain from offering ordinary people innovative new products.
1991-1999: The World Wide Web and e-commerce
The launch of the World Wide Web in 1991 brought the internet into people’s homes for the first time, but it wasn’t until the end of that decade that financial services started to change in response to e-commerce.
eBay, the first global, online marketplace needed a global, online payment platform. Banks didn’t see the opportunity, but entrepreneurs in Silicon Valley did. In 1999, Elon Musk and Peter Thiel launched PayPal, bringing new financial technology to millions of consumers around the world. Investors like Thiel understood something that banks and big corporations did not. Where banks treated customers as numbers, a new generation of online startups focused on empowering people with new services offering choice, autonomy and speed.
“The most valuable businesses of coming decades will be built by entrepreneurs who seek to empower people rather than try to make them obsolete.” – Peter Thiel
At the time, even telephone banking was a niche service. It was provided grudgingly by big banks via understaffed call centres, but sold in glossy TV adverts as a dazzling innovation. Most people still visited their bank to transfer money – if their local branch hadn’t been turned into ‘a trendy wine bar’. Worse, they paid high fees for a service that was slow and inefficient.
1999-2019: The Democratisation Of Financial Services
Incredibly, not much has changed for banks in the last 20 years. It is still normal for a cross-border money transfer to take up to five business days. In a world where Amazon can deliver a package within hours of a customer placing an order, this seems archaic.
When the dotcom bubble burst in 2001, thousands of companies collapsed and digital innovation slowed. Financial technology in particular was seen as a risk. Investors shied away from a heavily regulated sector, dominated by incumbents, which controlled not just the market but the world’s financial systems.
Then, in the summer of 2007, the iPhone arrived – and cheaper imitators soon followed. By 2017, 70% of the US population owned a smartphone. Suddenly it was possible for a consumer to manage their finances via a mobile app, and a new generation of challenger banks, money transfer services and trading platforms jumped at the opportunity to own this exploding market.
Now smartphones are a global phenomenon. In developing countries, a whole generation has skipped desktop computing entirely. Their experience of the internet has always come through a small screen. People in rural Africa who may not have mains electricity now have access to business loans and microfinance. The concept of mobile money itself was pioneered in Kenya by M-Pesa in the early 2000s, long before the smartphone even existed.
In the UK, migrant workers can now open a digital bank account in minutes, where once they were locked out of the financial system. Digital money transfer services can deliver payments instantly to many countries, while charging up to 90% less than banks and high street providers.
In China, nearly 50% of people have a mobile wallet, and WeChat Pay alone boasts an astonishing 600 million users, who can send money to friends and relatives and pay for services in seconds.
Financial technology is at last democratising financial services. The internet revolution that started in 1969 at first profited only a small network of elite institutions. Fifty years later, the fintech revolution is improving millions of people’s lives. Money has changed forever.