Fintech: Beyond the Banks vs Startups Paradigm

Fintech: Beyond the Banks vs Startups Paradigm

Phil Siarri

Principal Advisor at

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Fintech: Beyond the Banks vs Startups Paradigm

13.07.2016 03:00 pm

In the past couple of years, the media has heavily focused on reporting the development of new ventures in the financial technology sphere (''fintech'' as the cool kids like to call it). We have witnessed countless sensational headlines pitting big ''stuck-up'' banks versus highly innovative startups. While these match ups may be entertaining they do not necessarily reflect the history of this fascinating ecosystem. Let's take the time to debunk those preconceived notions.

Fintech is older than you think

Fintech has had a long history. Financial institutions and intermediaries have come up with innovative solutions and processes since the 19th century. Consider the invention of the telegraph in 1838 which led to setting up the transatlantic telegraph cable in 1866. Such laid the foundations of the global financial markets infrastructure. Charge coins (the precursor of charge and credit cards) were invented in the late 19th century. They were made of celluloid or metal and had a little hole, enabling it to be put in a key ring. They were provided to customers who had charge accounts in department stores and hotels. A charge coin typically had the charge account number along with the merchant's name and branding.

Banks are innovators too

Banks and other financial institutions have been true innovators in their own rights. In 1958, Bank of America launched the first revolving credit card ''BankAmericard''which revolutionized the then complicated consumer credit market. Barclays is credited with one of the earliest successful attempt at developing and introducing the automated teller machine (ATM) technology with Barclaycash in 1967 in the United Kingdom. In more recent times, online banking was perfected and introduced to the general public thanks to the efforts of  the Bank of Scotland with the release of the Homelink system in 1983. 

Banks and startups: an old partnership

Banks and entrepreneurs have been partners since the beginning of Fintech. Inventor and priest Father Giovanni Caselli's research was backed by Napoleon III's entourage and led to the implementation of the Napoleonic semaphore, the world's first telegraph network, carrying messages across France (mostly pertaining to the regime's finances). Fast forward to 2016: many established financial institutions are partnering with up-and-coming Fintech startups: Fidelity and Betterment (robo-advisor); Goldman Sachs and Symphony Communications (secure communication and sharing platform) just to name a few.

Moving away from binary reasoning 

The Fintech ecosystem is far from binary. It is a complex ensemble of different entities that compete against one another but also collaborate with each other. History has proven that the "David vs Goliath" paradigm is rather erroneous hence it is in our best interest to refrain from pitting established entities against younger, smaller structures; and rather focus on technological advancements and the benefits they procure to society at large.

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