In this new year full of hope and new innovations, but contrary to the current coverage, fintech is not a new topic. The evolution of financial services and the interest in applying ‘technologies’ current for the times has been around since the earliest of days.
We’re all familiar with the credit card, the ATM, SWIFT and mobile payments — all created after World War II. The introduction of the Bloomberg terminal is often credited as a turning point in the digital transformation of financial services. And, more recently, cryptocurrencies and AI have begun transforming aspects of finance in ways we still can’t predict.
Here, Sarah Biller, co-founder of FinTech Sandbox and leader at Mass Fintech Hub, shares how, in fact, financial innovation and advances in technology have been key to improving economic life and living conditions for many millennia and earlier examples were massively consequential.
Cuneiform was an early form of accounting and served to communicate data
The abacus and cuneiform tablets are examples of how new technologies have helped create new ways of calculating, accounting, and building trade. The cuneiform writing system was in use from the 31st century BC down to the second century AD. Early writings likely had a simple purpose: correspondence counting — it’s believed that our Bronze Age predecessors used this technique as the first accounting system. Communication remains an essential part of fintech as new technologies help us tell the story of growth using the essential element of data. By viewing finance through a “human lens,” we can see that cuneiform helped empower people to gain agency in their financial lives.
Fintech appears in the Old Testament
Over time, clay tablets and tokens were displaced by silver as the standard of value. Silver – known as a shekel – became the standard because it was portable, had a relatively constant supply and was a prized decorative material. The Babylonians who took over Mesopotamia from the Sumerians are credited with leveraging this standard to expand commerce and develop an early banking system. Modern banking techniques that we use today, such as deposits, interest, loans and letters of credit, existed in the Babylonians’ system. These advancements drove more trading and enabled greater exploration and science; however, the expansion was not without problems that we would recognize today. For example, the value of silver could be degraded by weighing errors or by adding impurities. This was so prevalent that there are eight passages in the Old Testament that forbid tampering with scales or silver, necessitating ever more innovative and secure ways of moving stores of value between “bankers” and the people.
Advancements in technology and communication help build a financial system.
In the 7th century, China developed the first paper notes to replace standard coins. The Song Dynasty developed the world’s first legal tender by issuing and accepting paper notes backed by gold reserves. The increasingly intangible character of money is the best evidence of its true nature. Advances in technology and – interestingly – communication have repeatedly led to changes in the way we deal with money, trust, identity, recordkeeping, and other key attributes of a well-functioning financial system.
Sustainable and inclusive finance has roots in Renaissance Italy.
Financial innovators have been focused on sustainable and inclusive finance since our earliest history. Availability creates access, which allows for agency. In the 15th century, the monti di pietà were co-founded by Franciscans and the secular governments of Central Italian cities to address income inequality and the usurious moneylending practices that, they believed, stifled economic growth, and devastated the lower classes. Some consider the monti di pietà to be predecessors of today’s credit unions. (More information on the monti di pietà will be available in the upcoming dissertation being written by Sama Mammadova.)
Fintech consistently addresses communication needs in finance.
The ‘tech’ in fintech has enabled communication throughout the ages. In 1856, Giovanni Caselli invented the pantelegraph, a precursor of the fax machine. It operated between Paris and Lyon, France, and was used to verify signatures in banking transactions.
Mobile commerce’s earliest origins are in another crisis.
Having just lived through the 1918 global Spanish Flu Pandemic, John Maynard Keynes explored the link between finance and technology in his book “The Economic Consequences of Peace” in 1919. Upon reflecting on the intersection of his views of a future financial system and emerging technologies of the time, Keynes observed that “The inhabitant of London could order by telephone, sipping his morning tea in bed, the various products of the whole earth, in such quantity as he might see fit, and reasonably expect their early delivery upon his door-step; he could, at the same moment and by the same means, adventure his wealth in the natural resources and new enterprises of any quarter of the world, and share, without exertion or even trouble.”
Fintech has long been a team sport.
In 1993, the term ‘financial technology’ is used first by Citicorp when it establishes a group —the Financial Services Technology Consortium — of banks, financial services providers, national laboratories, universities and government representatives to jointly solve challenges in the use of technology in Financial Services.
In 2021, the fintech industry has received a record $91.5billion in global funding — almost twice as much as what the sector collected in the entirety of 2020. In Q3 alone, 42 fintech unicorns (startups valued at over $1 billion) were created, bringing the year’s total to 200, according to CB Insights’ State of Venture Q3’21 Report.
So, clearly, fintech is having a moment. The collision of crisis and capital has advanced the adoption of digital tools faster than any time in history. Let’s leverage this moment by thinking as boldly as the entrepreneurs who preceded us did. I firmly believe sustainability and inclusion are critical to the next stage of financial services. As they have since the beginning, the best ideas will have the power to catalyze positive change across the world and to bring in those who may be left out of existing financial systems.
