Fintech (the Word, That Is) Evolves
Swift CEO Gottfried Leibbrandt talks about how the global messaging network is looking to stay relevant to its bank members; the potential and limitations of blockchain technology; and his views on the startups looking to disrupt banking.
Now a buzzword for disruptive technologies, Fintech was the name of a research project initiated by Citicorp in the 1990s, when the Citigroup predecessor was trying to shed its image of being "out of touch with market preferences."
The earliest use of the term "fintech" I can find in American Banker wasn't by some coder in a garage or venture capitalist in Silicon Valley. It was by Citi.
Fintech was the original name of the Financial Services Technology Consortium, a project initiated by Citicorp, a predecessor to today's Citigroup. In the early 1990s, the bank was trying to overcome a reputation for resisting technological collaboration with outsiders; Fintech, along with Citi's participation in the nascent Smart Card Forum, signified the company's new open stance. "Times have changed," a Citi executive said in a 1993 article. "Cooperation is necessary for common industry standards."
Once again times are changing, and fintech — which has become a common noun, lowercase "f" — is now an umbrella term for innovative technologies and startups pushing the financial services industry to improve. Confusingly, it's still also used to refer to the mature, time-tested technology used by financial institutions.
The gobs of money that venture capitalists have been throwing at the sector and the hype about its potential are giving some observers fintech fatigue. I took an informal poll on Twitter about what the term fintech means. The responses ranged from inspiring to cynical to smart-alecky.
@MarcHochstein also tech be utilized to conduct and disrupt traditional fin services, expand certain services to new markets, and…
— Brian Knight (@BrianRKnight) September 21, 2015
— Ghela Boskovich (@Ghela_Boskovich) September 21, 2015
@MarcHochstein "improving the UX of accounting information systems" without the yawn at cocktail parties
— Pierre Rochard (@pierre_rochard) September 21, 2015
— Angus C de Crespigny (@anguschampion) September 21, 2015
— Andrew Norton (@BradfordANorton) September 21, 2015
— Steve Timmons (@steve_timmons) September 21, 2015
The inimitable Chris Skinner has a grand conception of fintech. He wrote on the Financial Services Club blog in January:
Fintech is a new market. It is 21st century finance. It is the new form of banking, and is related but very different to the old form. Some of the old form players will metamorphose into these new digital fintech players. … Some of the new players will take over the markets of the old incumbents.
Interestingly, some people are starting to use the word "fintech" to refer to a type of company, or even the people running such a company, rather than the field they work in. Hence the plural noun: fintechs.
When used this way, the word sometimes carries a hint of condescension. In a BankThink op-ed in August, bank marketer Kevin Tynan described a doomsday scenario for banks in which "community banks lay in ruin, fintechs come and go, and megabanks dot the vast desert wasteland" (emphasis mine).
IMO what most fintechs overlook is that they're disrupting what is essentially a cartel system. Thus self defeating.
— Izabella Kaminska (@izakaminska) June 9, 2015
Given the perception of fintechs as Uber-esque startups, it's understandable that one Twitter follower questioned the headline "Top 100 Companies in FinTech" for our annual FinTech Forward vendor ranking, produced in partnership with BAI. But we've been using the word (capital "t") with these rankings for more than a decade, long before fintech became, as the kids say, a thing. Our forthcoming Companies to Watch list is full of fintechs, in the contemporary sense.
Since the 1980s, several companies have used the word "Fintech" in their names. Some capitalized the "t," some didn't. They included a trader of distressed debt, a software firm serving the oil and gas and manufacturing markets, and a South African electronics company. Whatever fintech means now or in the future, I doubt another company will be able to claim the word as its own again.
Marc Hochstein is the editor in chief of American Banker.