How Did Fintech Emerge as a Worldwide Phenomenon, and What Is It?

Somebody Who Just Started to Get Their Act Together

Despite concerted efforts to increase financial inclusion over the last decade, there are still more than two billion individuals globally who remain unbanked. The World Bank is now proposing that digital payment systems could be the solution to bridging the gap between those with and without bank accounts. This working paper, published in 2023, examines how fintech is becoming the primary tool for providing banking services to the unbanked population.

Financial technology, or ‘fintech’, is nothing new, having been present since the 1950s. This was when automated teller machines (ATMs) and credit cards were first introduced, allowing customers to manage their finances with greater convenience. Fast-forward to the present day and the fintech market has diversified, encompassing mobile applications, online lending and digital currencies. Smartphone users now have a variety of financial management and sharing applications at their fingertips.

This shift has opened up the realm of saving and investing to a much wider population, notably in developing countries, who may not have previously had access to such services. In other words, what were once pursuits that were only available to the privileged few have now become accessible to the masses.

The current surge in financial technology driven by consumer demand did not originate from regions with low levels of financial access. M-Pesa was an early innovator, but other major players in the industry, such as TransferWise, Stripe, and SoFi, emerged from well-developed financial hubs like London and Silicon Valley.

The worldwide proliferation of fintech has been a remarkable phenomenon, as it has grown from relative obscurity to becoming a mainstay of the global financial services industry. There are numerous factors that may have contributed to its success, such as the increasing availability of data and technological capabilities, the emergence of new business models, and the growing demand for digital financial services. Another factor has been the desire of foreign fintechs to access the services of offshore development firms. This has enabled them to access specialist skills, such as software development, that may not be available in their local market, as well as to benefit from the cost advantages of operating in a different country. Ultimately, the rise of fintech is an example of how technology can be harnessed to create innovative solutions to the challenges of an ever-evolving financial landscape.

To understand the global success of the fintech business, it is helpful to look back at its origins in the United States and others.

From the 1950s to the present day, fintech’s development may be traced.

Over the last 50 years, technology has played an increasingly important role in finance. According to Forbes, the introduction of credit cards, ATMs, computers and the Internet has revolutionised the financial industry, with thousands of new participants entering the market and a sharp rise in the number of people using these services. This has enabled the swift transmission of money across borders, which would have been unthinkable before the advent of such technological advancements.

It is becoming increasingly apparent that the current economic growth has exposed an unusual trend: financial technology (fintech) companies are now providing superior customer service in comparison to traditional banks. Whilst the banking industry is beginning to innovate in its practices, it is often lagging behind in terms of the latest developments. This mobile fintech revolution is bypassing the traditional banking system and providing a more efficient and direct service to end-users.

The Global Financial Crisis of 2008 acted as a springboard for the emergence of fintechs that focus on business-to-consumer services. The credit crisis and the associated tightening of regulations meant that banks were unable to be innovative. This led to a migration of customer-facing talent from banking to the technology and innovation sector. Soon, new businesses were able to provide more comprehensive and quicker responses to customers’ requirements than banks could.

As the financial technology (fintech) sector has grown and developed in the world’s financial centres, its potential to benefit developing countries has become increasingly evident. It is estimated that over 266 million people in Southeast Asia are not served by traditional banking services, while approximately 40% of the population in Brazil, the largest economy in Latin America, have no access to conventional banking services. Whilst the United States and Europe have been at the forefront of the recent surge in fintech activity, the impact of this trend can be seen around the world.

Emerging fintech companies are making a worldwide impact.

Between 2023 and 2024, investment in FinTech companies has continued to grow, although the rate of increase has slowed in the current year. There are now more than 25 FinTech unicorns operating globally, with a combined market capitalisation of $74.9 billion. The majority of these businesses are headquartered in the United States, Europe, and China.

The development of financial services has been demonstrated to positively influence economic growth and bring about greater social equity, particularly in countries with underdeveloped economies. Start-ups in the FinTech sector have identified the potential for both increasing financial inclusion and developing profitable business models, thereby facilitating the rapid growth of the industry.

Reasons why international financial technology companies outsource software development

As the digital and innovation industries become increasingly globalised, startups are increasingly relying on offshore development organisations as a source of talent. This is particularly true for fintech firms, which require highly specialised mobile technology and would otherwise find it difficult to afford the necessary engineers, product managers and finance professionals in major financial hubs. This has created a gap in the market, which is being filled by the growing demand for offshore and nearshore development services.

In order to stay competitive in the face of new, innovative fintech companies, traditional financial institutions are increasingly realising the benefits of outsourcing their services in order to gain access to the necessary technological expertise. There are a number of advantages to outsourcing for financial firms that can help them to grow and enhance their offerings. These include cost savings, improved quality of services, increased efficiency, access to specialist skills, and the ability to respond quickly to changing market needs. By outsourcing certain services, financial firms can focus on their core activities while entrusting the development of their technology-related tasks to dedicated professionals. This can improve their overall performance and provide them with a competitive edge in the marketplace.

Startups in the financial technology industry have access to significant capital.

It is estimated that by 2023, a total of 1,128 financial businesses across the globe will invest a combined amount of over $16.6 billion. Of this sum, a substantial $7.76 billion was raised in 35 funding rounds of $100 million or more. Start-up companies from the United States and Asia, particularly China and India, are at the forefront of the market for large financing rounds. These regions are strategically placed close to popular nearshoring hubs in Latin America and Southeast Asia, allowing businesses to benefit from additional growth opportunities. Consequently, many firms are able to invest in professional software development services to further their progress.

In recent years, there has been a marked rise in the trend of outsourcing software development, particularly amongst the world’s largest organisations and the most innovative new businesses. Companies such as Slack, Basecamp and Alibaba are utilising remote teams and coders from other countries to develop state-of-the-art software. Outsourcing software development can be advantageous for any team, regardless of their technical capabilities, as it allows for growth without additional overhead.

A Silicon Valley tech company can be a great example of how to structure their business to create a marketable, high-quality product. The product managers and developers are dedicated to ensuring customer satisfaction and the development of a robust backend, whilst also staying in compliance with applicable laws and regulations. In addition, corporate leaders look towards untapped markets and form strategic partnerships. However, it can often be hard to find the time and resources to devote to expanding the business. In order to free up these resources, the company may choose to outsource to a software firm specialising in software, which can provide mobile developers, software support specialists and user interface and experience designers. This can be an effective way to ensure the digital product is created, tested and honed to the highest standards.

High-tech experts are essential for the success of fintech companies.

The financial technology sector has been revolutionised by the introduction of innovative technologies such as blockchain, cryptocurrencies, AI, VR, and big data, meaning that some of the most advanced fintech businesses of today require complex systems that can only be created and managed by highly proficient programmers. Unfortunately, there are certain drawbacks associated with this cutting-edge technology, the most prominent of which being the difficulty of finding enough qualified engineers who are knowledgeable enough in the intricacies of modern technology stacks, particularly in major cities like London or New York.

At present, it appears that around four in ten Information Technology companies are encountering difficulties in recruiting and, crucially, keeping hold of highly-skilled software engineers. This is no surprise, as software development is one of the most sought-after and competitive careers in the global job market. In the main metropolitan areas, the most lucrative businesses and start-ups are naturally the ones that will be able to attract the most talented engineers. As a result, start-ups may need to explore the possibility of expanding to a worldwide level in order to remain competitive.

As a startup founder, one might come to the conclusion that their fintech company should be involved in data processing and analysis in order to make informed decisions. Since there is no experience of big data on the team, they have opted to hire an outside firm to provide them with a data scientist. Although outsourcing is a great way to reduce expenses, the best offshore development firm can also increase a team’s capability. In order to offer startups and fintechs with top-notch development services, Works only recruits the most skilled and experienced professionals, thus eliminating any potential worries regarding finding and retaining a developer.

Financial institutions are armed and ready to compete in the fintech sector.

Banks are increasingly turning away from partnerships with fintech companies in favour of developing their own fintech capabilities in-house. This shift comes with the benefit of giving banks access to a pool of highly skilled technology specialists, particularly millennials, within their own organisation. According to CB Insights, this is becoming a more common approach for banks looking to innovate and stay competitive in the financial sector.

Despite the fact that startups may experience difficulty in finding qualified workers, financial institutions face the same challenge. In some cases, this difficulty is felt more acutely by financial institutions due to the traditional working environment of a bank not being particularly attractive to talented programmers and innovators. This can lead to the situation where talented young individuals opt to work for startups, not necessarily because of the pay, but because of the flexibility and other benefits they offer. As a result, it can be difficult for a bank to find a suitable digital product manager or software engineer to lead their fintech initiatives.

In recent years, traditional banks have begun to look overseas for potential employees to fill vacancies within their workforce. This is not restricted to the world’s most economically prosperous cities, as highly-skilled developers can be found in a variety of places. By outsourcing their IT development needs, financial institutions are able to access experienced engineers who are well-versed in up-to-date technologies. Notable organisations such as Santander, Morgan Stanley, and JP Morgan have all taken advantage of this by working with offshore development companies specialising in quality assurance, app development, and big data management, as a way to remain competitive in the industry.

Fintechs will benefit from global talent as they compete on a global scale.

In recent years, the emergence of fintech companies in major financial hubs has been an encouraging trend. However, the need for financial inclusion is much greater in underserved regions, particularly in developing countries in Asia, Latin America, and Africa. To help unbanked individuals in these nations become participants in the global economy, technical solutions are required. Unfortunately, there is a considerable gap between the markets that need fintech the most and the entrepreneurs producing it. However, one possible solution could be to outsource software development to other countries. This could be a beneficial way of bridging the gap and helping to ensure that everyone has access to financial services.

Because the headquarters of numerous outsourcing companies are based in developing countries, the programmers that are employed by these firms have an in-depth knowledge and understanding of the issues that these regions face. Not only do they possess the technical skills to aid a business, but they may also bring their own creations to the table that can help to improve customer service. Outsourced developers can offer more than just economic assistance when it comes to financial technology; they can become a vital part of your team.

Perspectives on the Development of Financial Technology Around the World

The financial technology sector has seen an explosive rate of growth over the last few years, with Asian and Latin American markets experiencing unprecedented levels of success despite a decrease in venture capital funding in the United States and Europe. The United States remains the world leader in fintech, with some of the most influential and successful companies such as Stripe, PayPal, and Square hailing from the country. The novel concepts these businesses have brought to the market have been widely copied and implemented in other countries, demonstrating the US’ strong position in the global financial industry. It is likely that the US will continue to set the benchmark in fintech for the foreseeable future.

As technology continues to evolve, fintech companies around the world are adapting to better meet the needs of their customers. Banks may decide to compete or collaborate with these firms in order to stay relevant and increase innovation. Despite this, there will always be a need for experienced programmers. We expect that as fintechs become more technically advanced, they will increasingly outsource their projects to find the right personnel to solve the most pressing problems in the financial sector.

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