International Journal of Trend in Scientific Research and Development (IJTSRD)

Volume 8 Issue 6, Nov-Dec 2024 Available Online: www.ijtsrd.com e-ISSN: 2456 – 6470

Fintech: An Introduction
Paul A. Adekunte1, Matthew N. O. Sadiku2, Janet O. Sadiku3
1
International Institute of Professional Security, Lagos, Nigeria
2
Roy G. Perry College of Engineering, Prairie View A&M University, Prairie View, TX, USA
3
Juliana King University, Houston, TX, USA

ABSTRACT How to cite this paper: Paul A.

FinTech (also known as Financial Technology) is a catch-all term Adekunte | Matthew N. O. Sadiku | Janet
referring to software, mobile applications, and other technologies O. Sadiku "Fintech: An Introduction"
created to improve and automate traditional forms of finance for Published in
International Journal
businesses and consumers alike. It refers to the application of
of Trend in
innovative technologies to products and services in the financial Scientific Research
industry. This has to do with mobile payment apps to complex and Development
blockchain networks housing encrypted transactions and so on. (ijtsrd), ISSN: 2456-
The paper looks at the pros and cons of FinTech, the drawbacks and 6470, Volume-8 | IJTSRD72750
the possible solutions for the benefits of humanity. Issue-6, December
2024, pp.1074-1079, URL:
KEYWORDS: FinTech, mobile banking, blockchain, robo-advisors, www.ijtsrd.com/papers/ijtsrd72750.pdf
cryptocurrencies, big data, artificial intelligence (AI)
Copyright © 2024 by author (s) and
International Journal of Trend in
Scientific Research and Development
Journal. This is an
Open Access article
distributed under the
terms of the Creative Commons
Attribution License (CC BY 4.0)
(http://creativecommons.org/licenses/by/4.0)

INTRODUCTION
FinTech also known as “financial technology” is the expertise to startups in the financial technology
application of innovative technologies to products and industry [3].
services in the financial industry, which involves an
The groundwork for early fintech was laid in the 19th
array of technological advancements in financial
century with the development of the “telegraph” and
services, including mobile banking, online lending transactlantic cable systems – which helped to
platforms, digital payment systems, robo-advisors, transform the transmission of financial information
and blockchain-based applications such as
across borders, enabling faster and more efficient
cryptocurrencies [1]. Fintech refers to new communication between financial institutions, as
applications, processes, products or business models shown in Figure 2 [4].
in the field of financial services that are provided
through the internet, as shown in Figure 1 [2] In 1918 the Federal Reserve Bank established the
Firewire Funds Services that brought about a
HISTORY
significant milestone in electronic money movement.
FinTech evolution spans over a century and marked This was made possible by the use of telegraph lines
by significant technological innovations that have
to facilitate secure transfers between member banks,
revolutionized the financial industry. The term
which marked one of the first instances of electronic
“fintech” emerged in the late 20th century but gained
money movement [4, 5]. The Diners Club
prominence in the 1990s [3]. The term first appeared
International first introduced universal credit card in
in 1967 in an article “The Boston Globe” titled “Fin-
1950, which reshaped consumer spending and credit.
Tech New Source of Seed Money” – which reported
This innovation paved the way for the launch of
on a startup investment company established by
American Express cards in 1958 and the
former executives of Computer Control Company,
BankAmericacard (later Visa) in 1959, further
aimed at providing venture capital and industry
expanding the credit card industry [6, 7].

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The digital revolution was in the 1960s and 1970s Bank was founded by David Becker, which marked a
marking the beginning of the shift from analog to new era in online-only banking [16].
digital finance, as shown in Figure 3, followed by
Furthermore are the followings [1]:
several groundbreaking developments that shaped the
 The Dot-com era, in the late 1990s and early
future of financial technology. The world’s first ATM
2000s
in London was introduced by Barclays in 1967 which
revolutionized access to cash and basic services.  PayPal in 1998
Inspired by vending machines, the ATM marked a  The Post-financial crisis of the 2008 global
significant step towards self-service banking [8]. financial crisis
With the establishment of the Inter-bank Computer  The invention of Bitcoin in 2008 by an
Bureau in the UK in 1968, Fintech infrastructure anonymous creator who used the pseudonym
continued to evolve – this laid the foundation for the Satoshi Nakamoto brought the evolution of digital
country’s first automated “clearing house” system currencies and decentralized finance, which
that evolved into BACS (Bankers’ Automated resulted to the development in the field of
Clearing Services) to facilitate electronic funds cryptocurrencies, as shown in Figure 4.
transfers between banks [9]. In 1971, the world of
“securities trading” was transformed via the  The developer-friendly APIs that simplified
establishment of NASDAQ, the world’s first digital online payment integration, lowering the barriers
“stock exchanges” [10]. Two years later, the founding to entry for e-commerce and online financial
of the SWIFT (Society for Worldwide Interbank services
Financial Telecommunication) standardized and  The increasing adoption of smartphones
secured communication between financial institutions
globally. The SWIFT’s messaging then became the  The launch of Google Wallet in 2011 and Apple
global standard for international money and security Pay in 2014 assisted to popularize mobile
transfers [11]. payments. There was also the rise of peer-to-peer
(P2P) payment applications too, making it simpler
The introduction of electronic fund transfer systems, for people to split bills, share costs, or send
such as the ACH (Automated Clearing House) in the money to friends and family
United States, facilitated faster and more efficient
money transfers. The ACH network allowed for direct  The global COVID-19 pandemic in early 2000
deposits, payroll payments, and electronic bill led to acceleration of the adoption of digital
payments, significantly reducing the need for paper financial services due to lockdowns and social
checks [12]. distancing measures that forced businesses and
consumers to rely more heavily on digital
FinTech witnessed significant developments during channels with a surge in fintech solutions.
the 1980s and 1990s with the rise of digital financial
services and the early stages of online banking. A BENEFITS OF FINTECHS
major breakthrough came when Michael Bloomberg Fintechs have put Spain in the 6th position worldwide
founded Innovative Market Systems (later Bloomberg for the number of fintech companies that are in the
L. P.) and introduced the Bloomberg Terminal. This sector. Some of the benefits of fintech include [17]:
innovation revolutionized how financial professionals  Personalized service – by offering specific
accessed and analyzed market data, providing real- financial products and services adapted to
time financial market data, analytics, and news to customers’ needs.
financial institutions worldwide [13]. During the early  Convenience and speed – they offer real-time, 24-
1980s, the Bank of Scotland offered the first online hour services every day of the year.
banking service known as Homelink, where
 Easy access – this is by giving easy access to
customers can view statements, transfer money, and
efficient, agile, and simple paperless operations
pay bills using their televisions and telephones [14].
without leaving the house.
The late 1980s witnessed the development of EDI
(Electronic Data Interchange) standards, that enabled  Technology – it can guarantee the veracity and
businesses to exchange financial documents security of transactions from any device.
electronically and streamlining B2B (business-to-  Financial inclusion and democratization of access
business) transactions [15]. to financial products – the access to financial
Consumer digital banking came to the limelight in products does not have to be in person and can be
1994 when Stanford Federal Credit Union launched digital, thereby improving financial inclusion.
the first internet banking website. The first Internet

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 Transparency and fewer fees. 2. Compliance with government regulations: finance
 New products and services. is one of the most regulated sectors by the
government. Therefore, the ways out are:
 They offer richer data, improved user experience  to check for legal compliance before creating an
and more modern platforms, as shown in Figure application or utilizing the software
5.  if required, a legal consultant can be hired to lead
In the new financial ecosystem, both the traditional one through all the basic details and policy
financial institutions and fintechs now collaborate  before entering the market, ensure that the legal
leading to greater stability, wider range of products, department is aware of the latest government
and increased knowledge about the customer. policies
The financial sector’s ability to respond to the 3. Lack of mobile and tech expertise: some finance
pandemic has been fantastic due to the incorporation companies or banks may not have proper or
and use of innovative technologies such as Big Data convenient mobile banking services. The
or Artificial Intelligence, as shown in Figure 6, which solutions are that your mobile services must have
are able to standardize, analyze, and process the following features:
enormous quantities of data to assess the present  QR-code for payments in public transport
situation, identify behavior patterns and devise  NFC chip in shops
effective strategies. Big Data in the financial sector is  Automatic scanning of a credit card number with
used to [17, 18, 19]: a lense
 Proactively anticipate and mitigate fraud  Two-factor authentication with a finger-print
 Automatically assess customer solvency 4. Big Data and AI Integration: the use of big data
and AI are making their impact in every
 Minimize the risk of financial decisions organization. Using big data, organizations can
 Improve security mechanisms and policies for collect personal information about users, social
transactions status to financial behavior, habits, and in-app
activity. With the help of big data, AI automates
 Adapt to financial regulations to prevent fraud the whole process to detect fraud, perform a risk
 Cost reduction analysis, and manage transactions effectively. For
AI and big data to combine, one needs to teach AI
 Improve the customer relationship and user
through machine learning, which requires large
experience
amounts of data to train the system. Need to train
 Personalize the customer experience the machine learning system on smaller amounts
CHALLENGES FACED BY FINTECH of data because most banking apps are unable to
INDUSTRY AND SOLUTIONS process and fetch a large number of data sets.
The following are some of the challenges fintech 5. Blockchain integration: the integration of a
industry faces and the solutions [20]: blockchain is a great challenge for many financial
1. Data security: this is a major concern in the organizations. To integrate blockchain
internet world, be it mobile banking, payment technology, one must ensure to adhere to
apps, or Fintech in general. The traditional government guidelines and laws, and avoid any
banking systems make use of security guards, government restrictions concerning your mobile
CCTVs, vaults, and heavy bulletproof doors to services as they are still hesitant to allow massive
keep their data safe and secure. However, as with blockchain adoption.
virtual security, things are not as easy as we think.
6. User retention and user experience: this is also a
Vulnerabilities are much discreet and have
major concern for the fintech sector, but despite
potentially more impact on users, as not only their
this, a fintech app should manage a balance
money is at stake but their personal data too. The
between user experience and security. Hence, you
solution can be achieved via a high-level security
should offer a mobile app banking service that is
app with the help of the Fintech app development
neither easy to break nor too hard to access. The
company. The security app will consist of:
solution is to:
 Two-factor authorization
 Develop a fintech app that the UI/UX part is
 Biometric authentication
secure and user-friendly
 Data encryption and obfuscation
 Use two-factor authentication, but asking the
 Real-time alerts and notifications
details again and again for login may frustrate
 Behavior analysis
users

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 Analyze your competitors and observe what they [3] “Fin-Tech new source of seed money,” The
are using to offer a seamless user experience. Boston Globe, August 27, 1967, p 116.
7. Effective marketing tactics to acquire customers: Retrieved July 20, 2024.
fintech organizations fail to understand their [4] D. W. Arner, J. Barberis and R. P. Buckley
niche, target audience, and strategies. There is (2016), “The evolution of Fintech: A new post-
need to: crisis paradigm?” Georgetown Journal of
 Ensure that you are significantly better than your International Law, vol. 47, pp 1271-1319.
competitors by investing a bunch of money, ISSN 1550-5200.
effort, and human resources to offer seamless
[5] A. Gilbert, D, Hunt and K. C. Winch (1997),
services to your customers or walk along with the
“Creating an integrated payment system: The
traditional banks.
evolution of Fedwire,” (PDF), newyorkfed.org.
 Come up with a strong and effective marketing
Retrieved July 20, 2024.
strategy that consists of advertising, collaboration,
etc. [6] D. S. Evans and R. Schmalensee (2005), “The
economics of interchange fees and their
8. Personalized services: this has been the primary
regulation: An overview,” (PDF), MIT Sloan
and core factor of banking for a long time. In
Working Paper no. 4548-05,
today’s world, personalization means interacting
doi:10.2149/ssrn.744705.
with a user at the right time on their preferred
channel with a proper solution to their exact [7] D. L. Stearns (2011), “Electronic value
needs. The fintech organizations should: exchange: Origins of the VISA Electronic
 Have precise customer insights Payment System, Spinger. ISBN 978-1-84996-
 Understand the behavior of users and get insight 138-7.
into the user’s health, social interactions, and [8] “From the archives: the ATM is 50,” Barclays,
events June 27, 2017. Retrieved July 20, 2024.
 Develop trust with customers
 Keep user’s data secure and safe. [9] “Payment systems in the United Kingdom,”
(PDF), BIS. Retrieved July 20, 2024.
CONCLUSION
Fintech offers opportunities as a fast growing [10] “Nasdaq: 50 years of Market Innovation,”
technology to enhance the quality of financial Nasdaq. Retrieved July 20, 2024.
services, improve customer satisfaction/experience, [11] S. V. Scott and M. Zachariadis (August 1,
increase financial inclusion, support economic 2012), “Origins and development of SWIFT,
growth, and welfare gains. However, there is the need 1973-2009,” Business History Review, vol. 86,
to prepare for known and new risks that may likely no. 3, pp 461-502,
emerge to threaten financial stability, economic doi:10.1080/0007691.2011.638502. ISSN
growth and social welfare. Moreover, fintech startups 0007-6791.
are to offer more efficient and effective solutions to
benefit SMEs by providing them with increased [12] “History of the ACH Network,” Nacha.
access to more diverse funding options. India is Retrieved July 20, 2024.
adopting AgriTech, HealthTech and ProTech startups [13] “Bloomberg: The early years,” Bloomberg.
to disrupt traditional ways of doing business in these Retrieved July 20, 2024.
three industries to facilitate the nation’s most vital
[14] “British move fast in home banking,” The New
necessities of food, healthcare, and shelter for citizens
York Times, January 2, 1984. Retrieved July 20,
– this should also be adopted by all other countries.
2024.
More information on Fintech can be found in [21, 22]
[15] “What is EDI (Electronic Data Interchange)?”
and the related journal:
SAP. Retrieved July 20, 2024.
 American Journal of Financial Technology and
Innovation (AJFTI) [16] “First Internet Bank launches Real-time internet
banking services,” First Internet Bank,
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Fintech for consumers,”
[2] “Financial technology,”
https://www.gdslink.com/7-benefits-of-fintech
https://simple.m.wikipedia.org/financial-
technology

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[18] GDS Link (September 15th 2023), “The 8
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products,”https://www.linearloop.io/growth- Figure 2. Banking as a service
and-future-of-fintech-in-india Source:https://www.google.com/search?sca_esv=d7
e7d90bd6b3a957&sxsrf=ADLYWIJcO9zr53mtMtJ
[22] B. Kumari (05 July, 2023), “Role of Fintech in
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the banking and financial service industry in
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Figure 1. Fintech
Source:https://www.google.com/search?sca_esv=d7
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Figure 4. Cryptocurrency
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