CHAPTER 3The Historical Context for FinTech

INTRODUCTION

The aftermath of the Great Recession left a market environment that was incredibly suitable for FinTech companies to emerge. Key elements of this environment included banks tightening credit standards, a low interest rate environment that effectively offset a significant proportion of the funding advantage that banks have, the proliferation of technology in consumers' everyday lives, rising consumer expectations and trust in digital offerings (e.g., the evolution of digital offerings in retail and entertainment led to higher expectations for digital delivery of financial services), a relatively benign credit environment that has facilitated credit quality for lenders, and a robust funding market for early‐stage ventures.

While market conditions are favorable for FinTech presently and a number of pundits are hailing its potential, technology has a long history within financial services and that history is littered with examples of grand successes and failures. By examining the history of technological innovation within financial services before we delve deeper into current trends and outlook for FinTech niches in Section Two of this book, we can determine what has been successful in the past and provide some historical context for what may be successful in the future. Consequently, this chapter provides a historical context for today's FinTech companies, investors, and bankers. It also presents case studies on some selected ...

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