What is financial technology or as it's known Fintech?
It is the use of technology in the field of financial services to develop it to help individuals, companies, entrepreneurs, and customers to manage their financial transactions, through algorithms and software that work on computers and smartphones.
Financial technology or Fintech has never been a novel idea, but rather an industry that developed rapidly, especially in our current century. as technology has always been a major part of the financial sector.
Fintech began around 1866 when the first transatlantic cable entered, providing the first infrastructure for financial globalization. In 1918, the Telegraph became the basis of the Fedwire fund service, a special communications system established by the United States Federal to accelerate money transfers between its 12 federal banks. and the financial sector continued to use the Telegraph for bank transfers until the early seventies.
This was followed by the construction of the bulk of the financial technology infrastructure between 1950 and 1970. In 1950, Diners Club introduced the first modern credit card, before being rivaled in later years by companies such as American Express. In the early days of the banking sector, transactions were kept on paper, which led to simple processes such as withdrawals and deposits taking a lot of time, in addition to making them vulnerable to errors and manual fraud. The situation remained until IBM's computers were used in the sixties, a move that completely changed the face of the banking industry. IBM devices have contributed to automation, speed, transparency, and trust in the system.
This was followed by an ATM that digitally converted and developed the services, initially limited to meeting the requirements for cash withdrawals outside working hours. In subsequent years, ATMs began providing additional services such as inquiring about account balances, changing passwords, and modifying profile details. The first digital exchange (NASDAQ) was then established in the seventies. The emergence of the Internet in the nineties was a milestone in the relationship between technology and the financial sector, with banks creating online apps that would enable the client to make transactions through a website while sitting at home or office.
The tremendous success of Apple's iPhone in 2007 marked the real beginning of the smartphone era that prompted most banks to make their banking services available via apps installed on these mobiles after those services were only available on computers. With consumers losing confidence in banks due to the 2008 global financial crisis and with changing legislation, Bitcoin was born in 2009 and followed by other cryptocurrencies.
Financial technology has changed several sectors, including banking, trading, insurance, and risk management. To make financial services easier and more effective, fintech companies employ the most well-known advanced technologies, including Big Data, artificial intelligence, and advanced computing.
The FinTech industry in Saudi Arabia has grown significantly over the past few years, and it is now obvious that FinTech will greatly influence how financial services are provided in the Kingdom.
The story began in 2017 when the industry started to evolve on a worldwide scale and the Saudi Arabian Monetary Authority concluded that it was crucial to promoting this industry as one of the opportunities for expanding the financial industry as a whole. It started with discussions with banks regarding the state of the banking industry and banking services in the Kingdom as well as the kind of financial services that inhabitants and tourists to the Kingdom needed. and discussions with other legislators. This started as an idea, developed towards the end of 2017, and was introduced in April 2018 at the Saudi Arabian Monetary Authority.
Through contributing to the creation of the infrastructure required to facilitate the growth and development of the sector, the initiative seeks to establish the Kingdom of Saudi Arabia as a global leader in the financial technology industry. The number of Saudi fintech companies in 2021 reached 82 active startup companies, compared to 10 companies in 2018.
Examples of Fintech applications in Saudi Arabia include:
Applications that provide advanced digital payment solutions enable you to add balance using mada, credit cards, or add balance using Apple Pay and transfer from any bank account inside or outside the Kingdom of Saudi Arabia using a mobile number or IBAN.
Companies working in the fintech sector, specifically in the field of (buy now, pay later), enable you to shop and split payments with Tamara and Tabby without paying any fees or any interest.
Through the use of financial technology, it connects investors and entrepreneurs on a single online interface to deliver the advantages of equity and debt crowdfunding services.
The financing and investing procedures are developed and automated by Financial Sukuk to achieve the highest level of technical and technological efficiency.
In order to achieve 525 financial technology businesses by 2030, the Kingdom of Saudi Arabia aims to establish competencies and policies that are compatible with new business models and to provide funding sources for these companies. Fintech companies also have a major role in achieving Vision 2030 based on (Saudi Fintech).
Fintech companies will contribute to achieving Vision 2030 by enabling the Kingdom to diversify its investment base, provide quality jobs for Saudi citizens, support the financial inclusion of small and medium-sized businesses, and develop them digitally. Supporting the Kingdom's efforts to eliminate paper money and the transition to a digital economy are also essential.
The field of financial technology has seen significant growth, as evidenced by the global market value of 7.3 trillion dollars in 2020, and growth is expected to increase to more than 25% CAGR (Compound Annual Growth Rate). And all technology will have a significant impact on financial transactions as it will help define and create new standards.
The following podcast links are all related to fintech:
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Prepared by: Layan Alsubaie and Razan Aloli