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Erschienen in:
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2021 | OriginalPaper | Buchkapitel

2. A Historical Perspective on Disruptive Technologies

verfasst von : Rossella Locatelli, Cristiana Schena, Alessandra Tanda

Erschienen in: Disruptive Technology in Banking and Finance

Verlag: Springer International Publishing

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Abstract

This chapter provides a contextual background to understanding the contemporary FinTech revolution through the exploration of the history of disruptive technologies. Even at a very early stage (late 1860s–1960s) technology and finance had a strong relationship. Ever since, technology has contributed to the development and advancement of banking and financial solutions: two examples being the introduction of credit cards and ATMs. Later on (1960s–2008) the relationship between technology and finance became increasingly strong and intertwined—heavily impacting financial products and processes, and gradually digitalising the payment system, banking channels and securities markets. Beginning in 2008, and lasting up to 2020, the FinTech and digital economy revolution spurred many new disruptive innovations, such as cryptocurrencies, peer-to-peer marketplaces and robo-advisory services. Furthermore, the unprecedented effect of technological innovation in financial markets had an impact on the competitive environment, due to the entry of new (often unregulated) providers with innovative business models. These novelties ultimately affect the sustainability of the traditional business models of financial intermediaries and raise policy concerns related to financial stability and consumer protection. The chapter concludes by discussing the future developments suggested by recent trends in technological innovation, regulatory and supervisory approaches and the need to grasp the benefits of digitalisation by the financial sector.

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Vorheriges Kapitel Introduction
Nächstes Kapitel A Taxonomy of FinTech Innovation
Fußnoten
1
For instance, a page with 25 words could be transmitted through telegraph, but the process took almost two minutes to be completed (Getsmarter, 2018).
 
2
The history of the birth of credit cards has been reviewed several times in the literature and more recently by Agarwal and Zhang (2020).
 
3
A revolving credit card allows an account holder to borrow money up to an agreed limit.
 
4
Long before that, in 1980s a top retailer in the US (Sears, Roebuck & Company) incorporated an investment company and a real estate broker to provide financial services (e.g., credit cardsand insurances) in its stores under the label “Sears Financial Centres”. The diversification strategy, however, did not prove effective, and the financial arm of the company was sold after a huge loss in 1992 (see Bátiz-Lazo & Wood, 2002 for a detailed reconstruction).
 
5
Regulators and supervisors have questioned whether to include these entities and their activities within regulatory frameworks (already existing or newly designed) (Hernández de Cos, 2019).
 
6
The development of the so-called “public cloud” is crucial in this respect. Numerous agreements have been concluded between incumbentbanksand technology providers for the use of cloud systems (e.g., Google entered into agreements with Intesa Sanpaolo and Deutsche Bank for cloud services) (Deutsche Bank, 2020). The market power of BigTech is in this field considerable: for instance, Amazon Web Services is the largest provider of cloud services in the world, including to many financial institutions. Other large providers are Microsoft and Google, while in Asia, the main player is Ali Cloud (part of Ant Group) (Frost et al., 2019).
 
7
Please refer to Chapter 10 “How Is FinTech Shaping Economies?” of this volume for a discussion of the different impact of FinTech in different countries.
 
8
Particularly illustrative is the case of China, where the number of platforms has grown exponentially, especially in lending, leading to a speculative bubble. Numerous cases of bankruptcy highlighted inexistent or inadequate risk management policies of platforms. While huge losses of investors induced supervisory authorities to regulate some areas of activity surrounding peer-to-peer lending platforms to protect customers. Besides these cases of poor risk management, the market also experienced cases of fraud, which also resulted in investors losing significant sums of money (Claessens et al., 2018).
 
9
Harmonisation and a common policy framework are, in the eyes of the European regulator, two indispensable tools to promote an ordered development of the crowdfunding market.
 
10
Many banks implemented the capability of “instant transfer” of funds between current accounts; main players also invested in blockchain technologies. These latter include projects by JP Morgan for interbank payments, Santander for cross-border payments, and more than 100 banks that became part to the R3 consortium (including BNP Paribas, Credit Suisse, ING, and Unicredit) (Azarenkova et al., 2018; CB Insights data).
 
11
Consider that the number of (physical) ATMs in the world from which it is possible to operate with virtual currencies is 11,756, some large online operators accept paymentsin Bitcoin (including some websites) and as of November 2020 BitCoin alone is accepted in 18,629 establishments (physical and virtual). However, it is interesting to observe the growth in the number of establishments worldwide accepting BitCoin in recent years: there were 15,601 in November 2018 (+19.4% over two years) and 8662 in November 2016 (+115% over four years) (data taken from www.​coinmap.​org).
 
12
Cryptocurrencies have also become an instrument in raising resources for business start-ups or investments through ICOs—Initial Coin Offerings: by placing digital tokens based on blockchaintechnology, companies can raise funds in a similar way to an IPO. In this case, however, the investment is not directly in a security representing a share of share capital, but in a token, whose performance depends on the performance of the companies that issued it. ICOs are subject to the same critical issues as cryptocurrencies and, in addition, can be a vehicle for fraud (for a recent study on this topic, see Adhami et al., 2018; Toma & Cerchiello, 2020).
 
13
As evidence of the importance devoted to blockchain applications, not only related to the topic of cryptocurrencies or payments, almost half of all tested blockchain applications refer to financial intermediaries (Hileman & Rauchs, 2017).
 
14
For more detailed discussion of digital currencies, we refer the interested reader directly to Chapter 4 of this book.
 
15
The most successful P2Pinsurance companies include German firm Friendsurance, US-based Lemonade and British firm Guevara.
 
16
As an example, the car manufacturer Tesla in the US developed a service that includes insurance coverage, maintenance and driver assistance, while also collecting information on drivers’ habits and behaviour to get more accurate estimates of risk linked to car insurance.
 
17
Although there is no single definition of open insurance, we can refer to EIOPA’s interpretation as an environment in which accessing and sharing insurance-related personal and non-personal data via Application Programming Interfaces (APIs) is allowed (EIOPA, 2021).
 
18
Especially because of the concerns linked to the diffusion of COVID-19, in the latter months of 2020 and early months of 2021 the part of the InsurTech sector focussing on life and health received much attention and also important rounds of investments by investment funds; these included both specialised investors and BigTech companies (CB insights, 2020).
 
19
Their main competitive advantages are, in fact, their large and varied information set (big data) and their excellent reputations with their customers (Barba Navaretti et al., 2017; Bilotta & Romano, 2019; FSB, 2019; Schena & Tanda, 2019; Zetzsche et al., 2018).
 
20
Although internet banking is commonly used by different segments of the population, some age groups (older and elderly population) still prefer the physical channel (DNB, 2020; FSB, 2020; Lee & Shin, 2018).
 
21
The proliferation of digital banks encouraged the ECB in 2018 to issue guidelines expressly aimed at FinTechcredit institutions, which were later embedded in general guidelines (ECB, 2018). The intervention of the central bank was aimed at emphasising the characteristics that make an intermediary a “bank” and the need to act in the authorisation phase in a harmonised manner within the European market by all national supervisors.
 
22
A TechFin is a firm who leverages existing technology solutions to provides financial products and services.
 
23
Some banks and financial intermediaries are indeed now excluded from the use of alternative innovative data analysis tools, such as some artificial intelligence applications that work as black box (Giudici & Raffinetti, 2020).
 
24
As reported by Ratecka (2020) and Getsmarter (2018) the Chinese BigTech Alibaba introduced in 2017 a tool “Smile” that allowed to pay making a smile to the camera.
 
25
See, among others, European Commission (2018) and the European Green Deal (European Commission, 2019), Nassiry (2018), Macchiavello and Siri (2020).
 
26
As an example, the “G20 TechSprint” initiative, promoted in May 2021 by the G20 and the Innovation Hub of the Bank for International Settlements that will encourage private sector companies to develop innovative technological solutions to tackle the priorities set, including cyber security, open finance, green finance, SupTech and RegTech, next-generation financial market infrastructures (FMIs) and Central bank digital currencies (BIS, 2021).
 
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Metadaten
Titel
A Historical Perspective on Disruptive Technologies
verfasst von
Rossella Locatelli
Cristiana Schena
Alessandra Tanda
Copyright-Jahr
2021
Verlag
Springer International Publishing
Buch
Disruptive Technology in Banking and Finance

Print ISBN: 978-3-030-81834-0

Electronic ISBN: 978-3-030-81835-7

Copyright-Jahr: 2021

DOI
https://doi.org/10.1007/978-3-030-81835-7_2