Fintech refers to the novel processes of building systems to model financial products such as bonds, stocks, contracts and money due to digital technological advancements (Freedman 2006). More precisely, Arner, Barberis and Buckley (2015) described Fintech as technologically enabled financial innovation that could result in new business models, applications, processes or products with an associated material effect on financial markets and institutions and the provision of financial services. Wang, Xiuping & Zhang (2021) explained Fintech as the increase competition in financial markets that provide services in which traditional financial institutions do inefficiently or not at all, and expand the pool of users of such services. However, they will not be able to replace banks in the majority of their key functions. Similarly, Schueffel (2017) indicated that Fintech is the new “disruptive and incremental innovation in the financial industry”. Chishti and Barberis (2016) outlined in their book that Fintech is the “marriage between finance and technology”.
In the academic articles, Fintech has been defined as “an acronym which stands for financial technology, combining bank expertise with modern management science techniques and the computer” (Bettinger 1972, p.62). Also, Ryu (2018) described Fintech as “innovative and disruptive financial services, where IT is a key enabler”. With Fintech, users may engage in various digital banking transactions: mobile payments, transferring money, making loan requests, purchasing insurance, managing assets, mobile payments, mobile remittance, and P2P lending (Barberis 2014; Ryu 2018). These studies relate more to Fintech acceptance and willingness to use than experience and may not fulfil the current banking and regulators' needs.
Milian et al. (2019) highlighted that Fintech is a neologism that describes the contracting worlds of finance and technology, it can be spelt as “FinTech”, “Fin-Tech” or “fin-tech”. Gomber et al.
(2017) described Fintech as it is concerned with combining financial activities (for example, loans, payments, transfers of monetary values and diverse banking operations) with IT services (for example, cloud computing, mobile internet). Despite the increasing interest of both academics and professionals in Fintech transactions; however, there is a lack of a unified definition among practitioners (Milian et al. 2019). Arner et al. (2017) claimed that although Fintech combines financial and IT service, it is not confined to specific industries (for example, finance) or business models (for example, crowdfunding and P2P borrowing). Also, there is a consensus among scholars that customers are the keys to the success of Fintech's effective demand in the finance industry (Nurfadilah & Samidi 2021). Even though the concept of Fintech is at the infancy stage, it is growing rapidly in the industry, which has risen the interest of scholars to study the phenomena in the financial industry.
Zafar et al. (2019) suggested that the financial sector is under immense pressure to continue the measurement of whether Fintech services improve customer satisfaction and loyalty scheme.
Investigations into the level of benefit and risks of adopting Fintech have provided many insights into which customers opt for the use of the service. Similarly, Lee and Shin (2018) suggested that Fintech is directly linked to the core businesses of the financial institutions such as financial inclusions and innovations for products and services that require establishing effective relationships with consumers. According to Ryu (2018), perceived risk and benefit is essential determinant of customers’ switching intentions. The outcome of the study indicated that Fintech benefits and risks are significant factors affecting the Fintech continuance intention.
Over the years authors have attempted to define the meaning of “Fintech”, and stressed that there is no general definition of Fintech (Schueffel 2017). Hence, a universally accepted definition of Fintech is absent because literature in financial technology has only been established in recent years, and there are relatively few practitioners and researchers to develop a plethora of definitions or descriptions. Moreover, a survey has also been conducted in Germany on the extent to which financial service customers can define Fintech; 70% of them did not know how to define it (Schueffel 2017). Therefore, the result of this recent survey shows that it is necessary to outline and stress out an academic understanding of the meaning of Fintech. Within finance, economics, industrial management and data system literature, Fintech was variedly described with such terms as a disruptive technology in financial transactions. Therefore, twenty academic definitions of Fintech were collected from the literature and presented in the Table 2.1.
Table 2.1 Summary of Fintech Definitions Embedded in Previous Literature
Reference Definition
Micu and Micu (2016) “Financial Technology, also known as ‘FinTech’, is a new sector in the financial industry that incorporates the whole plethora of technology that is used in finance to facilitate trades, corporate
business or interaction and services provided to the retail consumers.”
Carney (2017) “‘FinTech’ can be broadly defined as technologically enabled financial innovation that could result in new business models, applications, processes or products with an associated material effect
on financial markets, financial institutions and the provision of financial services.”
Williams (2017) “’Fintech’ is an economic industry composed of companies that use technology to make financial systems more efficient.”
Jun and Yeo (2016) “Recent advances in information and communications technology (ICT) have led to the rapid development and expansion of new and
innovative financial services, often termed ‘FinTech’.”
Schueffel (2016) “‘Fintech’ is a new financial industry that applies technology to improve financial activities.”
Dorfleitner et al. (2017) “The term ‘FinTech’, which is the short form of the phrase financial technology, denotes companies or representatives of companies that combine financial services with modern, innovative technologies.”
Bettinger (1972, p.62) “an acronym which stands for financial technology, combining bank expertise with modern management science techniques and the
computer”
Arner, Barberis and Buckley (2015)
“Fintech as the substitution of traditional financial institutions that covers entire financial services and products technology-enabled
financial institution to develop financial institution processes.”
Chishti and Barberis (2016)
“Marriage between finance and technology.”
Kuo – Chuen and Teo (2015)
“Fintech is combining innovative business models and technology to enable, enhance and disrupt financial services.”
Freedman (2006) “Financial technology as being concerned with building systems to model, value and process financial products such as bonds, stocks,
contracts and money.”
McAuley (2014) “FinTech is an economic industry composed of companies that use technology to make financial systems more efficient.”
Ernst and Young (2016)
“Fintech as a type of business using hardware and software technologies to provide financial services.”
Kim et al. (2015) “Fintech is the technical process resulting from developing and establishing new financial software which might affect the entire
traditional system.”
Ryu (2018) “Innovative and disruptive financial services by non-financial companies, where IT is the key factor.”
Milian, Spinola and Carvalho (2019)
“Fintech is a neologism that describes the contracting words of finance and technology, it can be spelled as “FinTech”, “Fin-Tech”
or “fin-tech.”
Gomber, Koch and Siering (2017)
“Fintech as it is concerned with combining financial activities (for example, loans, payments, transfers of monetary values and diverse banking operations) with IT services (for example, cloud computing,
mobile internet).”
Schindler (2017) “FinTech’ is technologically enabled financial innovation that could result in new business models, applications, processes, products, or services with an associated material effect on financial markets and
institutions and the provision of financial services.”
Chen, Wu andYang (2019)
“FinTech can be broadly defined as any technology that enables or enhances the provision of financial services.”
Thakor (2020) “Fintech is the use of technology to provide new and improved financial services. Part of the motivation for the emergence of fintech
is that, while information technology has made everything – from computers to cars – cheaper and more functional, the unit cost of financial intermediation has apparently not changed much in over a
century.”
Buckley et al. (2020) “Fintech is the key driver to achieve financial inclusion and the broader objective of inclusive growth.”
As apparent from the Table, there is no consensus regarding the meaning and common understanding of the term “Fintech”. Thakor (2020) argued in his publication “Fintech and banking: What do we know?” The technology around Fintech and its interaction with banking is evolving, so do the understanding and definition of it. Simultaneously, the definition of Fintech is
relatively recent, and it has been discussed quite a bit in the past few years. However, without a doubt, Fintech appears as a great important phenomenon to the financial industry that is in contact with information technology and innovation. Interestingly, the extraordinary growth and consideration of Fintech was an area of concern by researchers. Specifically, both Arner, Barberis
& Buckley (2017) and Schindler (2017) were interested to know the potential addition that Fintech could add to the finance industry. They gathered that financial technology innovation has the power to alter the fundamental finance products as well the underlying attributes of the financial system. Considering this finding, the impact of financial technology needs to be measured from the financial industry, consumer adoption and law regulation (Sangwan et al. 2019).
Through the definitions presented in the literature explaining financial technology, this research adopts the importance of the role of modern technology in financial technology in general (Chishti
& Barberis 2016; Micu & Micu 2016; Schindler 2017). In particular, the definition of financial technology as the main driver for achieving financial growth for institutions and keeping pace with technological changes in the financial sector (Chen, Wu & Yang 2019; Buckley et al. 2020; Thakor 2020), since the financial performance of banks is the major focus of this study. The next section will focus on the significance of Fintech by demonstrating the researcher’s views on its contribution to improving and developing traditional financial services. It will demonstrate the phases of Fintech and outline the recent knowledge on the rise of Fintech in the finance industry.