The FinTech Universe Series: “What is FinTech and How Did We Get Here?”

This article will focus on the function of FinTech what their roles are in local economies and why they are so critical to our global economy and our financial well-being.

The essence of what banking is hasn’t changed since 800 B.C. when the Babylonians first conceived banking. If I were to describe banking in a single sentence, it would be it’s a medium for financial exchange. So what does this mean? At the core of every bank, regardless of its size, is a business model that focuses on receiving deposits and using those deposits to make loans. 

Where the complexity comes into banking is with the variety of products that make up deposits and loans and the transactions associated with these products . This means that banks work as intermediaries between two sets of parties, those that want to deposit funds and in return receive interest in the form of monetary compensation. And then there are those who want to borrow funds and in return pay interest in the form of monetary compensation. 

The interest that a bank receives from lending is then paid to depositors less, a margin that the bank takes for providing the service. And the final part of this is liquidity. For example, when I deposit my money with a bank, I’m in effect lending my money to a bank on the promise that the bank will return this to me if and when I ask for this back. This is where liquidity comes into play. Banks need to be able to respond to depositors demands quickly. Banks are required to retain a certain amount of deposits in liquid assets to meet the day-to-day demands of depositors. 

Given that banks are in the business of lending, recalling loans and asking for borrowers to return funds, for example, by selling their homes to make depositors demands is impractical. The business model of banks is wide, so it includes retail banks, so banks which target people like you and me for our everyday banking needs. Then there are commercial banks. These banks typically focus on business banking from small businesses right through to larger, sometimes even global enterprises. This includes familiar names like BNP Paribas and ICICI in India. They provide similar products and services as retail banks, as well as in deposits and lending. 

But the design and focus of the products and services is tailored to the unique needs of business clients. Then there are well known investment banks like Barclays, Goldman Sachs, Deutsche and Morgan Stanley. They’re world famous and there’s a reason why these guys operate in the big league. Investment banks tend to focus on capital financing and wholesale banking for enterprises and governments, using a variety of methods, including equity, debt, IPO’s bonds, mergers and acquisitions, portfolio management, etc. 

They are big revenue and profit generators. In 2019 Goldman Sachs reported net revenues of thirty six point five five billion dollars, which is the GDP of Bolivia. Now, whilst a split these business models out, it’s not uncommon for a bank to operate across all three models. 

Managing Your Career Into 2024 and Beyond 

As 2023 draws to an end, the current geopolitical climate, marked by uncertainties such as the Israel/Gaza and Russia/Ukraine conflicts, is having a significant impact on career landscapes, particularly in the Financial Services sector, which is highly sensitive to...

Artificial Intelligence – Where Are We Now?

Forum Summary Dec 2023 The evolution of artificial intelligence (AI) has been a journey of transformative technological advancements. Once it was big data that dominated the tech scene; now, AI is at the forefront. AI encompasses a wide spectrum of technologies, which...

Consumer Duty – A Hot Topic

Terry Yodaiken, Armstrong Wolfe Advisor The July 2023 deadline for firms to have completed effective implementation for the FCA’s Consumer Duty initiative is fast approaching and exactly where asset managers are in their implementation journey’s is a hot topic.  To...

Converging Paths: The Synchronicity of Product Visionaries

In the realm of innovation, where revolutions unfold, it is crucial to comprehend the profound significance of design.Design is not about mere appearances; it is the fusion of aesthetics, functionality, and human experience. Our duty as pioneers of the digital age is...

Management challenges within hybrid working

Hybrid working has become the pyramidal battleground between the authority of the company to define its working patterns and the right of the individual to select their own. This point of tension rests upon an understandable, although some would say aged corporate...

3 of 24 things on the Control Officer’s mind

1. What’s in a name? 2. Can you measure culture? 3. Emerging technologies 1. What’s in a name? Within the continued evolution of controls and 1st line risk management, some banks are renaming their control function, risk management. Most say it would make sense to...

Workforce Management: Caught in the hybrid cul-de-sac

The honeymoon period for hybrid working is over, the hopes of a new epoch in working practices has hairline cracks, and companies that embraced this new dawn are facing difficult decisions. It is too simplistic to draw a line mid-Atlantic to define where banking and...

Mental Health Forum Summary – UK Mental Health Week 2023

The use of data to manage stress and mental health in the workplace is crucial for maximising productivity. In 2022, Armstrong Wolfe launched an ESG data management programme with our alliance partner Sutherland. From this programme, we concluded three things: Many...

The role of the COO in developing and implementing ESG strategies

Armstrong Wolfe are looking to establish the current roles and responsibilities of the COO where they relate to managing and interacting with their organisation’s ESG strategy, and to offer a possible framework of solutions to facilitate productive ESG management. In...