While the Internet has officially been around since 1991, it wasn’t until the launch of the smartphone that consumers around the world could truly access the financial technology that big banks had been utilizing for years.
As Computer Business Review recently reported, the first Internet innovations in finance—particularly the SWIFT system of international payments and the NASDAQ—were only available to financiers, brokers and corporations. And big banks were in no hurry to offer their customers the services that would allow them to complete their personal banking anywhere other than a local branch.
In fact, when eBay became the first global, online marketplace, banks passed on the chance to help the eCommerce site develop an online payment platform. Instead, entrepreneurs in Silicon Valley took on the challenge, with Elon Musk and Peter Thiel launching PayPal in 1999 so that consumers around the world could access financial technology.
“The most valuable businesses of coming decades will be built by entrepreneurs who seek to empower people rather than try to make them obsolete,” Thiel has said.
But it wasn’t until Apple introduced the smartphone in 2007 and other models soon followed that consumers finally started to reap the rewards of handling their finances anytime, anywhere. By 2017, 70 percent of the US population owned a smartphone, allowing them to pay bills, make purchases and transfer funds using their phones. In China, nearly 50 percent of people currently have a mobile wallet, and WeChat Pay has a whopping 600 million users.
More importantly, underserved people around the globe now have access to financial resources. People in rural Africa can apply for business loans, while migrant workers in the UK can open a digital bank account in minutes.
In fact, digital banks have popped up all over the world in the last decade to take on traditional banks. According to the U.S. Federal Reserve, digital banking users have increased from 26 percent to 51 percent between 2012 and 2017. In addition, a study by PwC found that almost half of all consumers did not bank at a physical branch in 2017, and funding for challenger banks rose from $2 million in 2013 to $453 million in 2016.