International Business Research; Vol. 15, No.

1; 2022
ISSN 1913-9004 E-ISSN 1913-9012
Published by Canadian Center of Science and Education

Fintech: A Literature Review

Ferdinando Giglio1
1
Department of Economics, University of Campania “Luigi Vanvitelli”, Capua, Italy
Correspondence: Ferdinando Giglio, PhD at University of Campania “Luigi Vanvitelli”, Corso Gran Priorato di
Malta, 1, Capua 81043, Italy.

Received: November 26, 2021 Accepted: December 13, 2021 Online Published: December 17, 2021
doi:10.5539/ibr.v15n1p80 URL: https://doi.org/10.5539/ibr.v15n1p80

Abstract
This article analyzes the Fintech evolution. After describing the process of this phenomenon, some of the main
definitions are provided both nationally and internationally. Finally, six main models of Fintech are analyzed.
Through a systematic literature, 14 articles have been selected that deal with the phenomenon of Fintech.
Six Fintech business models implemented by the ever growing number of Fintech startups have been identified,
payment, wealth management, crowdfunding, loan, capital market and insurance services. Internationally,
Fintech has already been defined by the International Monetary Fund (IMF), the World Bank Group (WBG), the
Financial Stability Board (FSB), the Organization for Economic Cooperation and Development (OECD), the
International Organization of Securities Commissions (IOSCO), the Bank for International Settlements (BIS).
On a national level, on the other hand, Fintech has been analyzed by various countries, USA, United Kingdom,
Singapore, China, Switzerland, China, Australia and the European Union.
Fintech refers to a broad set of innovations - observable in the financial field in a broad sense - which are made
possible by the use of new technologies both in the offer of services to end users and in the internal production
processes of financial operators as well as in the design of market enterprises, without thereby compromising
new possible configurations of intersectoral activities.
Fintech appears to be representative of innovative methods - based on technology - of carrying out activities
directly or indirectly connected to financial services rather than being a pre-defined industrial sector. Following
the logic of the digital economy, Fintech contributes to designing an open and continuous network of modular
services for businesses, individuals and banking, financial and insurance intermediaries, becoming a powerful
acceleration force for the integration policies of the financial services markets in the EU.
Keywords: fintech
1. Introduction
E-government, e-governance and information systems were born thanks to the advent of the world wide web
(Razzaque and Karolak, 2010). Concepts such as knowledge management have received great consideration in
both corporate and managerial research (Razzaque and Hamdan, 2020). The financial sector also contributed
predominantly to the emergence of these information systems.
It is claimed that a new era of Fintech is dawning; this phenomenon embraces various sectors such as: financial,
technological and innovative. The word Fintech arises from the union of two terms, such as: finance and
technology. Fintech describes the relationship of various technologies with financial assets.
This phenomenon has been the subject of research by many researchers who have outlined its history and
evolution. The document is structured as follows: after having illustrated the evolution of Fintech, some of the
main definitions of this term are provided at national and international level and finally the main models of this
phenomenon are examined.
2. Fintech 1.0 (1866-1967): Towards the Digital World
The terms "finance" and "technology" have been linked to each other. Finance was born through administrative
systems (Rowlinson, 2010).
According to Mervyn King (2003-2013): “The story of money is… the story of how we evolved as social
animals, trading among ourselves. It begins with the use of commodities such as money, grain and livestock in

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Egypt and Mesopotamia as early as 9000 BC. ... The cost and inconvenience of using such commodities have led
to the emergence of precious metals as the dominant form of money. Metals were first used in transactions in
ancient Mesopotamia and Egypt, with metal coins originating in China and the Middle East and remained in use
until the 4th century BC. The first banknotes appeared in China in the 7th century AD. "(King, 2016).
Banknote represents a technology that illustrates alienable values (McGroarty, 2011); this is a feature of the
modern economy. In addition, the birth of the first information technologies has supported financial transactions.
Another form of information technology is double-entry accounting (Spoke, 2015) which was born from the
union of finance and commerce in the medieval period.
In this period, the advancement of technology has been helped by finance and access to capital. For this reason,
the link between finance and technology is long-standing, with a journey that lays the foundations for the
modern era.
2.1 The First Period of Financial Integration
Finance and technology came together to give life to what has been called the first period of financial
globalization. Financial interconnections have been supported by various technologies such as telegraphs,
railways, canals and steamships and have enabled the transmission of financial information in the world. At the
same time, resources have been provided by the financial sector to make these technologies effective (Roth and
Dinhobl, 2008).
2.2 The Early Post-War Period
Even after the First World War, technological tools continued to develop. Texas Instruments, in fact, created the
first financial calculator in 1967 (Thibodeau, 2007). The first fax dates back to 1964 thanks to Xerox
Corporation (Auth, 2016).
3. Fintech 2.0 (1967-2008): Traditional Digital Financial Performances
Fintech 2.0 is natp thanks to the birth of the ATM. The second period of Fintech runs from 1967 to 1987.
3.1 Digitalization and Globalization of Finance
In the late 1970s, electronic payment systems changed rapidly. The Inter Bureau was born in the United
Kingdom in 1968, establishing the base of the Bankers' Automated Clearing Services, (Welch, 1999) while the
Interbank Payments System in 1970 (Federal Reserve Bank of New York, 2002). Fedwire became an electronic
system in the early 1970s (Federal Reserve Bank of N.Y., 2015). The BIS Payments and Settlements Committee
was established in 1990. In the securities industry, the transition from trading physical securities from the late
1600s to the present was due to the establishment of the National Association of Securities Dealers Automated
Quotations in the United States in 1971. Online banking was introduced in the United States in 1980 and in the
United Kingdom in 1983 (Choron and Choron, 2011). Also in that year there was "Black Monday". All this has
led regulators to work on mechanisms to foster cooperation on cross-border securities markets (Steinberg, 1999).
The Single European Act, the 1992 Maastricht Treaty and various directives and regulations on financial
services, have laid the foundations for full interconnection.
3.2 What Are the Regulatory Approaches in Fintech 2.0?
Due to the change in technology, the regulatory framework and strategies have also changed. Great efforts have
been made in the United States and Europe. Regulating new innovations applicable to the financial sector has a
limited advantage (Chan, 2016). Internet banking could eliminate the numerous lines at the branches, allowing
customers there operations directly from home (Carse, 2016). By eliminating the physical link between customer
and bank, competition was expected to increase. Internet banking has advantages, most notably better data
organization which leads to an understanding of the real credit risk of borrowers (Douglas Arrier and Jarios
Barberis, 2015). The distinction between risk and Fintech stratup marks the transition to Fintech 3.0.
4. Fintech from 2008 to the Present Day
The global financial crisis of 2008 is a turning point and may have fostered the growth of the Fintech 3.0 era.
Indeed, since 2008, the image of the brand and the perceived stability of banks have been compromised.
Research from 2015 found that bank confidence levels are affected by Americans' abilities in tech companies.
China is an example of this phenomenon (Weihuan Zhou, Douglas W. Arner and Ross P. Buckley, 2015) with
over 2,000 P2P lending platforms operating outside a specific regulatory framework (Alois, 2015).
This does not demoralize millions of lenders and borrowers, who are willing to lend or borrow billions on these
platforms due to the lower cost, seemingly better potential return, and greater affordability. There may be a lack

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of "legacy behavior" in developing markets so that the public does not expect only banks to provide financial
services. As effectively described more than two decades ago, "banking is necessary, banks are not" (McLean,
1998).
4.1 Can Fintech Be Called a Revolution?
The bank and customers have been hit hard by the financial crisis. First, the public perception of banks has
deteriorated (Sumit Agarwal et al., 2014). Second, the crisis has affected two groups of people (Kell, 2014).
Many finance professionals have discovered FinTech 3.0 in which to put their skills into practice (Mark Esposito
and Terence Tse, 2014).
The training of recent graduates has provided the tools to understand the financial markets and their skills have
found a favorable outlet in Fintech 3.0. Post-financial crisis regulation has increased banks' correspondence
obligations and changed corporate structures. The universal banking model presents obligations and capital
increases. In this way, the way in which banks grant loans changes (Ferrari, 2016). The crisis was also caused by
the not always appropriate way of using financial instruments (Segoviano et al., 2013). Finally, schemes have
been put in place to prevent bank failure. In fact, these latest ones required recovery plans and stress tests were
put in place to assess their concreteness (Barberis, 2012).
4.2 The Birth of Fintech 3.0
Post-crisis reforms have had the effect of stimulating the rise of new technology players (Release, 2013). This
has led to disadvantages, including the embezzlement of capital. For this reason, consumers have relied on P2P
lending platforms. The request for greater access to credit was granted thanks to the Jump Start Our Business
Startups (JOBS).
4.3 How Is the Fintech Industry Made?
Fintech comprises 5 domains: (1) finance and investments, (2) internal operations and risk management, (3)
payments and infrastructure, (4) data security and monetization, and (5) customer interface.
In the first group, many investors focus on financing mechanisms, such as P2P lending.
Internal financial transactions and risk management represent the second fundamental area of Fintech for
financial institutions because they have created the best compliance systems to cope with the changes that have
taken place after the crisis (Marino, 2015).
Payments and infrastructures have represented the development of national electronic payment systems.
The security and monetization of data have allowed consumers to be more protected when carrying out a
financial transaction.
Finally, the interface will continue to be an essential point of traditional financial services.
5. Definitions of Fintech
Fintech was born thanks to the invention of Citicorp with a precise project. Over time, this phenomenon has
intrigued the public. Imran (2014) found that Fintech has been used in the service sector. It proposes a change
especially in the banking services sector (Imran, 2019). There is a great variety of definitions of the term in
academic practice and business journals. Table 1 shows some of the main definitions of the term Fintech.

Table 1. Definitions of Fintech

Definitions Source Year
Fintech not only encompasses specific sectors but also covers a whole Arner, DW; Barberis, JN; 2015
range of financial services and products. Buckley, RP
The creation and dissemination of new financial instruments describe Farha Hussain 2015
financial innovation.
Fintech is defined as an industry made up of many companies that make McAuley, D. 2015
financial systems more efficient.
Fintech uses IT technology to improve the efficiency of the financial Kim, Y., Park, Y. J., & 2016
system. Choi, J.
Fintech describes a financial services industry born in the 21st century. Investopedia 2016
Fintech makes use of modern software and technologies. Fintech weekly 2016
Fintech combines different business models to make the financial system Ernst & Young 2016
better.

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6. The International Definitions of Fintech

Some of the definitions of the term Fintech internationally have been reported.
The BFA describes Fintech as a technological advance capable of innovating the provision of financial services
(IMF, 2018).
Instead, the FSB defines it as a technology that has contributed not only to innovation in the financial sector but
also to the emergence of new business models (FSB, 2019).
The OECD, on the other hand, defines Fintech as the innovative application of digital technology for financial
services (OECD, 2018).
IOSCO states that Fintech is a variety of innovative business models with the potential to transform the financial
services sector (IOSCO, 2017).
Finally, the Basel Committee defines Fintech as a company whose main task is to provide innovative services,
such as the launch of new technologies in the financial sector.
7. Definitions of Fintech at the National Level
7.1 Fintech in USA
In the United States, there is no clear-cut framework for fintechs. Fintech is defined by the National Economic
Council as a set of innovations in financial assets (National Economic Council, 2017).
The first sandbox was born in Arizona that allowed entrepreneurs and companies to have their own products and
services (State of Arizona, 2018).
7.2 Fintech in the United Kingdom
Even in the UK, as in the US, there is no regulation for fintechs. The guidelines are provided by the Financial
Conduct Authority which argues that innovation has good potential to make customers' lives better. For this
reason, the FCA has given life to the "2 innovate" project with the aim of promoting innovation even more.
7.3 Fintech in Singapore
In Singapore, there is a balance between rules and Fintech. The latter are institutions administered by the
Monetary Authority. Under the MAS, applications can be submitted by two entities: a financial institution
licensed as a partner and one licensed in the capital sector (MAS, 2019a).
7.4 Fintech in China
In China, Fintechs allow you to pay, lend and sell online. For this reason, they help e-commerce companies to
sell and distribute financial products.
7.5 Fintech in Australia
In Australia, fintechs spread innovation when they allow markets and financial systems to be effective and
consumer-oriented (The Australian Government, 2016).
7.6 Fintech in Switzerland
In Switzerland, Fintechs are based on the principle of technological neutrality and are regulated by the Federal
Supervisory Authority. A requirement that Fintechs in Switzerland must have is the fact that they must be
joint-stock or limited liability companies or that they must have their registered office in Switzerland (FINMA,
2018).
7.7 Fintech in The European Union
The European Union has lagged behind the United States and China. Fintechs are described as lenders enabled
through new technologies to create innovation (European Parliament, 2017).
8. Business Models of Fintech
Six Fintech business models have been identified from the recent Accenture report (2016a): payments, wealth
management, crowdfunding, lending, capital market and insurance services.
8.1 Payment
Fintech companies that focus on payments are able to acquire customers at low cost and are among the fastest in
terms of switching and choosing new payment features. There are two types of market for payments: consumer
and retail payments and wholesale payments. Consumer and retail payment fintechs include mobile wallets,
peer-to-peer mobile payments, foreign currency, real-time payments, and digital currency settlement; wholesale

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transactions mainly deal with interbank transactions - such as money market contracts and foreign exchange
transactions - as well as commercial payments, generally of a significant amount for which timely execution is
required (Mellon, 2015).
8.2 Wealth Management
One of the wealth management fintech business models are wealth managers who use algorithms to suggest
assets to invest in based on the client's needs (Ask the Algorithm, 2015). This model benefits from changing
demographics and client attitudes that support automated investment strategies (Holland Fintech, 2015).
8.3 Crowdfunding
Crowdfunding fintechs allow people to verify the creation of new products and media (International Trade
Administration, 2015). Crowdfunding has three parts: the promoter of the project, the contributors who may be
interested in supporting the cause or project and the founder.
Three typologies of crowdfunding are: based on rewards, donations and shares.
Reward-focused crowdfunding has been an interesting fundraising choice for thousands of small businesses and
innovative projects.In the event that there is interest to be charged on the premium-based crowdfunding amount,
the borrower sets the interest rate at which feels comfortable and can guarantee reimbursement within the
established time period (Mollick, 2014). Donation-based crowdfunding is a way to raise money for a charity
project by asking donors to participate with money. In a donation-based crowdfunding, the lender receives a
form of non-monetary reward. Share-based crowdfunding is an attractive option for small and medium-sized
businesses as the higher capital ratio requirements for traditional banks describe loans to SMEs as less needed
than traditional banks. Share-based crowdfunding allows entrepreneurs to reach investors interested in having
shares in their startup or other small private business.
8.4 Lending
P2P fintechs allow people to lend and borrow. They are able to guarantee lower rates and a better loan process
for lenders and borrowers. P2Ps have no obligation to comply with capital requirements affecting total
availability because they are not used in the loan itself (Williams-Grut, 2016).
8.5 Capital Market
Investors through trading fintechs can discuss with each other but above all they allow them to share knowledge,
execute orders to buy and sell commodities and risk management. Trading fintechs allow the reduction of
barriers and costs for SMEs transacting in foreign currencies around the world.
8.6 Insurance Services
A direct relationship between the customer and the insurer takes place in insurance-type fintechs. They employ
data analytics to quantify and manage risk, and products are provided to customers to satisfy them. They
facilitate healthcare billing processes.
9. Conclusions
This article wanted to highlight the evolutionary path of Fintech that culminated with Fintech 3.0 in 2008 wanted
by several customers. After having dealt with this topic, some of the main definitions of the term Fintech have
been provided both nationally and internationally. Finally, six Fintech models were analyzed, among them:
payment, asset management, crowdfunding, lending, the capital market and insurance services.
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