Fintech. It began in London.
Software programming is at the heart of fintech.
When we think of fintech we think of the awakening of the financial services to the threat of startups since 2012. We might consider trending topics such as niche disruption, disintermediation, perhaps even hot topics such as wearables and blockchain. But one thing we can say is that fintech, the innovative application of technology in the financial services industry, is dependent on creative software to enable disruption.
If we look back through the history of the use of computers in finance, large events such as semiconductor manufacturing first found their foothold in Japan and then subsequently in Silicon Valley in the 1960s. Prior to that, electro-mechanical counting counting machines were implemented in American banks as early as the late 1950s. But few would consider new counting machines alone to be disruptive innovation in banking.
Computer programming, the ingredient that enables fintech, was invented in Britain. One of the earliest applications of networked software systems (after war-time initiatives such as radar, avionics & ballistics) was financial services. In the 1960s and 1970s, British software programming companies were world leaders in deploying revolutionary “information systems” in investment and retail banks across the globe. These banks craved real-time position information to help them gain competitive advantage rather than having to use position data that was up to several hours old.
Such “software packages” were designed and implemented by “systems analysts” and “programmers” working for companies such as Logica & ICL who were leaders in their class. FX trading systems in the 1970s that were true disruption points in the fintech industry took as many as 30 man years to create and looked like this:
Forward-looking mavericks argued that the UK government should actively invest in creating a new industry around the creation of software systems because innovation and invention were considered to be great strengths of the British. The plan was to create world-beating “automated typing machines” and “trading systems” in order to create “applied mathematics systems” to process the information being generated by the financial services industry. Large-scale unemployment was considered to be a necessary consequence of the fully automated economy caused by the micro-processing industry.
The “second industrial revolution” of the “integrated circuit industry” that began in the 1970s and early 1980s was expected to affect all aspects of industry and life. And it did, particularly in financial services. This culminated in the “big-bang”: the simultaneous and sudden deregulation of financial markets and change from open-outcry to electronic, screen-based trading, enacted by the United Kingdom government in 1986. Across in the US the first “home banking by computer” (called Pronto, launched by Chemical bank) was launched in 1983, but it didn’t catch on. And it was Barclays bank in London that introduced the first ATM in 1967 (in Enfield of all places). It took another 10 years for Citibank to deploy a network of ATMs across NYC.
For those who were around in the 1990s, the introduction of internet-driven software services was a huge disruption on the information asymmetry that was so prevalent in the financial services industry of the time:
Fintech, with its high dependency on software, began in London.
This article is reprinted from a blog post on ignitr.eu.
