55 Years of Technology in BankingThere have been a lot of technology advancements in the banking sector in the last 55 years or so. Let’s take a look back through a brief history of banking tech.
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The banking industry has evolved dramatically from the first form of lending in early Mesopotamia to today. And, in the past 55 years since Neil Armstrong landed on the moon, more innovation and more data has been generated in financial services than ever. Let’s take a look back through a brief history of banking technology to see just how far we’ve come.
In 1969, surgeons implanted the first artificial heart, Dorothy Hodgkin determined the structure of insulin, nearly 500,000 people attended Woodstock, and Neil Armstrong became the first man on the moon. It’s been 55 years since then — more than five decades of technological advancements and cultural development.
The financial services industry is no different. From the first magnetic strip on a credit card in 1969 to the use of generative AI for financial advice today, there have been a lot of new innovations and advancements in banking. Here’s a rundown of the most notable changes over the past 55 years:
New innovations from the first email to the Apple II, which sparked the rise of personal computing for the masses, led to widespread innovation in the banking industry. In the early 1970s, banks established the international SWIFT payment network and the Automated Clearing House was established to provide electronic alternatives to paper-based checks. Banks also started to significantly invest in computer technology to automate processes and find new ways to meet customer needs.
By the end of this decade, banks were branching out across state lines and the government recognized electronic payments were here to stay, passing the Electronic Fund Transfer Act in 1978. As we head into the 1980s, banks are experimenting with early forms of digital banking, which will change the game forever.
In the 1980s, digital technology was well underway. The term ‘online’ — which referred to the use of a terminal, keyboard and TV to access the banking system using a phone line — gained popularity. For financial services, online banking enabled banks to deliver lower transaction costs, more easily integrate services, and more accurately target consumers with their marketing.
The creation of the first graphical user interface by Apple and the launch of the WIndows OS also paved the future of how consumers view and manage their daily lives, including finances. And, with the introduction of Microsoft Excel in the late 1980s, budgeters found a tried-and-true way to keep track of finances that is still in use by many today.
The 1990s gave birth to one of the most significant technology advances in the history of mankind — the Internet. With the introduction of the World Wide Web, this decade led to an explosive growth in e-commerce and online retailers — Amazon, eBay, and Google were all founded. In the early 1990s, we also saw the very first SMS text message, which would lead to the first form of mobile banking by the end of the decade.
Late in the 1990s, consumers were introduced to PayPal, a new, user-friendly way to send money electronically. And, artificial intelligence starts to make noise when IBM’s Deep Blue beats world chess champion and grandmaster Gary Kasparov at his own game. Now, it’s time to move from Y2K and dial-up Internet to the age of mobile.
The early 2000s, with the advent of wireless technology and the wide adoption of smartphones, brought the next major shift in the financial industry — mobile banking. Mobile banking made it possible for people to manage their financial lives from virtually anywhere and at any time. Now people could pay bills, check balances, transfer funds, or add new accounts all from their mobile devices.
For the first time, the branch experience started to become secondary as people flocked to the convenience and ease of their mobile devices. Today, the average consumer has at least 5 to 7 finance-related mobile apps on their phone. And, in 2023, there were over 489,000 finance apps downloaded per minute.
In 2004, “the Check Clearing for the 21st Century Act” was passed, making it possible for check recipients to make a digital copy of a check and process it electronically. This laid the groundwork for remote check deposit capture a few years later, reducing the waiting period for check processing and making funds instantly available to consumers.
The 2010s ushered in wave after wave of innovation for the financial services industry. From digital wallets to virtual assistants, technology companies and financial institutions begin to rethink the status quo. In 2011, Google introduced Google Wallet, a mobile payment technology meant to rival credit cards. For the first time, people could use their phones directly for purchases. This opened up a new level of freedom for consumers and took financial technology to new heights. Apple launched Apple Pay soon after in 2014.
As Watson wins Jeopardy and everyone starts talking to Siri, companies begin experimenting with more use cases for robotic process automation and artificial intelligence to speed up manual work, automate processes, and generate insights. In addition, technology advances create more secure processes and infrastructure for mobile banking apps (with the rise of biometrics) and credit cards (with the implementation of EMV chips). By the end of this decade, payments are in real time, consumers can Buy Now, Pay Later, and the foundation for consumer data rights and open banking is laid.
Today we’re seeing another major shift in the financial industry, largely brought about by consumers’ expectations for convenience, relevance, and ease. As technology continues to advance in the banking industry, it’s fundamentally changing the banking model. Consumers expect hyper-personalized and relevant communication from all of their online and offline interactions. And they don’t want to initiate the conversation. They want their financial institutions to keep them in the know about their finances and notify them if something needs their attention.
Consumers want proactive financial advice at the right moment and time — helping them stay on top of all of their financial matters in real-time. People no longer simply want to trust their financial institution with their money. And, financial institutions are no longer just a repository of money. These organizations hold vast stores of personal financial data. Consumers want to trust that their financial institution can keep their data and money safe. And, they want their financial provider to understand them and have their best interest in mind.
Luckily, financial institutions are well positioned to take advantage of everything technology has to offer. As Open Banking and Open Finance become the norm, it’s now easier than ever before for financial institutions to access and act on consumer-permissioned financial data to help customers become financially stronger.