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X.com, PayPal, and the origins of the FinTech revolution

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Banking has always been a tedious affair. Before the advent of the internet, banking involved going to the nearby branch and queuing up for a long time until the cashier or the banker was available to address your query. Not one consumer would have looked forward to it.

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The key issue in banking was a lack of an effective solution that could speed up the process. Banking, even in the 90s, was stuck in the Stone Age, and couldn’t satisfy the need of consumers in the best way possible. In addition, fees charged on many transactions were deemed excessive by consumers, who couldn’t do much about to due to a lack of alternatives.

That was until Elon Musk came along. The visionary entrepreneur and founder of billion-dollar companies like PayPal, Tesla and SpaceX started with FinTech. Despite being from a non-finance background, Musk recognized the roadblocks in the current banking system and decided that the internet could have something to say about it.

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He started x.com, an online bank that was FDIC insured and intended to simplify transactional costs. X.com was a moderate success and managed to get itself a partnership with Investment Banking giant Barclays. Later, x.com merged with a company called Confinity, which was the initial developer of PayPal. After a series of changes and renaming, the company eventually came to called as PayPal.

PayPal was a revolutionary product at the time as it allowed people to bank online using portable routers. This was at a time when email and SSID encryptions were not really prevalent. However, once the email was invested with Hotmail, PayPal improved its product to ensure that people could transfer money using emails.

This was really the first technological side to finance, or the origins of FinTech, if you will. While many were suspicious of the security aspect of it, PayPal spread like wildfire in the United States, especially in the east and west coasts. Elon Musk and Peter Thiel, who are considered the managerial masterminds behind this revolutionary product, were finally rich men.

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Once PayPal set the wheels in motion, other products followed, radicalizing the banking industry and turning the heads of traditional banking giants. It was really at this point that consumers began to feel some power in the management of their personal finances. Banks slowly began to realize that they had to step up their game, with Citibank being one of the early pioneers in starting the online banking revolution.

And FinTech hasn’t looked back ever since. Today, Fintech has extended its claws to the fields of trade, payments, treasury and FX. Consumers have a lot of power in Finance, as they rightly should have considering that it is their money in the first place.

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