--- title: "What is fintech and how it was born: from credit cards to the digital ecosystem" description: "Analysis of the evolution, classification, business models, and regulatory framework of fintech companies in Colombia compared to traditional banking." image: "https://gurwi.com/api/og-cover?u=https%3A%2F%2Fresources.gurwi.com%2Forganizations%2F12507178-6db7-4624-a70d-1a6472534555%2Fgenerated%2F6832e380-5dd4-41cb-ba9e-c8f6d8c2087c.jpg" --- # What is fintech and how it was born: from credit cards to the digital ecosystem ## What is fintech and how it was born: from credit cards to the digital ecosystem The word "fintech" is a portmanteau of *financial technology*. It describes organizations that integrate programming, data analysis, and cloud architecture to create, transform, or deliver financial services. Although the term gained massive popularity after the 2008 global financial crisis, the digitization of money began several decades earlier. The evolution of financial technology is generally structured into three major stages: - **Fintech 1.0 (1958-1967):** Marked by analog infrastructure and the first global payment network. It was born with the launch of the Diners Club card and the subsequent consolidation of BankAmericard (now Visa) in 1958, along with the installation of the transatlantic telecommunication cable that interconnected global financial centers. - **Fintech 2.0 (1967-2008):** Began with the installation of the first ATM by Barclays in London (1967) and the founding of SWIFT in 1973. This era turned internal banking digital through the automation of ledgers, interbank settlement systems, and, in the late nineties, the appearance of the first online banking portals. - **Fintech 3.0 (2008-present):** Triggered after the collapse of the traditional banking system in 2008. The loss of trust in mature institutions, coupled with the mass adoption of smartphones (iOS and Android) and low-cost access to cloud servers, allowed independent startups to offer financial services directly to the final consumer. In Colombia, this development evolved from an initial core of startups into a mature ecosystem. From 180 registered companies in 2019, the industry grew to 341 in 2022 and exceeded 410 active local companies by 2025. This progress positions the country as the third largest fintech hub in Latin America, trailing only Brazil and Mexico. ## Fintech vs. traditional banking: structural differences The tension between traditional banking and fintech firms lies in their operational architecture and cost structure. A traditional bank operates on legacy systems, frequently developed in COBOL during the seventies or eighties, maintained through successive layers of software patches. These legacy platforms require costly maintenance and hinder real-time processing. In addition, the classic banking model bears a substantial fixed load: physical branches, in-person staff, and risk committees with manual approval workflows that take days or weeks to evaluate a credit application. | Variable | Traditional banking | Fintech companies | | --- | --- | --- | | **Infrastructure** | Dedicated servers and legacy systems | Native cloud architecture and microservices | | **Onboarding** | In-person verification and physical paperwork | Digital verification (KYC/biometrics) in minutes | | **Risk assessment** | Static scoring (credit bureau, collateral) | Dynamic models and artificial intelligence | | **Cost structure** | High (maintenance of branch network) | Low (low marginal cost digital operation) | Fintech companies operate through cloud microservices and application programming interfaces (APIs). This allows them to deploy code continuously, automate onboarding via facial recognition, and consult alternative data sources to calculate risk in seconds. However, banks possess decisive structural advantages: full mass-deposit licenses, low funding costs through sight deposits, and robust balance sheets with decades of credit history. Therefore, the dominant model in Colombia has evolved from destructive competition toward embedded finance schemes, where the fintech acts as the distribution or user experience layer while the regulated entity provides the balance sheet infrastructure. What is a key operational advantage of fintech companies over traditional banking? options: - Mass-deposit licenses with low funding costs - *Agile cloud deployment through APIs and microservices - Physical branch networks for in-person customer service - Balance sheets with decades of consolidated financial reserves ![What is a key operational advantage of fintech companies over traditional banking? options: - Mass-deposit licenses…](https://resources.gurwi.com/organizations/12507178-6db7-4624-a70d-1a6472534555/generated/33bec286-5629-45a1-b1f4-d7bfc2cde6b8.jpg) What is a key operational advantage of fintech companies over traditional banking? options: - Mass-deposit licenses… feedback: Fintechs stand out for their native cloud architecture and use of APIs, allowing them to deploy software changes quickly and reduce operating costs compared to traditional banking legacy systems. ## Digital payments, neobanks, and credit: the engine of financial inclusion The Colombian ecosystem is strongly concentrated in three business verticals. According to sectoral reports, digital credit accounts for 39.4% of active fintechs in the country, followed by digital payments with 33.0%. In the payments segment, gateways, aggregators, and electronic wallets have transformed daily transactions. Platforms such as Nequi and Daviplata have popularized the use of electronic money, achieving that 46% of Colombians use digital wallets for their daily purchases. The launch of **Bre-B**, the interoperable instant payments system led by the Banco de la República, unifies immediate transfers between financial entities and wallets without commission for the end user. In the realm of 100% digital banking, neobanks operate through Financing Company Licenses or Specialized Electronic Deposit and Payment Companies (SEDPE). Entities such as Lulo Bank or Nu Colombia offer remunerated deposit collection and credit cards with no management fees, entirely dispensing with physical infrastructure. Digital lending, on the other hand, handles microcredit and free-investment loan requests for informal or unbanked sectors. By processing wallet transactions, consumption habits, and telephony data through natural language processing and machine learning algorithms, these platforms originate loans in less than five minutes, mitigating the bias of lacking history in traditional credit bureaus. - Automated credit scoring - Continuous processing of alternative data sources using AI - i - Financial inclusion: - The model analyzes non-traditional patterns to calculate risk in seconds without prior banking history. - AI - Scoring - of 850 pts ## From insurtech to regtech: the diversity of the Colombian fintech map Beyond payments and credit, the fintech ecosystem in Colombia encompasses specialized verticals that solve complex operational and financial frictions: - **Insurtech:** Platforms that digitize insurance distribution and management. They offer tailored embedded policies (pay-per-mile insurance or life microinsurance) that can be contracted in seconds from mobile apps. - **Wealthtech & Trading:** Solutions that democratize investment access through robo-advisors. They allow small savers to invest in collective funds, local stocks, or global markets with amounts starting at ten thousand pesos. - **Corporate Finance & E-Factoring:** Tools aimed at micro, small, and medium-sized enterprises. They automate payroll, electronic invoicing, and invoice trading to obtain immediate liquidity through digital factoring schemes. - **Cryptoassets & Blockchain:** Companies that facilitate the purchase, sale, custody, and settlement of remittances using virtual assets and stablecoins, reducing international transfer costs. - **Crowdfunding (Collaborative Financing):** Digital marketplaces where multiple people finance real estate, business, or social impact projects in exchange for financial returns or equity shares. - **Regtech & Suptech:** Technologies applied to regulatory compliance. They automate anti-money laundering and terrorism financing prevention controls (SARLAFT), identity verification (KYC), and periodic data reporting to regulatory agencies. Approximately 66% of fintech companies in Colombia already integrate artificial intelligence models into their operations, customer service, and fraud detection processes. ## The role of Colombia Fintech and Compensation Funds (CCAF) The development of the sector in the country is driven by coordinating entities that connect private initiative with public regulation. **Colombia Fintech** is the trade association grouping over 300 companies in the sector, playing a key role as an interlocutor before the Financial Superintendency, the Financial Regulation Unit (URF), and the Banco de la República. Through its periodic reports (*Fintech Snapshot*), the association quantifies job creation—estimated at over 26,000 direct jobs—analyzes startup survival rates, and promotes good operational practices. On the other hand, traditional social protection system actors such as **Family Compensation Funds (CCAF)** have entered the ecosystem. Their participation focuses on two key fronts: 1. **Labor financial inclusion:** Integration of fintech solutions for payroll loans and wage advances for middle- and low-income workers. 2. **Factoring and liquidity irrigation:** Support for the affiliated SME ecosystem through digital invoice discounting and agreements with technology platforms. This combination of the digital-native trade association and social coverage entities accelerates the penetration of formal financial services in vulnerable sectors. ![Trade ecosystem and financial inclusion](https://resources.gurwi.com/organizations/12507178-6db7-4624-a70d-1a6472534555/generated/d42261c2-b38d-466d-b4f4-a654b7c24244.jpg) Trade ecosystem and financial inclusion ## Regulation, sandbox, and Open Finance in Colombia The growth of financial technologies demands dynamic regulatory frameworks that protect consumers and prevent systemic risk without stifling innovation. The Financial Superintendency of Colombia (SFC) and the National Government structured three main regulatory mechanisms: - **LaArenera (Regulatory Sandbox):** A supervised testing environment created by the SFC that allows supervised entities and technology companies to test innovative models under temporary regulatory waivers. It measures technical feasibility and risks before mass commercialization. - **Controlled Testing Space and LIFT License (Decree 1234 of 2020):** A temporary licensing scheme that allows new fintechs to apply for a Temporary Operation Certificate (COT). It grants them the possibility of providing financial services under limited supervision for a period of up to two years while consolidating capital and the requirements for the final license. - **Open Finance:** A regulatory framework governed through amendments to Decree 2555 of 2010. It establishes the standardized exchange of customer data between banking entities and third-party service providers via APIs, always conditioned on the prior, explicit, and informed consent of the user under the framework of Personal Data Protection Law 1581 of 2012. - Data exchange in Open Finance - Transmission of credit information via explicit consent - User consent - Revocable permission to share credit data - BANK - API GATEWAY - FINTECH - Authorized access - OAuth 2.0 token active - The Open Finance API transmits encrypted credit information via TLS 1.3 to the requesting fintech. - Scope: read:credit_score - Status: 200 OK - The Open Finance API transmits the encrypted credit history. The fintech evaluates risk in real time. - Access denied - Token revoked - Without user consent, the API blocks the request at the Gateway. No data leaves the custodian bank. - Status: 403 Forbidden ## Sources ### References - [Colombia Fintech. *Fintech Snapshot: Sector Report 2026*. Colombia Fintech, 2026.](https://colombiafintech.co/2026/04/23/fintech-snapshot-informe-sectorial-2026/) - [Superintendencia Financiera de Colombia. *InnovaSFC: laArenera and Regulatory Sandbox Framework*. SFC, 2021.](https://www.superfinanciera.gov.co/publicaciones/10114254/innovasfclaarenerasandbox-regulatorio-10114254/) ```json {"@context":"https://schema.org","@type":"LearningResource","name":"What is fintech and how it was born: from credit cards to the digital ecosystem","headline":"What is fintech and how it was born: from credit cards to the digital ecosystem","description":"Analysis of the evolution, classification, business models, and regulatory framework of fintech companies in Colombia compared to traditional banking.","url":"https://gurwi.com/class/Xli3CXXuoV6?lang=en","inLanguage":"en","datePublished":"2026-07-30T02:33:06.926831+00:00","dateModified":"2026-09-26T15:34:38.218117+00:00","isAccessibleForFree":false,"author":{"@type":"Person","name":"Natalia Barraza"},"provider":{"@type":"Organization","name":"Natalia Barraza","url":"https://gurwi.com/"},"image":"https://gurwi.com/api/og-cover?u=https%3A%2F%2Fresources.gurwi.com%2Forganizations%2F12507178-6db7-4624-a70d-1a6472534555%2Fgenerated%2F6832e380-5dd4-41cb-ba9e-c8f6d8c2087c.jpg","hasPart":{"@type":"WebPageElement","isAccessibleForFree":false,"cssSelector":".gw-paywall-gated"}} ```