Future of Financial Services Delivery and Role of FinTech Start-ups

Customer demand is shaping the future of financial services delivery and fundamentally changing traditional business models. The battle for the customer is now top of every organizations agenda. Today’s customers expect timely and tailored products and services and the competition across financial services delivery is fierce. To meet this expectation, new ways of engaging with customers are erupting onto the street from start-up firms and big technology businesses. New approaches like crowdfunding, peer‑to‑peer lenders, mobile payments, digital currencies such as Bitcoin, and robo‑advisers could benefit consumers by increasing choice and stimulating more competition. 

FinTech is shaping financial services from the outside in

Fintech is shaking up the once-traditional financial services industry – forcing companies to re-think strategies, offerings, and tactics that worked for decades without a hitch. Most companies are trying to engage with FinTech firms in variety of different ways – mostly from forming partnerships to acquiring companies. Technology-focused start-ups
and new market entrants innovate the products and services currently provided by the traditional financial services industry. As such, FinTech gaining significant momentum and causing disruption to the traditional value chain. FinTech Companies and new market activities are redrawing the competitive landscape, blurring the lines that define players in the financial services sector.

FinTech is driving the future of financial services and increasing customer satisfaction

  • Innovations in devices and connectivity are providing consumers with payments like digital wallets. They provide a way to pay, move money, and manage loyalty relationships and they are a natural part of the revolution. The rise of mobile devices and digital wallets suggest that consumers will be more in control of their everyday payments than ever before.
  • New streams of granular, real‑time data are emerging, and with them innovators who use that data to support financial decision‑making.
  • Alternative funding platforms are widening access to capital raising activities and providing funding to a greater number of companies and projects.
  • Robo‑advisers have automated a full suite of wealth management services including asset allocation, investment advice, all offered to customers at a cheaper cost and more personalized level.
  • Marketplace lenders and crowdfunding platforms are becoming an alternative source of lending and an important source of funding for many seed‑stage businesses. Peer-to-peer lending offers benefits for borrowers and investors.

Peer-to-peer lending offers benefits for borrowers and investors

  • Disaggregation driven by FinTech has the capacity to transform the insurance industry and greater personalization of policies will improve insurance products and policies.
  • As consumer trust in the banking system falters, a growing number of FinTech start-ups are poised to steal away a big worth of business. Many banks are taking the unusual approach of either investing or providing the funds for expanding FinTech start-ups. The disruption of the financial industry is very close and banking will never be the same. A few traditional banks are acquiring FinTech start-ups to keep up. Those FinTech start-ups are providing services originally provided by banks ranging from personal finance, small business facilities to wealth management. They have become attractive because they are easy to use, and often marginally cheaper than what traditional banks offers. FinTech start-ups are “attacking” individual services and products offered by traditional banks. They provide at least one of the services banks offer to individuals and small businesses. As we head deeper into 2017, these FinTech start-ups will continue to revolutionize banking as we know it.

The Future of FinTech and Financial Services Delivery

Nothing is for sure, of course, but most likely there are two possible scenarios.

1. FinTech Companies vs. Banks!

Outcome № 1: Forced to meet strict regulations and cost reduction goals, traditional finance will be unable to compete with more agile start-ups. The banks will operate on the less profitable segments of finance and their brands will be relegated to suppliers of normal everyday utilities in the eyes of the customers, which will make them similar to water, energy and gas companies. In consequence, more exciting services and products will be provided by smaller disruptive companies.

Outcome № 2: “The other side of the coin” assumes banks will embrace the innovations at the business model level. They will use their resources (money and data) to predict future trends and tech users’ expectations. Eventually, they will come up with exciting new products and services.

2. A Happily Ever-after? ‘Fintegration’ Where FinTech Companies and Banks Collaborate.

Banks have money, market reach, and existing customer relationships – three elements that fintech startups would love to have and partner with. So, why not collaborate? As banks go through a transformational stage, FinTech firms and banks are beginning to realize the benefits of working with each other to deliver innovative solutions and a superior customer experience. For these companies, collaborating with banks will be a huge advantage as the biggest challenge they face is scale.

Another challenge is time. Keeping in mind that many start-ups work under the venture capital model, they would need additional sources of capital to scale quickly, and if they do, it would require them to become proficient in the art of risk management, ensuring data security and building technology to support these capabilities.

The relationship between FinTech firms and financial institutions may certainly look to be a complicated one, but just like any great relationship, leveraging each other’s core capabilities would reap great dividend for all stakeholders involved including the most important one – the bank customer.



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