The Rise of “FinTechs”
by Ken Neal
May 25, 2017
In this post, my colleague at Canon Business Process Services (Canon), Serdar Ercetin, BPO Advisor with a special focus on banking and financial services (BFS), spotlights a key trend in the industry. Serdar points out that competition and disruption in the banking and financial services industry have never been greater. Having to navigate in a highly regulated industry and deal with an enormous amount of transactional data made the companies in this sector call for help. “FinTechs” (financial technology companies) answered the call. They started providing cutting edge technologies, mostly on cloud platforms, which yielded cost effective, efficient data access and quick implementation turnaround times. In addition to helping companies better manage Big Data, FinTechs also help them serve a demanding younger generation that wants advanced technology and personalized services.
The Fintech market grew from almost $2 billion to $20 billion between 2010 and 2015. FinTech investments have targeted the most profitable segments of global banking, notes Serdar, especially in consumer banking and asset management. There has also been a sizeable growth in the payment market as FinTechs offer payment processing capabilities far exceeding what banks could offer. Other disruptive services such as digital banking, payment through social media, biometrics, peer-to-peer lending and crowdfunding also contributed to the explosive growth of Fintechs.
As younger generations shift their behavior and move more towards digital solutions, banks will need to shift to an omni-channel sales strategy in order to compete with FinTechs over the next decade. This means that banks need to overhaul their legacy systems in order to provide personalized, targeted services for different customer segments. It also means moving toward a reduced, modernized branch network. This transformation has already begun in the past few years.
Serdar points out that, according to Citi Research, the US and Europe are at the tipping point in terms of financial innovation, whereas China is past this point with FinTech companies having a similar number of clients as the major banks. In fact, China has the largest number of peer-to-peer (P2P) networks in the world, which is largely due to the exclusive services that FinTech companies provide and their superior technological capabilities.*
The death of banks and traditional financial institutions had already been predicted by many, including Bill Gates and Microsoft in the 1990s. Visionary CEOs of FinTech companies today were able to interpret these predictions and build foundations for their disruptive companies. The emergence of new technologies such as RPA, AI and Blockchain introduced a new wave of FinTech companies in this space, which will keep driving digital transformation. Serdar adds that as more and more banks and financial institutions rely on FinTech technologies, FinTech companies need to innovate faster than ever and analyze Big Data in real- and near-real-time enabling a completely new generation of services.
Feel free to visit the Financial Services page of our website for insights on industry trends and best practices including whitepapers, case histories and more.
*Source: “DIGITAL DISRUPTION: How FinTech is Forcing Banking to a Tipping Point,” Citi, March 2016