Issue #10 - Unpacking Fintech Themes
The constant flood of fintech buzzwords, themes and terms often obscure what’s most important about the innovations, models and changes happening in our industry.
This is the first of a multi-part series that unpacks the current themes and models to identify what they mean, where the opportunities are, and who some of the key players are.
To kick off the series, we’ll focus on an overview of the four main themes with some quick definitions and a few relevant examples.
Update: links to the followup articles:
If you have thoughts or questions to share on this series, please leave a comment.
Open Banking “...is the practice of sharing financial information electronically, securely, and only under conditions that customers approve of [via APIs].” +The Balance
Why: New regulations which require banks to provide a standardized way for customers to “...delegate access to their accounts to third parties so that they can read their data or perform operations on their behalf.” +BBVA
Bank Opportunity: Improve “...the appeal of a bank and enable them to meet the changing demands of existing customers as well as appeal to prospective customers.” +Mulesoft
Customer Opportunity: “Open banking principles will shake up the banking sector in a similar way as price-comparison services did to the insurance industry. It will empower customers to take control of their finances, make better-informed decisions and manage multiple accounts through a single application.” +Financier Worldwide
Examples:
Banking as a Service (‘BaaS’) “...enables the digital delivery of banking services via APIs.” +Tearsheet
Why: “To meet the rising demand for embedded finance, financial institutions are increasingly offering banking as a service (BaaS)—bundled offerings, often white-labeled or cobranded services, that nonbanks can use to serve their customers” +McKinsey
Opportunity: “... a great opportunity for existing banks, insurers, and wealth managers to reach a greater number of customers at a lower cost by teaming up with non-financial businesses.” +Oliver Wyman
Examples:
Embedded Fintech is “...the integration of fintech products and services into financial institutions' product sets, websites, mobile applications, and business processes.” +Forbes
Why: “The legacy IT systems of banks may be preventing effective collaborations with FinTechs, with just 6% of banks currently achieving their desired ROI on such ventures” +Consultancy UK
Opportunity: “...financial institutions can stay competitive with fintechs by broadening and modernizing the range of products and services they offer and the market segments they choose to serve.” +Tearsheet
Examples:
Embedded Finance “... is the integration of financial services into non-financial websites, mobile applications, and business processes.” + Forbes
Why:“The motivation for non-financial companies to embed financial services is...driven by first principle design thinking, which means always focusing on what your customer’s needs are and then figuring out the set of services to offer the customer.” +Rosenblatt Securities
Opportunity: “...allow banks to simultaneously service millions of transactions and reduce the cost of attracting customers while maintaining retail infrastructure…” +TechEu
Examples: Google moves into Venmo and bank territory with checking accounts and updated payment app +CNBC
If you have thoughts or questions to share on this series, please leave a comment.
Shout-out to Dion Lisle for help thinking through this edition.