The Fintech scene is growing and growing. The banks have abandoned their initial defence and are becoming more and more interested in the offers, but also in the way the "young guns" work. Because agile project methods and the focus on the customer and his needs also advance the established banking world in the changing digital age. How can both sides benefit from each other and what is needed for implementation?
The Swiss FinTech Start-up Map, published monthly by Swisscom together with e-foresight, counted 270 Swiss start-ups as of August 2018, operating in the categories Investing and Asset Management, Market Information and Advisory Portal, Payment, Crowdfunding, Crypto, Data Driven Insights, Incumbent and Insurance. The overview includes companies with B2B as well as B2C business models. In order to successfully position itself in the market and differentiate itself from competing offerings, Fintech's user experience, service delivery method, quality and price revolutionize and implement products in a cost-effective and agile manner.
After the initial fear that Fintechs would primarily jeopardize the established business models of banks, financial institutions today are increasingly recognizing the opportunity to acquire the know-how and technology of innovative and agile Fintechs through acquisitions or cooperations.
After a peak in 2016 with 28 billion dollars, in 2017 around 24 billion dollars were invested worldwide in Fintechs. Bank Santander is on top of the rankings with around 20 investments (Source: Financial Technology Partners, FintechInsights). Credit Suisse and UBS are also among the top 3 banks actively investing in Fintechs. The Swiss Fintech and banking scene is organized in associations and Fintech hubs, such as "Swiss Fintech Innovations" or "Swiss Fintech + Technology Association". The declared aim of the associations is to promote and establish the development of digital innovations and the exchange between the banking and Fintech ecosystems.
In which areas do Fintechs contribute to the further development of the financial sector?
- Business models: Fintechs have the unique opportunity to develop innovative and disruptive business models on a greenfield approach and test them cost-effectively in the market - without restrictions due to inflexible legacy systems or restrictive processes.
- Community / Ecosystems: The new and disruptive B2C business models are often aimed at a user community and ecosystems. Key competencies are building, activating and monetizing the community or ecosystem.
- User experience: To establish as a Fintech at the customer interface, exceptional user experience is essential. Fintechs have a decisive influence and shape the user's expectations of user experience and user journey.
- Agile innovation and development processes: Successful Fintechs develop and test close to the customer and rely on agile innovation and development processes. Short and cost-efficient innovation cycles and fast time-to-market are the key.
- Technology: Technology builds the basis of most innovative business models. Fintech start-ups drive technologies such as block chains, API platforms and many more.
In what way can financial institutions benefit and derive concrete benefits from working with Fintechs?
The Bank continues to have the central asset in its customer relationship: trust. According to the Retail Banking Study 2017 conducted by the Lucerne University of Applied Sciences and Arts, clients in Switzerland are still very reluctant to switch banks. Only 1 per cent of the 2,486 people surveyed in the study plan to change their main banking relationship. A further 5 per cent are considering establishing a new main banking relationship.
However, this supposedly "reassuring" finding is also relativized in the study: More than 20 per cent of the respondents stated that they would be open to interesting competitive offers and would be willing to change their main bank.
One way of combining strong customer loyalty with the advantages of targeted cooperation with Fintechs and thus securing the customer interface in the long term is for the bank to act as a "trusted partner". The bank provides its customers with an overview of their current financial situation via the channel of their choice. It aggregates, quasi all data and information as well as suitable offers and thus enables customers to "one-stop shopping" in financial matters.
The following prerequisites must be met:
- Strategic anchor: Strategic anchoring of an open innovation process in the company. This builds up the competence and ability to take up trends and technologies and to make them tangible and experienceable by means of "Minimal Viable Product" and, if the market test is successful, to convert them into own solutions or products.
- Active community: Establishing and orchestrating a digital ecosystem that offers customers real and perceptible added value to pure banking services.
- Consistent user experience: Ensuring an attractive and consistent user experience across all channels and touchpoints.
- Open infrastructure: Providing a reliable and trusted open platform through standardized and secure APIs. Partners can retrieve data (e.g. account data) and trigger business processes in the bank.
But very few banks are prepared for these complex challenges. Thinking in silos still dominates, business and technology are not yet working hand in hand. Not to mention that the newly added interfaces can be designed and managed externally within the overall ecosystem. Professional and technological expertise is needed to define viable new strategies and business models for the digital age. Above all, however, the right methods are needed to navigate the partners through the solution-oriented conception of digital end-to-end value creation and its successful implementation across all interfaces. Projects of this kind are only possible through co-creation and agile project management. It is worthwhile to call in external neutral experts for the methodology, moderation and implementation.