Presenting a series of contracting outlooks for the future of the industry, the report considers the evolution and impact of FinTech firms on financial services.
- Over the last 10 months they engaged with over 150 experts and held 10 workshops in order to answer pivotal questions, like those below:
One of the most important findings from the raport is the fact that FinTechs have changed how financial services are structured, provisioned and consumed, but haven’t successfully established themself as dominant players.
“They play a critical role in defining the pace and direction of innovation across the sector but have struggled to overcome the scale advantages of large financial institutions.” [source]
According to the report, these are the 8 forces that have the potential to shift the competitive landscape of the financial ecosystem:
- Cost Commoditization: Financial institutions will accelerate the commoditization of their cost bases, removing them as points and creating new grounds for differentiation
- Profit Redistribution: Tech and new partnerships will enable organisations to bypass traditional value chains, thereby redistributing profit pools
- Experience Ownership: Power will transfer to the owner of the customer interface; pure manufactures must therefore become hyper-scaled or hyper-focused
- Platforms Rising: Platforms that offer the ability to engage with different financial institutions from a single channel will become the dominant model for the delivery of financial services
- Data Monetization: Data will become increasingly important for differentiation, but static data sets will be enriched by flows of data from multiple sources combined and used in real time
- Bionic Workforce: As the ability of machines to replicate the behaviours of human continues to evolve, financial institutions will need to anage labour and capital as a single set of capabilities
- Systemically Important Techs: Financial institutions increasingly resemble, and are dependent on, large tech firms to acquire critical infrastructure and differentiating technologies
- Financial Regionalization: Diverging regulatory priorities and customer need will lead financial services in different regions of the world down district paths
New players in the Financial Services: the Tech Firms
Facebook (as we saw above) isn’t the only example of tech firm threatening the system and that’s mostly because the payments have continued to migrate away from cash.
They become less visible to the customer as consumers shift purchases to online and mobile channels:
- Amazon’s online store growth represented 53% of overall US ecommerce growth in 2016, driven by the success of Amazon Prime, which now has 80 million subscribers
- Amazon is also creating an ecosystem around its one-click payment service by rolling it out to other merchants (in direct competition with PayPal). [source]
“As FinTechs and banks seek partners to optimise their value chain, large tech firms start hosting significant distribution platforms”
- More regulatory sandboxex begin to develob and allow firms like Facebook to operate in the financial area
- Tech firms/ Facebook begin to offer simple financial services products, backed by one or two partners. [source]