Business Models in Fintech : an overview

Last week, the European Fintech Awards were won by a number of companies from across Europe. The interesting thing was however that the number of Fintech-companies with real innovative (digital) business models and digital revenue models still seems to be rather limited.

If you look at many of the Fintech-companies presented in different events, the following conclusions can be drawn on their offline and online business models:

1) In many cases, the business models are very similar to the ones still used by the traditional incumbents, also called the ‘Jurassic Banks’ with the only difference that they use new technology and they have less overhead costs.

2) Fintech seems to be mainly focusing on Banking and specifically Payments whereas Fintech in Insurance is starting up.

3) Software companies are trying to market different types of software to replace existing legacy systems or as an add-on to improve the user-experience of clients, especially on mobile devices.

4) Many initiatives can be found around different types of e-marketplaces. We know from the first wave of .com companies that most of these initiatives will go down the drain, including many crowdfunding sites.

5) There are some promising initiatives around Robo Advisory but the specialists seem to forget the experience around traditional expert systems and smart system development from the Eighties of the last century onward. The future in this field is bright if really smart systems can be produced using fuzzy-logic and not the traditional ‘tree-based’ logic.

6) A promising area where a number of Fintech-companies are focusing on can be found in a number of applications and use of Big Data around GRC (Governance, Risk and Compliance) including in the Security and Privacy domains. The interesting challenge here is to combine e-compliance with Digital Customer Experience as part of the traditional sales-funnel.

7) A number of companies seem to be on the way to leverage the power of Blockchains in a number of ways, including in new databases and around Diamonds.

8) As far as I can see, none or hardly any of the different Fintech-companies are working on digitizing in a clever way one of the most expensive processes in terms of time, money and energy wasted and that is Governance and managing inside the Jurassic Banks of the ‘Dinosaur organizations’ (see this article). This really would make an impact although the decision the implement such systems would probably be blocked by many of the current ‘Dinosaur-managers’.

Conclusions

The degree of real innovation focusing on adding value to the customer in the digital personal finance (‘Digital Product Leadership’) and digital customer intimacy space is still rather limited. There are however great opportunities if smart software can be introduced including Robot advisory in these spaces for companies that want to leverage Big Data, artificial intelligence and digital customer experience to really create value for the different customers and to finally provide them with a ‘Wow-experience’ instead of a standard ‘me-too’ experience from a multichannel perspective.

And the same thing applies to the GRC-space including in the processes of Governing and managing. One of the biggest costs in large Jurassic Banks and other Dinosaur organizations: the organizational costs in terms of time, money and energy wasted in large traditional organizations in comparison with Fintech-companies, other startups and cross-overs from other industries.

From a digital transformation and survival perspective, new digital revenue models are actually more important than digital business models. That is where real innovation in banking & insurance will have to take place. New digital earnings models are without a doubt to be found in marketing & commercializing unique knowledge and experience from the relationship capital of the organization in different forms. Including in digital products and services. Produced and distributed by new digital organizations that will look like the virtual organizations from Jay Galbraith. Agile organizations that will also have used technology to reduce their own internal organizational costs to almost zero. To be continued.

Tony de Bree.