The digital revolution has redefined the business models of the banking industry by inviting itself into all areas of banking. The web no longer distributes only traditional banking products: it allows many players to create their own banking offer that is changing the codes of the sector. Fintech, in the midst of its conquest of the general public, has already bypassed the major banking institutions. What's next?
A report by the consulting firm Accenture indicates that at the international level, investments in Fintech have increased by 75 % between 2014 and 2015. Of the 22.3 billion euros recorded, 5 billion came from banks. This win-win partnership could be summed up as follows: the banks bring their infrastructures, their client base and their institutional relationships, while the Fintechs offer their digital expertise to build the future distribution model. The digital transformation thus benefits from advances in artificial intelligence. The aim is to optimise the data collected to offer more efficient banking services. (Source : banques-en-ligne.fr - February 28, 2017)
The rustle of Fintech
17.8 billion invested in Fintech in Q3 2016 [1]. Combining info-com and the banking sector, it's an innovative tidal wave that many start-ups boast of having initiated, rightly or wrongly. It is difficult to define the limits: if the term "fintech" is recent, the concept is not. Paypal initiated it in the late 1990s. New with old? But Fintech does not just recycle a recipe that works.
By disrupting the relationship with others, and therefore with customers, social media and new technologies have transformed consumption patterns; deregulation has taken care of the rest. The drastic regulation imposed by the financial crisis has liberalised access to the financial sector for new players. These are start-ups of all sizes with a wide variety of projects, and they all agree on one point: Fintech combines digital technologies with banking services and disrupts finance.
Rethink the bank, then what?
The Fintechs are rethinking the entire vertical logic of the banking sector inherited from the industrial revolution: with these new players, the bank is moving to a horizontal position and no longer sells a product, but responds to a need. By offering a more personalised and accessible mode of consumption, Fintech is putting customer relations back at the heart of its challenges. A first wave of start-ups is thus emerging, and preparing the ground for a second wave that will be even more different from the historical system.
Fintech's great diversity, which now covers a full range of banking services (account, factoring, crowdfunding, crowdlending, peer-to-peer payment and loan terminals), makes it a major asset for large international groups or web giants who would like to capture their customers' payment flows and offer banking services. Tomorrow, Google could recreate a 2.0 bank from bits and pieces of Fintech. All it would need would be an API to connect to third parties, a customer identification process and a basic banking license to build its own customer base and gain a foothold in the world of banking services, independent of traditional banks.
Banks: The steel industry of tomorrow?
11 billion - this is the amount of traditional banks' revenues that Fintech is impacting and this only on the US market. [2]. By offering them a future, the banks intend to benefit from the creativity and innovation of these start-ups. The FinTech's are destined to be acquired by web empires or international entities such as BNP Paribas, which welcomed eight of them to its Paris accelerator this summer. Their ability to take a global view of a highly targeted market to address a specific problem is crucial.
The future of Fintech is therefore focused on international collaboration. For this, opening up its information systems is a necessity. The IPAs are carrying the wave of innovation that is sweeping the sector and pushing the banks to join the movement. But the real race is not technological, it is about user experience. APIs are a way to quickly outrun competitors by exposing services to external programmers. This is a (re)structuring evolution for the digital world, which could then lead to "openbanking", the ultimate model of neobanking. The future of these start-ups, as much as that of the banks, lies in their ability to develop services based on APIs and to pool their resources.
Fintech has long positioned itself as a competitor to traditional banking institutions. Today, after having conquered and digitised banking offers, it is to these historical players that they are turning, in search of credibility, visibility and key access to the market. And they are paying them back: for banks, start-ups embody the opportunity to meet the expectations of a public that is abandoning them. Historic antitheses, banks and Fintech are now becoming a winning duo: complementary entities destined not only to coexist, but to ensure each other's future.
Bruno GloaguenManaging Director of Anytime
1] According to KPMG's Venture Pulse study, October 2016.
2] Goldman Sachs study, March 2015.
