Article Synopsis :
This report from Capgemini’s Market Intelligence Unit, in collaboration with LinkedIn and Efma, explores the FinTech world of today, mainly through its intersection with large, established financial institutions. Finding #1 is that though each understands the potential value the other provides, the market has seen few success stories in which Incumbent/FinTech partnership has generated significant growth.
A comprehensive report (68 pages), rich with information and insights, here’s an executive summary:
FinTechs are redefining the financial services customer journey.
- Competition and rising customer expectations spur intensified focus on customer-centricity:
- The financial services industry is being reshaped by higher customer expectations for personalization and convenience, driven mainly by GAFA (Google, Apple, Facebook, and Amazon)
- FinTechs’ focus on customer-centricity bridges the gap between what financial services firms currently offer and what today’s customers want
- Four principles are foundational to customer experience: personalization, quick response (speed), relevance, and seamless delivery
- Emerging technologies enable journey transformation:
- Emerging technologies eliminate multiple pain points across the customer lifecycle
- Infrastructure innovations (platforms and open APIs) enable fundamental industry disruption; robotic process automation, chatbots, and distributed ledger technologies enable greater agility, efficiency, and accuracy
- Design-based UIs make the customer journey quick, convenient, and seamless; data-focused insights fuel relevance and personalization
- Alignment with customer goals, creation of trust, and delivery of digital, agile, and efficient processes are catalysts for success:
- Innovation with a central focus on the customer is vital for survival and growth
- Customer focus means empathy with the customer, earning trust, simplifying the customer experience, and aligning with customer goals and expectations
- Bringing in top talent, creating the right culture, and making investments in agility, digital, and operational excellence are all essential to achieving customer focus
A symbiosis between FinTechs and traditional financial institutions?
- FinTech and Incumbent firms’ respective competitive advantages and shortcomings make collaboration a logical fit:
- FinTechs are agile, intensely customer focused, and unburdened by legacy systems. But they face significant challenges around brand, distribution, capital, and regulatory expertise—all Incumbent strengths
- Successful FinTechs focus on functions or segments with high friction levels or those underserved by Incumbents, but struggle to scale. Incumbents are increasingly open to innovation through collaboration and APIs over building on their own
- The relationship between FinTechs and Incumbents has morphed from competition to collaboration, but this collaboration is still early stages
- Skills, culture, and strategic investments in agility, digital and operational excellence are all essential to achieving customer focus. An effective partner ecosystem is also required
- Finding the right partner for collaboration is essential:
- Globally, 7,500+ FinTech firms have raised over $109 billion, yet most will likely fail for lack of product-market fit, high costs of scaling up, and the inability to find the right partner toward building a differentiated product that cannot be replicated
- Partner potential should be assessed on four parameters: People, Finance, Business, and Technology
- FinTech leaders have struggled with Incumbents’ lack of agility, culture fit, and willingness to partner. FinTechs should be openly mindful of these very real constraints.
- Successful collaboration requires commitment and agility from FinTechs and Incumbents:
- The build-versus-buy question has shifted to, What collaborations work best to meet rising customer expectations?
- Some firms still attempt to drive innovation from within, but most look externally through incubators, accelerators, hackathons, and venture funds
- Most FinTechs cite the importance of CxO level buy-in
The Path Forward: An impending role for BigTechs?
- BigTechs have redefined customer experience across all sectors, including financial services, leveraging massive amounts of customer data
- Unlike FinTechs, Big Techs have massive customer data sets and vast cash reserves to scale operations
- The BigTech phenomenon is regionally agnostic, but its impact is most strong felt in Asian markets, with strong examples such as Alibaba’s Ant Financial. However, Western firms such as Amazon could make waves through their strength in customer experience, innovation, diversification, infrastructure, agility, vision, culture, and leadership
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Digital Insurer's CommentsTraditional industry boundaries are blurring as consumers move increasingly to digital and mobile, where BigTechs such as Alibaba, Google, Apple, Facebook, and Amazon own “first-in” status.
They also own—as we learned in the recent Facebook page-scraping investigation—massive amounts of startlingly detailed user data. Today Facebook (and Google) monetize that data selling ads. When will they use it to enable the sale of other things?
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