Where is the financial services heading?
FinTechs are giving a run for the money to the traditional players. The biggest conundrum how the service and revenue mix will look like in the next 5 years. It is highly probable that majority of the revenue will come from services that do not exist today. Based on our observations and experience, the following areas of the financial services see major disruption.
1. Deposits and Lending witness shifting customer preferences. Alternative sources dominate the market. New platforms are transforming loan origination and credit evaluation. Customers are also exposed to new sources of capital.
2. Disaggregation is happening in insurance markets like sharing economy, autonomous vehicles etc. Connected insurance is becoming the norm involving IoT, advanced sensors etc.
3. Cashless markets and new payment rails are visible in Payments area. Some of the initiatives are integrated billing, mobile and streamlined payments. Mobile Money and Crypto currency are the emerging rails. As new customer functionalities are built on existing payment systems, customer behaviour changes. This is where the incumbents are likely to lose control of the customer experience arising from transactions.
In general, which areas of FS lend themselves highly to innovation and facilitate entry of FinTechs?
- Areas that have the greatest customer friction resulting in disengaged customers
- Areas that are less capital intensive and more data intensive
- Areas that are more regulation-free
What does this mean to the IT landscape of the FinTechs?
They are more likely to deploy that platform based IT solutions that give more control and flexibility in delivering a service E2E are dominating the market. Making use of Gartner’s terms, the % of systems that innovate, differentiate and records is in the range of 60%:30%:10% respectively thus giving high nimbleness to the platforms as compared to an incumbent whose spread is in the range of 10%:25%:65%.
FinTechs are giving a run for the money to the traditional players. The biggest conundrum how the service and revenue mix will look like in the next 5 years. It is highly probable that majority of the revenue will come from services that do not exist today. Based on our observations and experience, the following areas of the financial services see major disruption.
1. Deposits and Lending witness shifting customer preferences. Alternative sources dominate the market. New platforms are transforming loan origination and credit evaluation. Customers are also exposed to new sources of capital.
2. Disaggregation is happening in insurance markets like sharing economy, autonomous vehicles etc. Connected insurance is becoming the norm involving IoT, advanced sensors etc.
3. Cashless markets and new payment rails are visible in Payments area. Some of the initiatives are integrated billing, mobile and streamlined payments. Mobile Money and Crypto currency are the emerging rails. As new customer functionalities are built on existing payment systems, customer behaviour changes. This is where the incumbents are likely to lose control of the customer experience arising from transactions.
In general, which areas of FS lend themselves highly to innovation and facilitate entry of FinTechs?
- Areas that have the greatest customer friction resulting in disengaged customers
- Areas that are less capital intensive and more data intensive
- Areas that are more regulation-free
What does this mean to the IT landscape of the FinTechs?
They are more likely to deploy that platform based IT solutions that give more control and flexibility in delivering a service E2E are dominating the market. Making use of Gartner’s terms, the % of systems that innovate, differentiate and records is in the range of 60%:30%:10% respectively thus giving high nimbleness to the platforms as compared to an incumbent whose spread is in the range of 10%:25%:65%.
