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Fintech Disruptors Report 2015: Startup Banking

The Fintech Disruptors report identifies and discusses seven interdependent themes, outlined below.

The consequences of the financial crisis of 2007 – 2009 were far reaching. They are still being felt today – the difference in European output in the second quarter of 2015 compared to that predicted by pre-crisis levels is equivalent to the size of the German economy. For established banks the complex array of challenges that are confronting the industry, and helping to level the playing field as a result, mean that in many ways banking – both old and new – is in ‘startup’ mode.

The full report is available from MagnaCarta Communications. Thank you to The Dock, London, for hosting the release event.


Easier access to consumers through digital channels, and specifically smartphones, is driving the trend to straightforward products distributed by new fintech entrants, in most cases themselves simple, single product companies. While this strategy may be impractical for multi- channel institutions, the research highlights the opportunity for banks to simplify the user- experience, rationalise product lines and improve returns, which now stand on a level comparable to utilities companies.


Trust, once a byword for financial services has been severely damaged by the financial crisis and waves of scandal in the decade following it. Loss of trust has opened the doors to new fintech, non-bank competitors. While most of these have not yet been tested by a downturn, waiting for the next crisis to restore trust is not a viable option. The report shows that winning back customer trust will require an emphasis on rebuilding the relationship with consumers through transparent pricing and communications, and greater use of technology to replace human interaction with automated systems.


Smartphone app use has radically altered consumer demand for innovation, with new products launched more quickly, tested in the open market and continuously re ned. Organisations in this report underline how banks are adapting to this cultural change with innovation initiatives that include venture capital investment, internal development and acquisitions. Most critically however, greater collaboration with third parties outside the bank and, paradoxically after a wrenching financial crisis, ‘getting over the fear of failure’ are increasingly viewed as essential ingredients to an agile innovation strategy for large institutions.


The focus on user experience by fintech entrants, including those in this report,
is drawing attention to the opportunity to redraw the relationship of financial services providers with their customers. For banks, this will mean seizing the potential to leverage deep pools of data for greater customer insight to understand how to monetise their services transparently in a way that fosters the longer term relationship.


The price transparency enabled by the rst internet wave at the beginning of the century, in the form of price comparison sites such as Moneysupermarket.com, has been complemented by an in ux of new entrants with straightforward pricing and simple business models in the age of the mobile internet. For banks, often characterised by complex businesses and opaque pricing, a response will require a root-and-branch commitment to transparency to help restore trust and re- build the connection with customers.


New fintech entrants are exploiting the advantages of single product focus, following a trend that was set by the launch of mono-line credit cards in the 1990s. The benefits this strategy affords include greater emphasis on the customer to build loyalty and a simpler corporate and revenue model. With fintech valuations riding high, countering this threat solely through acquisition is probably unrealistic. To compete, banks will need to develop a clearer understanding of how to leverage their multiple channel structure to create a better experience and deliver greater bene t, while exploring the potential for unbundled product pricing.


The impact of the fintech revolution on product price-setting of products remains
the most unresolved area of the ongoing shake-up in the financial services industry. Price is already the primary battleground on which the challenge to existing incumbents
is being fought. The research reveals that while transparent pricing is a central
pillar of the strategy for new entrants, banks and complex financial services organisations are trying to understand how to reconcile consumer expectations for cheaper digital products with an obligation to maintain multiple delivery channels.

[author title=”MagnaCarta” image=”http://thefintechtimes.com/wp-content/uploads/2015/12/magnacartalogo-copy.png”]MagnaCarta Communications[/author]


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