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How Financial Services Disruption Created Opportunities

The term 'Fintech’ has been applied to describe the transformation taking place in the financial services sector across the globe. Traditional forms of payment such as cheques have been displaced by debit and credit cards. In turn, contactless payment and digital wallets will likely replace the cards.

Moreover, new and evolving banking business models have resulted in both the legacy financial services industry and fintech start-ups investing in digital technologies. Initially, the focus was an organization's website or automating aspects of their customer service call center.

Now the focus has shifted to service delivery via smartphone software apps. The savvy financial services start-up entrepreneurs embrace innovative methodologies to differentiate themselves from the incumbents, but the CIOs and CTOs at traditional banks are now starting to catch-up.

Fintech Market Development

According to the latest worldwide market study by Juniper Research, driven by the increasing acceptance of alternative approaches to traditional banking solutions, fintech platform revenues will reach $638 billion by 2024 -- that's up from an estimated $263 billion in 2019.

Technologies such as artificial intelligence (AI), machine learning, big data analytics and blockchain will be the cornerstone of fintech platform deployments. These systems will fundamentally alter the way financial services are delivered and enable fintech platforms to become the new standard.

The innovative applications of these technologies will make new use cases mainstream -- including smart contracts, loan underwriting using AI to analyze non-traditional data sources, and personalized insurance policies based on IoT-generated data.


Besides, with rising customer acceptance of new business models, traditional financial services institutions are reacting to these changes. Incumbents are attempting to replicate the fintech firms’ offerings. As an example, with digital banking offshoots (Marcus from Goldman Sachs) or new services (HSBC’s Wealth Compass).

According to the Juniper assessment, banking incumbents will likely apply new strategies to appeal to customers outside their normal target audience, such as millennials, to develop the market for their services and thereby attain future revenues.

Where incumbents find that they cannot easily replicate the fintech platforms, they are partnering with fintech start-ups. For example, the Austrian banking group Bawag is using Spotcap’s lending-as-a-service platform to support SME lending.

However, the Juniper analyst believes that the challenge would be to effectively integrate these partnerships, keeping friction low and maintaining control of the overall customer experience.

Outlook for Fintech Applications Growth

"The distinction between the fintech suppliers and traditional incumbents will blur in the 2020s; digital engagement will become the norm," said Michael Larner, market analyst at Juniper Research. "The winners will be those that provide personalization allied to an outstanding customer experience."

Meanwhile, the market study findings uncovered significant regulatory burdens imposed on financial institutions after the 2008 financial market crisis also mean that direct entry, beyond partnerships, remains unlikely in the near term for even large technology companies.

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