One of the biggest advantages FinTech have over incumbents is the positive feedback loop, particularly for marketplace type businesses such as TransferWise. These new upstarters have the edge – they are pleasant to use and they encourage virality. If people save money using TransferWise they share it on social media (see image below) praising the brand and the service, in turn, advertising it. This gets more users who do the same. By increasing the number of users using its service TransferWise is becoming a more powerful network, and business. This is a positive feedback loop. Can you imagine this happening with RBS or HSBC? I don’t know. Actually, I couldn’t find a positive endorsement on their social media pages at all. That’s why TransferWise is winning.
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4 Banking Business Models for the Digital Age
By Ben Robinson
Digitization of the banking industry is making new banking business models possible. But, it is the combination of regulation and technology that is making new business models a necessity. There are 4 strategic options open to banks. These vary in terms of the scope of banks’ own activities as well as in terms of profitability. The traditional universal banking model and the infrastructure provider model are both asset intensive and low margin, which makes them unattractive. In addition, the universal banking model, in that it requires the bank to manufacture and distribute all of its products, is probably unsustainable. The aggregator model offers the possibility for very high profitability with low asset intensity, but will be difficult to defend. Thus, it is the vertically integrated but open platform model which offers the best route to sustainably high margins.
The Bank of the Future Will Be Invisible
By 2030, technology will have made banks and banking invisible to customers, hidden by Siri-like personal assistants that cull data from our connected lives to fulfil daily personal and financial obligations, claims KPMG. In this vision, there is no “banking app” – access to money is interwoven with health, time management, leisure and other parts of daily life. This means that the “platform layer” – the customer interface – is likely to be provided by global technology players such as Google, Apple and Facebook. Banks can own the product layer – product, balance sheets, security and custody of assets – but a new wave of utilities – outsourcers, fintechs and existing giants such as Visa – will emerge to win the process layer, facilitating things like payments, client onboarding and KYC.
Banks’ Burning Platform is Obvious
By Chris Skinner
There is a burning platform in all banks, and it’s called the legacy system. That’s how I know it’s a burning platform as, for every year that passes, the embers that were ignited by internet banking have been getting more fuel on the fire. Mobile banking; digital reach; new open platforms; blockchain, cloud and APIs; machine learning, apps and analytics; and more. All of these open, internet-based technologies have been attacking that proprietary internal legacy, and the longer it goes on, the hotter the problem is getting. Like a dead fish washed onto the shores, an incumbent bank will go the same way if it doesn’t open up and join the marketplace wave. This has been a requirement for twenty years, since the internet banking age arrived, but is now a burning platform as the opening of finance through FinTech has arrived.
Why Facebook is a Dark Horse in the Financial Services Industry
By Elena Mesropyan
For someone who looks beyond popular news releases of the financial sector, quite different (and often repeatedly) names pop up in the background, and those are not ‘financial’ names at all – we are talking about large technology and code-first companies that were never before considered a part of the financial services industry. For an illustrative purpose, let’s take a look at the biggest social media giant of all times – Facebook. The company has been having big plans for its Messenger App and professionals across industries started paying closer attention to the ever-expanding commercial capabilities of a former chat app. The bottom line here is not that Messenger will push banks out of business, but the fact that users may not need to communicate with a bank to get a financial service if banks channel those services in a more efficient manner through a user-friendly and highly automated channel.
5 things that made me smarter this week
What a computer thought of the presidential debates. A team of grad students showed Hillary Clinton and Donald Trump’s performances to software that interprets emotions from facial expressions. Sarah Slobin and Michael Tabb present the results, which, while crude, are surprisingly revealing.
Meet the Russians hacking the US election. A group known as (among other names) “Fancy Bear” has been identified for years as the culprit behind various high-profile hacks. But only now has the US openly accused it of taking orders from the Kremlin. Buzzfeed’s Sheera Frenkel describes its tactics.
Scientists might have finally found a cure for the common cold. A new vaccine is showing promising results in animal trials.
De Beers is mining underwater diamonds. A powerful vacuum on the ocean floor near Namibia has found some of the world’s most valuable gems (paywall).
Sweden is trying to revive repair shops. It’s offering tax breaks to citizens who fix, rather than replace, broken consumer products.
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Also published on Medium.