Digitization is now affecting all sectors and financial services are no exception. Technology conquers all sectors of the industry and a segment of actors supporting this innovation is needed: the fintech. A contraction of “finance” and “technology”, the Fintechs are concentrating companies – startups and growing companies – that bring innovation to traditional products or financial services. Far from being a mere fad, the Fintech represent a real disruption in the world of finance. Main activities involved: banking and wealth management.
FINTECH, A TSUNAMI IN THE WORLD OF FINANCIAL SERVICES
The Fintechs are generating an unprecedented wave of disruption that is particularly disruptive to banking and asset management. Thus, it is estimated that the volume of activities threatened by 2020 is respectively 28% and 22% for these industries. The digitalization of the customer relationship and the disintermediation facilitated by digital technologies are rapidly transforming the way of “consuming” banking and financial services. Cost reduction, process simplification, strong connectivity, the Fintech ranking gives power to customers. Once the experience of the digital tested, backtracking is rare. This is one of the strengths of the Fintechs to capture an audience of unsatisfied with traditional banking in the first place, followed by customers simply looking for a simpler, more efficient and fluid relationship. Banks 100% online (pure players) feed expectations expressed or not customers. Today, only 17% of customers go to their counter more than once a month. They were 62% just five years ago.
The success of the Fintech is based in particular on their adequacy to the needs not satisfied by traditional financial services, mainly among millennial consumers – the “Millennials” (people born between 1980 and 2000), a highly connected, demanding and volatile. While the human relationship is still sought after for certain services (for example loans), a digital communication and purchasing channel is no longer an option for banking sector players or a source of differentiation.
Fintechs are also revolutionizing the use and exploitation of a resource that has been underutilized by traditional financial services: data. The refinement of data analysis to better identify and quantify risks and the automation of asset management is a major contribution of the Fintechs. These data processing and modeling technologies make it possible to create predictive scenarios for investments. Formerly expensive and reserved for the most important organizations, these solutions democratize access to information, allowing small players to access the market. Thus, in the asset management industry, managers are equipped – or planning to equip themselves – with centralized management solutions capable of processing data analytically at all stages: customer relationship management, management portfolios, compliance and integration of customer-generated data for investment decisions.
Another disruption that shakes the world of traditional finance: the arrival of robo-advisors. By reducing human intervention to its maximum, this new type of automated asset management advisor lowers the cost of wealth management. Thus, this technology makes it possible to offer these services to audiences with more limited heritage than the level usually required.
TOWARDS THE “FINTEGRATION” OF TRADITIONAL FINANCE
As fintechs shake the world of financial services, banks, insurers and asset managers are gradually realizing the benefits of joining forces with new players. This combination offers innovative solutions and an improved customer experience to more and more digital customers. For the Fintechs, this combination offers them, on the one hand, the opportunity to access the broad base of loyal customers of the banks with a relationship of trust installed, and to benefit from their experience in risk management and compliance. . On the other hand, they rely on a wide range of financial products and the financial strength of these banker institutions and managers in place.
A convergence of the two worlds seems today the most likely outcome. It remains to be seen what dominant model will emerge, between more or less peaceful coexistence between fintechs and traditional financial services, gradual “consolidation” of traditional organizations or the domination of the Fintechs on the market.