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Is Fintech an enabler or a disruptor?


By Stephan Tschabold in Financial Services (KPMG Suisse).




Stephan Tschabold
Stephan Tschabold
While some Swiss private banks, independent asset managers and institutes specialized in lending services may clearly think that fintech will have a negative impact on their business, we together with the banks and insurance companies already working in the field of fintech share a different view.

Various Swiss private banks, independent asset managers and institutes specialized in lending services have voiced their opinion that fintech will have a negative impact on their business. However, the banks and insurance companies already working together with fintech startups think differently.

Whatever one may think of fintech, it is already quite clear that it will have a major effect on the financial services industry and the way their services will be provided to customers.

While fintech covers a diverse array of companies, business models and technologies, companies generally fall into several key verticals, including:
- Lending tech: lending companies include primarily peer-to-peer lending platforms, as well as underwriter and lending platforms that use machine-learning technologies and algorithms to assess potential borrowers’ creditworthiness.
- Payments/billing tech: payments and billing tech companies offer solutions that range from the facilitation of payments processing over payment card developers to subscription billing software tools.
- Personal finance/asset management: tech companies that help individuals manage their personal bills, accounts and/or credit, as well as manage their personal assets and investments.
- Money transfers/remittances: money transfer companies include primarily peer-to-peer platforms to transfer money between individuals across countries.
Blockchain/bitcoin: these companies include key software or technology firms in the distributed ledger space, ranging from bitcoin wallets over security providers to sidechains.
- Institutional/capital markets tech: companies providing tools to financial institutions, such as banks, hedge funds, mutual funds or other institutional investors. These range from alternative trading systems to financial modeling and analysis software.
- Equity crowdfunding: platforms that allow a collection of individuals to make monetary contributions for projects or companies in the form of equity.
- Insurance tech: companies creating new online carriers, brokerages and distributional platforms.

After the US and Asia, Europe is third in terms of interest and growth in the fintech area (see report). In Switzerland, interest is steadily increasing whereby market participants may do well to closely follow this development in order not to fall behind competitors domiciled in other financial markets such as Luxembourg.

Examples for the increasing interest in fintech is the growth in customer-to-customer lending platforms and partnerships entered into by sizeable financial intermediaries and fintech startups, not to mention the numerous conventions and seminars in this area. The symbiosis of established financial intermediaries and startup fintech companies has proven to produce the most successful fintech firms (some of which are valued at more than USD 1bn). These firms predominantly focus on payment processing or lending technologies, which historically are core services for most banks.

The growing success of partnerships between financial intermediaries is based on two factors. One is the trust customer have in banks and the other one is the change demanded by new generations on how, when and by which means they want to receive their financial services. Whereas in former times banking secrecy may have attracted assets, the new AML regulation, FATCA and AIA are now forcing Swiss financial intermediaries to focus more on customer service quality, experience, satisfaction, speed, cost and efficiency in order to keep or even raise their assets under management to the benefit of their profitability and lastly to conserve the status of the Swiss financial market.

It is key for financial intermediaries to watch out for opportunities on how they can better serve their customers and a cooperation with a fintech company may be the best way to reach this aim.

While exploring fintech opportunities, it is crucial for both financial intermediaries and fintech companies to find a reliable partner that understands the regulatory opportunities/limitations and at the same time has a profound understanding of IT-related processes.

Further information:
http://blog.kpmg.ch/fintech-enabler-disruptor/

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Mercredi 20 Avril 2016
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