Although 96% of
bank directors acknowledge the growing importance of digital technology in
the banking sector, and the ever-growing involvement of Financial Technology
companies ("FinTechs") in such activities, only 13% of these directors believe they have taken the necessary steps
to face up to these changes. (Study: Capgemini
World Retail Banking Report 2016)
A graduate of ESSEC Business School, Sedikk Jama has been tracking the financial services sector with Capgemini Consulting for eleven years. Over recent years he has become a specialist in the digital...
If the financial crisis has had a lasting impact on the
economic performance of banks, the emergence of FinTech companies has dealt a
new blow. From a difficult starting position, these new actors have launched an
offensive against all links in the banking chain with the aid of innovative and
The David versus Goliath comparison is not really the reality;
the struggle between small start-up and well-established banking institution is
not as unbalanced as you may think. In 2015, FinTech companies made more than
ten billion dollars. Paypal, one of the forerunners in this sector, is valued
at 48 billion dollars, which is more than Deutsche Bank, Crédit Suisse or
Why is FinTech gaining traction with customers?
The success of FinTechs is down to several reasons. These companies have
developed a model that focuses on customer experience. FinTech solutions are developed
for and with their clients, aiming to reduce some of the obstacles the latter
may encounter with traditional banks. Bankin', a personal financial management tool,
renders bank statements more user-friendly by automatically categorising our
spending (food, transport, leisure etc.). Such data related to spending has
remained unexploited by banks for decades.
Furthermore, FinTechs rely on simplified and flexible
organisation models. Decision-making is swift and the iterative nature of their
services enables them to deliver a product quickly then improve it as soon as the
earliest feedback from users becomes available. What's more, FinTechs do not
suffer the burden of IT legacy like traditional banks do. Their IT systems are,
at their very heart, based on "API" and are "data-centric", as well as being
stored on the cloud. They pay for these systems depending on consumption
levels, without having to invest in their own infrastructure.
How are banks responding to the new reality?
Banks have no other choice than to cosy up to FinTech
companies, in order to encourage an internal wind of innovation to blow and to
broaden their services. As part of an internal study, Capgemini asked banks how
they engaged in competition with FinTechs: 43% responded to the challenge with
incubator programmes, 20% via partnerships, 20% through shareholding
agreements, 10% via acquisitions and 7% by launching their own FinTech
companies. Crédit Mutuel Arkéa holds 34% and 15% of the capital of Prêt d'Union
and Linxo respectively, and it recently took over Leechi.
Boursorama bought out Fiduceo, Credit Agricole makes
regular updates to its 'innovation village', and BNP Paribas now has multiple
partnerships with FinTech companies. Also, Axa Banque has launched Soon, a bank
that is 100% mobile. While it had "only" 12,000 clients in 2015, this Axa Banque
platform paves the way for numerous opportunities for experimentation.
From new payment methods, alternative finances, online piggy banks,
peer-to-peer money transfers, Personal Financial Management (PFM) and much
more, FinTech companies have invested massively in retail banking services
which have been greeted with open arms by their clients, notably the youngest
generations who are now fleeing traditional bank branches.
These companies are moving up the value chain - for
evidence, look no further than the website Yomini, which offers asset
management services. B2B services are also covered, whether it be in the
business loan sector (crowd-lending), treasury management or factoring. Beyond
bankers, others concerned by the rise of FinTechs include traders, insurers and
mutual fund stakeholders.
As Capgemini turns 50, we give early stage start-ups the opportunity to jump-start their business and win equity-free funding of $50,000.