Capitalizing on FINTECH innovations

Two of the most common questions we hear from our clients are: “How is fintech going to impact what we do?” and  “What should we do to prepare for the disruption from FINTECH companies?” To these, we would add a third: “How will  technology innovations developed by these new companies benefit my firm?”

In this report, we attempt to answer these questions by disaggregating the impact of FINTECH in 6 areas within financial  services and across 6 business dimensions.

We wanted to understand this impact in a more substantive way to be able to offer some action steps for traditional  financial services firms. Therefore, we purposely chose to use the incumbents’ lens. This focus was important because  much of the attention to date has been on what FINTECHS are doing to disrupt financial services rather than the precise  effects on incumbents.

Simply put, our message is this: FINTECH disruption doesn’t have to spell doom for traditional firms. Indeed, the influence  of fintechs can be a net positive for the incumbents, particularly those who are able to make the right strategic choices  with passion and urgency. Incumbents can indeed thrive in a disrupted world. They can learn from history and be  proactive in managing the change instead of being passive participants. But first they need to understand how fintech  effects them before taking advantage of all the potential benefits FINTECH offers.

In doing our analysis, we relied on the framework developed by the World Economic Forum, “Future of Financial  Services: How disruptive innovations are reshaping the way financial services are structured, provisioned and  consumed.” We chose to leverage the rigorous research that was done for this report in disaggregating the impact  along multiple dimensions.

Our analysis suggests the following five takeaways for financial services executives to consider:

  1. A new level of personalization comes to retail financial services products, breaking the grip of stagnant, standardized  products that have been the norm.
  2. Even as technology forces narrowing margins in many traditional businesses, new markets will open up, offering  opportunities to develop new profit pools and forcing some incumbents to “move upstream” to serve more sophisticated  and profitable cohorts.
  3. Incumbents will use online social norms and platforms to do to financial services what “Web 2.0” did to the internet:  allow users to take control of aspects of the financial supply chain, from decision support to financial intermediation.
  4. The playing field will level as firms of all sizes take advantage of emerging networks and platform-based services to  lower cost, improve compliance, and focus on markets where they have true competitive advantage.
  5. Although new sources of data will continue to emerge and analytic sophistication will likewise advance, the value of  the unique capabilities of humans will not be lost, and firms will need to adjust their talent strategies as a result.