Introduction Flashcards
(25 cards)
What is Fintech?
Fintech is a new, disruptive, financial products and services industry composed of companies (mainly start-ups) that use technology to make financial systems, and the delivery of financial services more efficient, faster, cheaper and more accessible.
Informally what is fintech?
Fintech is the set of financial technologies that create new, or enhanced, automate, and improve existing financial products and services for consumers and businesses.
This includes personal financial management tools, insurance, payments, asset management, blockchain, regulation and more.
What is Fintech used for?
Fintech is used to describe new technologies and innovations that aim to compete with traditional financial methods in the delivery of financial products and services. It includes the companies that conceive, design, implement and release these technologies.
Things that enable Fintech:
- New legislation like PD2
- Internet Access and Fast Broadband
- Wireless Connectivity (4G, 5G)
- Mobile Devices
- Consumer Sentiment
- Advancements in ICT
- The Cloud
- Big Data
- AI
- Game Theory
- Data Security
Fintech is the digitization of financial services normally provided by:
Banks, credit card companies, credit unions, investment banking and other financial businesses Ex. Money transfer and payments etc.
Financial Services can be defined as
The intangible financial products and services provided to consumers and businesses by financial institutions (banks etc.). Financial services are not limited to banking but also real estate, wealth management etc.
Financial Services focus on
Enhancing customer experience
Financial Services are usually of a transitory nature, what does this mean?
A service’s function comes to an end after it fulfils its purpose. They are connecting blocks between two parties in an exchange.
Disruption
Way to think about successful companies that not only meet and exceed client’s needs and expectations, but anticipate their future needs.
Incumbent
A leader in some industry. May have the largest market share or additional sway in the industry. May change in response to changes in the market.
Start Up
Young company that is beginning to develop. Usually small and initially financed and operated by a handful of owners. Offers a product or service that isn’t offered anywhere else or that is being offered in an inferior manner.
Digital Disruption
Change that occurs when new digital technologies and business models affect the value proposition of existing goods and services. The goods/services themselves do not have to be digital.
Start-ups in industries with high barrier to entry
Much harder. Creating disruptive software is much less expensive and requires less capital.
Advantages of Incumbents
- Greater access to capital
- Strongly trusted brands
- Large customer base
- High quality of customer relationships
- Deeper innovation capability
Disadvantages of incumbents
- Cumbersome legacy systems
- Heavy, multi-tiered bureaucracies
- Slow to react
- Living in comfort zone
Advantages of Start Ups
- Faster innovation capability
- Greater agility
- Culture of experimentation
- Culture of risk-taking
- Highly digitized products and services
- Vision
Disadvantages of Start Ups
- Not enough funding
- Not enough planning
- Vulnerable to market changes
- High failure rate
Incumbents vs Start Ups
Start-ups compete by being agile and innovative. Incumbents compete due to strong asset bases and deep relationships with customers and stakeholders.
Two Phases in Digital Revolution
1/ Silicon Valley firms create new markets and eviscerate weak firms in sleepy industries.
2/ Second Phase favours incumbents, as they summon the will to adapt, innovate and increase efficiency.
Disruption of Financial Services
Disruption creeps up on an industry or incumbent resulting in a sudden shift in landscape. Financial service innovation has serious potential to unsettle longstanding incumbents (banks, insurance companies etc…)
Business Disruptors
- Ryanair disrupted carriers with low cost product
- iPhone was ignored by phone makers
- Blockbuster didn’t buy netflix for 50 million
- Uber was formed in 2009 as a p2p ridesharing app
- AirBNB took over hospitality
- SpaceX has taken over space launch business
- Amazon changed the way people shop
- Dyson disrupted hoover and won a lawsuit against them
The use of OpenAIs
Enable 3rd party developers to build applications and services around the financial institution. Greater financial transparency options for account holders. Many banks have their own API manager that handles access control.
Key drivers for implementing Fintech solutions;
- Efficiency gains
- Risk Reduction
- Customer Satisfaction
Fintech Disruption
Fintech start-ups have driven innovation in the ways consumer, business and financial services are delivered.
