The financial service industry is literally undergoing a major revolution due to the rise in Fintech. However, before getting too excited we need to understand that fintech start-ups are similarly vulnerable as other new features in different industries. This is all despite the brouhaha currently heard about in trending topics around fintech and other new and advancing technologies. A very important question that has emerged is what factor is currently differentiating the winners from those already losing out?
Necessities for success
There are three essential elements needed to reach success. In the business of peer-to-peer relationships it is vital that we start with a minimum of two of these factors. First, a major incoming flow of customers is needed to begin with and build your foundation upon. Second, there is a dire necessity for a huge amount of data. And third, and last but not least, is the utter need for credit risk skills that must be strong indeed. Those start-ups ending as P2P winners will be a very short list. It will be in the low dozens, and rest assured they will not number in the thousands or the hundreds, even, for any time soon.
Any benefit in e-commerce firms
There is a concept that more helpful data is found in e-commerce firms in comparison to credit bureaus. A sound basis will not be found in this type of data for any credit decisions that are pending. You might find support in making more informed decisions. However, if one only takes in e-commerce data thinking you can't reach simple solutions very fast; it simply doesn't work that way. For example, the mere fact that we once paid $30 for a shirt doesn't mean we are a constant buyer of expensive clothing.
Enter the model (financially speaking)
To make the right and informed decision we are in need of a specific model to make use of the data at our disposal. Here is where social media data can play a major role in. For instance, a very successful medium in forecasting what WeChat customer may actually become borrowers has been WeBank. This has been coordinated with credit, yet it is common knowledge now that an interested party will need to enter a cycle, and only then will they understand what is productive and what is not.
Is there a threat from big tech firms?
There is also this perspective that already huge technology firms, including the likes of Alibaba, Amazon, eBay and Tencent provide a significant threat to financial institutions. And that fintech start-ups are posing such a danger. The winning party must be able to make use of technology interface and the data at its service. This must be to a good extent in order to establish products of two different types. First to speak of are financial products that are only notional. There is also internet products, where customer experience, usability and user-friendly characteristics innovation is seen quite easily. Putting these specifics together is utterly key in this regard.
In the trending business of robo-advising, there is a rising notion of financial institutions having the upper hand. This is especially true when discussing financial products with upgraded customer experience. Back in 2015 the sudden rise in this industry in the United States was alarming. More interestingly, there are two reasons for this timing, and why not perhaps 5 or 10 years ago? First, the U.S. exchange-traded fund (ETF) market has been growing very efficient and allocation among ETFs is varying to be the main investment tool in a robot. Second, we have to realize that a user interface has been provided to us by smartphones, making us feel very comfortable carrying out asset allocation chores in a much more user-friendly environment and method.
The cultural aspect of fintech
There is a somewhat sophisticated aspect to fintech that most people usually miss out on. One is a cultural perspective in this regard and the role it plays is quite vital. There are two kinds of people in this field of work. Risk management and product design expertise is found amongst the characteristics financial services people, and you will most definitely need them. These are people who fully comprehend the regulations, along with what investors are attempting to materialize. Then comes the necessity of people who enjoy background in internet activity. These are the guys who understand the nuts and bolts of the online world. This involves customer acquisition, simplifying products and the all-important customer management.
Working for banks
It is becoming highly difficult for people with much needed internet background to even think about working for banks. The most important factor may actually be establishing a different wing embedded inside a major financial services firm. More firms these days are adopting the mentality of hiring more people involved in the e-commerce industry. These are not ordinary office workers wearing a suit and tie. They look more like ordinary people with more comfortable clothing, such as khakis. You will find yourself in need of finding methods to discover the expertise necessary and the different groups of people to make continuous contact with.
As always, team work will play a very important role in gaining success. Many firms are also experiencing how open platform modeling is the best method to grow business success. This doesn't, however, deny the fact that financial services continue to have and gain much valued expertise in the field of risk management and others. This also is realized in hiring 100 or more workers. Various firms have evolved into sourcing 70% to 80% of their flow from their sister financial institutions. This includes products such as mutual funds, money market funds and insurance products. Customers are nowadays able to connect the platform to their bank accounts. And there has never been a company able to provide enough of all the products needed to satisfy their entire customer demand.
The future of fintech will most probably witness how a small number of start-ups will win in the field of fintech. While a number of traditional companies will continue to enjoy some gains. This is a popular and trending aspect of today's growing tech industry.