The Financial Services Guide to Fintech

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The Financial Services Guide to Fintech

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Disruption can be a scary phenomenon.
However, disruption can also present significant opportunities in times of change and has single-handedly given us fintech, a fascinating industry whose sole purpose is innovation.

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260 pages, published in 2020
Devie Mohan

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The financial services industry had been immune to severe disrup­ tion until the early 2010s, well after several other industries like energy, utility, transportation, entertainment, hospitality and retail all went through significant change processes, structures and systems in the 1980s through to the 2000s. One of the fundamental drivers for disruption in these industries was the need to have more control over customer ownership. Uber, Airbnb, Skype, Alibaba, Netflix, etc were major disruptors in their industries by focusing on one common aspect - the transfer of control to the customer by shifting the busi­ ness models from asset ownership to customer ownership. Netflix thrived while Blockbuster, with vast amounts of physical resources, died; Amazon disrupted several major physical bookstores and Airbnb emerged as the ‘hotel’ without rooms. Well before this round of disruption, the energy and utility indus­ tries saw major disruption in the 1980s through the process of vertical disintegration due to sudden deregulation. Instead of owning all the infrastructure and processes from generation to transmission to distribution to retail marketing, energy players decided to focus on core competencies and key strengths while engaging collaboratively with other players vertically above or below them in the energy value chain. The highly expensive, difficult-to-maintain transmission infra­ structure was owned and controlled by one company, whereas the business model shifted towards a better focus on creating new offer­ ings, pricing structures and marketing messages for the consumer. The energy industry thus became a marketing game. When transformation hit the financial services industry, it was due to a variety of factors including the economic crisis, loss of consumer trust in banks, and deregulation driven by these changes. This disrup­ tion manifested primarily in the form of disintermediation in the financial services industry. The focus by start-ups was to cut the middleman - to remove the intermediary so as to offer cheaper, better products in a faster and more transparent way than the traditional banks and investment firms. This worked so well that these start-ups, the key part of the fintech ecosystem, have successfully disrupted processes, systems, service channels, marketing channels, products, services and pricing in the financial services industry with significant long-term impact. And with much more to come.