I would like to recommend to you an article titled “Banks are taming the Fintechs,” published in the ‘Frankfurter Allgemeine Zeitung’ on 29.07.2017. I would have liked to simply link it here, but the article only appeared in the print version of the FAZ, so unfortunately I cannot spare you a walk to the newsstand.
The mentioned article reports on the failed “dreams of the young Fintech entrepreneurs”, on the “cooling of the mood of change” and on traditional banks, which are now creating FinTechs themselves to offer “digital services, such as payments, through mobile”, and thus the “disruption in the financial industry is reaching its limits”. The thesis of this article is underlined by a study of a French consultancy, as well as the apparent crisis situations at established FinTechs such as Outbank and our company Centralway Numbrs.
The inadequately researched article, and at times simple text, is unfortunately not an exception in current times. The journalist could have improved on his lack of knowledge through intense research, but instead some passages were hurriedly copied from previously published articles, which unfortunately results in a rather monotone report. The resource scarcity for editorial staff is leading to this unfortunate development of journalists having less time to familiarize themselves with a topic in-depth, and therefore the inability to write important articles.
Apparently, I do not agree with the conclusion of the article and do not believe that the disruption in the finance industry has reached its limits. On the contrary, I believe the revolution has already begun and is as strong as ever. Throughout history, no traditional company has mastered the digital transformation successfully. Well-known examples can be found in every industry:
- Holidays are no longer booked through Neckermann or TUI but Booking.com or Airbnb.
- Fashion is no longer bought from the Otto catalog but through Zalando.
- Luxury products are no longer purchased in a boutique but through Net-A-Porter.
- Consumer goods are less frequently bought in retail shops, and instead on Amazon or Alibaba.
The digital transformation is all-embracing, omnipresent and changes markets and society. For this reason, I am convinced that the digital transformation will also reach the financial industry, and traditional banks will have to rethink their business models from the ground up. Through new technologies, middle men of the banking sector will become irrelevant, financial services will be cheaper, and custodian banks, brokers, and commercial banks will become obsolete.
The digital transformation cannot be overcome through a FinTech side-project and a PR cooperation with a famous technology company. Rather, the business model needs to be rethought entirely. Central to this is the customer relationship, the services, the products, as well as the organizational structure and the communication channels. That this will affect the entire corporate strategy is beyond doubt. The challenge is therefore greater the more traditional and hierarchical a company is. In this case, the cooperation between FinTechs and a traditional bank can be successful.
I do indeed believe that many start-ups in the financial services sector are overestimated. At most, a handful will establish themselves — and only on the condition that they reach the same level of professionalism as traditional banks. Most FinTechs are far from this goal. Centralway Numbrs is not.
I look forward to the exciting times that lie ahead.
Founder & Executive Chairman