keynote speaker innopay presentation at meetfintech day on may 26th - payments
TRANSCRIPT
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Tomorrow’s transactionstoday
Forcedmarriage,romancestilltobediscoveredFinTech and Banks
May2016Shikko Nijland
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2 Banksand FinTech – Forced marriage, romancestill to be discovered?Innopay.May2016.©InnopayBV.Allrightsreserved.
• Innopay:Innovationexpertsindi• >30consultants• HQ:Amsterdam,newoffice inFrankfurt• ThreePractices:Payments,DigitalIdentity,e-Business• Services:Strategy,Co-creation,Transformation• MemberofEBA,EPCAandECP• FoundingmemberofHollandFinTech
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3 Banksand FinTech – Forced marriage, romancestill to be discovered?Innopay.May2016.©InnopayBV.Allrightsreserved.
FinTech and Banks:forcedmarriage?
@startupfestEU,crazydudefromInnopayclaims:FinTechs needbank’scollaboration,otherwisetheywillnotsurvive:D:D:D
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Tomorrow’s transactionstoday
May2016Shikko Nijland
@startupfestEU,crazydudefromInnopayclaims:FinTechs needbank’scollaboration,otherwisetheywillnotsurvive:D:D:D
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5 Banksand FinTech – Forced marriage, romancestill to be discovered?Innopay.May2016.©InnopayBV.Allrightsreserved.
BanksandFinTech:aforcedmarriageofconvenience?
Services/FinTech spaceInfrastructure
SEPA
Processing:ACH,Visanet,Banknet
Settlement:RealTimeGrossSettlement
Instruments:SCT,SDD,Cards
e.g.Browser e.g.Webshop
Payer
account
Beneficiary
account
Onlinebanking Routingservice
OnlinePaymentProvider (PSP)
Information FundsSource: Innopayanalysis,EuroBankingAssociation(EBA)
CUSTOMER MERCHANT
CREDITORBANKDEBTORBANK
1 1
2 Regulatedfinancialinstitutionsmoreoptimisedforregulatorycompliance,securityandresilience,addingtrust,reach and scalability
Lessexposedtotheonerousrequirementsandcomplianceobligations,addingexcellentserviceshavingfitwithcustomerneeds,intuitiveUI andseamlessUX
=Bank&FinTechchemistry
TRADITIONALFOURCORNERPAYMENTSMODEL BANKS VSFINTECHCAPABILITIES
INSTANT PAYMENTS
2
Source:Innopayanalysis
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6 Banksand FinTech – Forced marriage, romancestill to be discovered?Innopay.May2016.©InnopayBV.Allrightsreserved.
Puttingpaymentsinabroadercontext:threekeychangedriversinfinancialservices
1.CUSTOMERBEHAVIOUR 2.FINTECH&COMPETITION
Newplayerscapturingmarketsharedrivenbytechnologicalinnovation
Seamlesspaymentsanytime,anywhere,anydevice
3.EUROPEANREGULATION
Regulatoryreformsdisruptingtraditionalvaluechain
(PSD2,IFR,GDPR, AML4,eIDAS)
Source:Innopayanalysis
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7 Banksand FinTech – Forced marriage, romancestill to be discovered?Innopay.May2016.©InnopayBV.Allrightsreserved.
Devices
Context
Custom
erJo
urne
ys
Orientation Selection Transaction Delivery CustomercareCommerce
Bank
ing
Onboarding Usage CustomercareSelectionOrientation
OnlinePOS On-the-go
Customersexpectdigitalservicesanytime,anywhereonanydevice..
Source:Innopayanalysis
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8 Banksand FinTech – Forced marriage, romancestill to be discovered?Innopay.May2016.©InnopayBV.Allrightsreserved.
..andwishtointegratepaymentsseamlesslyintheirday-to-daylife
Instantavailabilityofinformationand
funds
Mobile initiation
Simpleandeasy Omni-channel,oneexperience
Reconciliationandbenchmarking
Integratingvariouspaymentmethods
Safe&secure,robustandnofraud
Accessalwaysandeverywhere
Source:Innopayanalysis
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9 Banksand FinTech – Forced marriage, romancestill to be discovered?Innopay.May2016.©InnopayBV.Allrightsreserved.
Puttingpaymentsinabroadercontext:threekeychangedriversinfinancialservices
1.CUSTOMERBEHAVIOUR 2.FINTECH&COMPETITION
Newplayerscapturingmarketsharedrivenbytechnologicalinnovation
Seamlesspaymentsanytime,anywhere,anydevice
3.EUROPEANREGULATION
Regulatoryreformsdisruptingtraditionalvaluechain
(PSD2,IFR,GDPR, AML4,eIDAS)
Source:Innopayanalysis
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10 Banksand FinTech – Forced marriage,romancestill to be discovered?Innopay.May2016.©InnopayBV.Allrightsreserved.
Technologicaldevelopmentaredrivingchangeinseveralsectors
• Mobilewallets• Digitalcurrency
Payments
• Automatedinvestments
• Robo advice
WealthMgmt &savings
• P2Plending• Crowd-funding
Lending&capitalraising
• Useofsensors• Newriskpools
Insurance
Changingecosystems(APIs, opensource)
Enhanceddatahandlingmethods(bigdataanalysis,machinelearning)
Portalaggregation
Distributedanddecentralizedledgers(Blockchain)
Newmethods forsecurity(Identification, authentication,tokenandcredentialmgmt)
Movetowardsthecloud
Sectortranscendingtrends
Source:Innopayanalysis,DNB (2015)
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11 Banksand FinTech – Forced marriage,romancestill to be discovered?Innopay.May2016.©InnopayBV.Allrightsreserved.
…butnotalltechnologies areasrelevant:impactvspriority
High
Medium
Low
Impa
ctonIndu
stry
Priorityinthenext3yearsHighMediumLow
Instantpayments
Onlinepayments
Digitalwallets
Contactlesscards
NFC
Bank2corporateconnectivity
Cybersecurity
HCE
E-invoicing
Biometricsinauthentication
E-Identity
TokenizationCloudPaymentservices
mPOS
Distributedledgers
P2Pmobilemoneytransfers
API-ification
Machinelearning
Virtualaccounts
Supply ChainFinance
Willbecomemainstream
fast
“Highimpact”driversare(potential)game
changers
Bigdata
Source:Innopayanalysis,Accenture (Nov2015)
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12 Banksand FinTech – Forced marriage, romancestill to be discovered?Innopay.May2016.©InnopayBV.Allrightsreserved.
FrontOffice(distribution) BackOffice(manufacturing) Market(processing)
infrastructure
Investing/Wealthmgt
Personalsavings
Payments
Lending
Capitalraising
Incumbent’suniversalbankingmodel:offerfullrangeoffinancialproductsandservices‘end-to-end’
Customertypes Servicecategory
CONSUMER
BUSINESS
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13 Banksand FinTech – Forced marriage, romancestill to be discovered?Innopay.May2016.©InnopayBV.Allrightsreserved.
…isunderattackofspecialisedFinTechs:competitiononisolatedproductsandservices
Customertypes FrontOffice(distribution) BackOffice(manufacturing) Market(processing)
infrastructure
Investing/Wealthmgt
Personalsavings
Payments
Lending
Capitalraising
Independent UXlayer,digitalfront-end
API-drivenmiddle- andbackoffice
Electrificationofmarketinfrastructures
Independent, digitalfrontend,middleandbackoffice
Servicecategory
CONSUMER
BUSINESS
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14 Banksand FinTech – Forced marriage,romancestill to be discovered?Innopay.May2016.©InnopayBV.Allrightsreserved.
Deathbyathousandcutforbanks?Let’sexploreFinTech-Bankrelationship
Source:CBinsights
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15 Banksand FinTech – Forced marriage, romancestill to be discovered?Innopay.May2016.©InnopayBV.Allrightsreserved.
Traditionally,bankswerethedominantfinancialservicesprovider…
ADDRESSABLEMARKET1:FINANCIAL SERVICES
Traditionalbankservices
Traditionalbanks2
1Addressablemarket:potentialconsumerandprofessionalclientsforincumbentbanks2Traditionalbank:establishedplayerinthemarket
BANK
Source:Innopayanalysis
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16 Banksand FinTech – Forced marriage, romancestill to be discovered?Innopay.May2016.©InnopayBV.Allrightsreserved.
…butnowmanyFinTechs emergeseekingtodisintermediatebanksortakeheadsoncompetition
ADDRESSABLEMARKET1:FINANCIAL SERVICES MODEL FINTECH MODELDESCRIPTION EXAMPLE
DISINTER-MEDIATION
Competeand/orcooperatewithtraditionalplayers.Dependonrelationwithincumbenttoofferservice
DIRECTCOMPETITION
Compete withincumbents, offersimilarserviceasincumbents, oftenstartviamarket‘long tail’(whichistypically un-/underaddressed)
Traditionalbankservices
Traditionalbanks2
DISINTER-MEDIATION
DIRECTCOMPETITION
BANK
1 2
1Addressablemarket:potentialconsumerandprofessionalclientsforincumbentbanks2Traditionalbank:establishedplayerinthemarket
1
2
Source:Innopayanalysis
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17 Banksand FinTech – Forced marriage, romancestill to be discovered?Innopay.May2016.©InnopayBV.Allrightsreserved.
…however,notallFinTechs aimto‘disrupt’banks,ascollaborationcouldbemorebeneficialinparticularsituations
ADDRESSABLEMARKET1:FINANCIAL SERVICES MODEL FINTECHMODELDESCRIPTION EXAMPLE
DISINTER-MEDIATION
Competeand/orcooperatewithtraditionalplayers.Dependonrelationwithincumbenttoofferservice
DIRECTCOMPETITION
Compete withincumbents, offersimilarserviceasincumbents, oftenstartviamarket‘long tail’(whichistypically un-/underaddressed)
SUPPLIERTO
Support incumbents (andother serviceproviders) incompetingthroughloweroperationalcostsand/ornewproduct/service capabilities
COMPLEMENTS
Newplayerswithnewapplicationswhichrepresentvaluetocustomers(butthatdonotimpacttraditionalplayersyet).Potentialareasforproductexpansion&revenuegrowth.
Traditionalbankservices Adjacentfinancialservices
Traditionalbanks2
COMPLEMENTS
SUPPLIERTO
BANK
3
4
1
2
3
4
DISINTER-MEDIATION
DIRECTCOMPETITION
1 2
1Addressablemarket:potentialconsumerandprofessionalclientsforincumbentbanks2Traditionalbank:establishedplayerinthemarket
Source:Innopayanalysis
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18 Banksand FinTech – Forced marriage,romancestill to be discovered?Innopay.May2016.©InnopayBV.Allrightsreserved.
FinTech investmentsareincreasingeachyear,mostactivityinpayments
0
2
4
6
8
10
12
14
2008 2009 2010 2011 2012 2013 2014
United States Europe Asia-Pacific Other
9% 7% 14% 13% 14% 12%9% 9%
11% 9% 9% 10%13% 16%
10% 9% 12% 14%
17% 18%22% 24% 18% 21%
53% 50% 43% 45% 47% 44%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
2008 2009 2010 2011 2012 2013
Capitalmarkets Personalfinance mgmt
Dataanalytics Bankingandcorporate finance
Payments
$billion
GLOBALFINTECHINVESTMENTS GLOBALFINTECHDEALSBYCATEGORY
Source:McKinsey&Company
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19 Banksand FinTech – Forced marriage,romancestill to be discovered?Innopay.May2016.©InnopayBV.Allrightsreserved.
…butonlyfewFinTech start-ups areabletobecomescale-ups
Source:Statistic Brain, Jan2016
PERCENTAGEOFSTART-UPSOPERATINGACROSSINDUSTRIES
Acrossindustries,50%ofthestart-upsfailedtoremaininoperationafter4years
PERCENTAGEFAILEDTOSURVIVEAFTER4YEARSPERSECTOR
42%ofthestart-upswithinFinance,InsuranceandRealEstatesectorfailedtosurviveafter4years
0%10%20%30%40%50%60%70%80%
1 2 3 4 5 6 7 8 9 10Year
Percentsurvived
42%
44%
44%
45%
46%
49%
51%
53%
53%
55%
63%
Finance,InsuranceandRealEstate
EducationandHealth
Agriculture
Services
Wholesale
Mining
Manufacturing
Construction
Retail
Transportation,CommunicationandUtilities
Information
PercentFailedtoOperateAfter4years
50%
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20 Banksand FinTech – Forced marriage, romancestill to be discovered?Innopay.May2016.©InnopayBV.Allrightsreserved.
ThemainreasonsFinTechs failisoveralllackofreach,trustandscalability
FINTECHSBANKS
WehaveReach,Trust and
Scalability!
WehaveAgility,UIand
UX!
Source:Innopayanalysis
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21 Banksand FinTech – Forced marriage,romancestill to be discovered?Innopay.May2016.©InnopayBV.Allrightsreserved.
Puttingpaymentsinabroadercontext:threekeychangedriversinfinancialservices
1.CUSTOMERBEHAVIOUR 2.FINTECH&COMPETITION
Newplayerscapturingmarketsharedrivenbytechnologicalinnovation
Seamlesspaymentsanytime,anywhere,anydevice
3.EUROPEANREGULATION
Regulatoryreformsdisruptingtraditionalvaluechain
(PSD2,IFR,GDPR, AML4,eIDAS)
Source:Innopayanalysis
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22 Banksand FinTech – Forced marriage,romancestill to be discovered?Innopay.May2016.©InnopayBV.Allrightsreserved.
Fiveupcoming‘regulations’:we’llfocusonPSD2anditsimpactonpayments
Source:Innopayanalysis
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23 Banksand FinTech – Forced marriage,romancestill to be discovered?Innopay.May2016.©InnopayBV.Allrightsreserved.
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24 Banksand FinTech – Forced marriage, romancestill to be discovered?Innopay.May2016.©InnopayBV.Allrightsreserved.
NewmodelemergingunderPSD2providingthirdpartyaccesstoaccount(XS2A),therebydisruptingexistingvaluechains
Payer
account
Beneficiary
account
TRADITIONALFOURCORNERMODEL
DEBTORBANK CREDITORBANK
Information Funds
CUSTOMER MERCHANT
SCT,SDD,Cards
ACH,Visanet,Banknet
RealTimeGrossSettlement
Instruments
Processing
Settlement
SEPA
e.g.Browser
Onlinebanking
e.g.Webshop
Routingservice
Onlinepymntprovider
Services
Infrastructure
Payer
account
Beneficiary
account
EMERGINGXS2AMODELUNDERPSD2
AS-PSP CREDITORBANK
Information Funds
CONSUMER MERCHANT
SCT,SDD,Cards
ACH,Visanet,Banknet
RealTimeGrossSettlement
Instruments
Processing
Settlement
SEPA
e.g.Browser
Standardisedinterface(‘API’)1 Routingservice
Onlinepymntprovider
ServicesInfrastructure
PaymentInitiationServices(PIS)
Account InformationServices(AIS)
e.g.Webshop
• CHALLENGESCUSTOMERRELATION• ADDSTOCOMPETITION INACQUIRINGBUSINESS• REDISTRIBUTION OFMSC
• CHALLENGESCUSTOMERRELATION• MONETISEACCESSTODATA
1Thereseems to be industry consensusthat ApplicationProgrammingInterfaces(APIs)provide for acost effective,easyand securemeansofenabling XS2A.Final decision subjectto EBARegulatory TechnicalStandardsSource:Innopayanalysis
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25 Banksand FinTech – Forced marriage, romancestill to be discovered?Innopay.May2016.©InnopayBV.Allrightsreserved.
Twonewregulatedrolesthatwillshakeuptheexistingpaymentlandscape:paymentinitiation serviceprovider(PISP)
1.PAYMENT INTIATIONSERVICEPROVIDERS
Customer initiates payment (SCT, SEPA Credit Transfer) directlyvia PISP (and not via AS-PSP). PISP forwards instruction to AS-PSP and communicates result to customer andmerchant
CUSTOMER MERCHANT
AS-PSP
3
2
1
PISP
Paymentscheme
EXAMPLESERVICESPROVIDINGSIMILARFUNCTIONALITY
Source:Innopayanalysis1Thereseems to be industry consensusthat ApplicationProgrammingInterfaces(APIs)provide for acost effective,easyand securemeansofenabling XS2A.Final decision subjectto EBARTS
ExistingflowFutureflow(API)
API
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26 Banksand FinTech – Forced marriage, romancestill to be discovered?Innopay.May2016.©InnopayBV.Allrightsreserved.
Twonewregulatedrolesthatwillshakeuptheexistingpaymentlandscape:accountinformationserviceprovider(AISP)
2.ACCOUNT INFORMATIONSERVICEPROVIDERS
TheAISPpresentsaggregatedviewontransactionsandbalancesfrommultipleaccountsheldatmultiplebanks
AS-PSP AS-PSP AS-PSP
1
Displayedcountries areindicative
AISP
CUSTOMER
EXAMPLESERVICESPROVIDINGSIMILARFUNCTIONALITY
2
Source:Innopayanalysis1Thereseems to be industry consensusthat ApplicationProgrammingInterfaces(APIs)provide for acost effective,easyand securemeansofenabling XS2A.Final decision subjectto EBARTS
ExistingflowFutureflow(API)
API API API
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27 Banksand FinTech – Forced marriage,romancestill to be discovered?Innopay.May2016.©InnopayBV.Allrightsreserved.
Today’sinteractionwithone’sbankaccountsislimitedtoexclusive,bank-ownedchannels…
Bankaccount
Internetbankingandmobileapp
Customers
Bankdomain
PRE PSD2XS2AERA
Source:Innopayanalysis
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28 Banksand FinTech – Forced marriage,romancestill to be discovered?Innopay.May2016.©InnopayBV.Allrightsreserved.
…PSD2XS2AwillprovidecustomersmoredigitaloptionstointeractwiththeirbankaccountsthroughTPPs…
Bankaccount
Internetbankingandmobileapp
Customers Customers
TPP1
Bankdomain Bankdomain
PRE PSD2XS2AERA (POST-)PSD2XS2AERA
PaymentaccountBankaccount
Internetbankingandmobileapp
XS2A(‘API’)2
1Includesboth PISPand AISP2Thereseems to be industry consensusthat ApplicationProgrammingInterfaces(APIs)provide for acost effective,easyand securemeansofenabling XS2A.Final decision subjectto EBARTSSource:Innopayanalysis
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29 Banksand FinTech – Forced marriage,romancestill to be discovered?Innopay.May2016.©InnopayBV.Allrightsreserved.
…potentiallycausingfragmentationinservicesasmanyTPPswillseektomonetise accountaccess…
Bankaccount
Internetbankingandmobileapp
Customers Customers
TPP
Bankdomain Bankdomain
PRE PSD2XS2AERA (POST-)PSD2XS2AERA
Paymentaccount
EntranceofTPPs(incumbents,FinTech,bigtech)
Bankaccount
Internetbankingandmobileapp
XS2A(‘API’)
Source:Innopayanalysis
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30 Banksand FinTech – Forced marriage,romancestill to be discovered?Innopay.May2016.©InnopayBV.Allrightsreserved.
…withnot onlyfinancialplayersenteringthemarket:serviceproviderscomefromdifferentbackgrounds
Data/creditreference
ThirdpartyIdentity
Invoicing
Remittance&FX
Banks
ERPs
Lending&Finance
Merchants
PaymentPlatform
Peer2Peer
OnlineBanking&e-payments
Deferredpayments
E-Wallets
CollectingPSPs
SEPAe-mandates CashManagement
Multi-banking
OnlineBanking&Cards
NON-EXHAUSTIVE
Source:Innopayanalysis
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31 Banksand FinTech – Forced marriage,romancestill to be discovered?Innopay.May2016.©InnopayBV.Allrightsreserved.
OpportunityforbanksandFinTechs tocollaboratebeyondregulatoryPSD2push:leveragingthevalueofOpenAPIs
Source:Innopayanalysis,EuroBankingAssociation
ON
OptionalPaymentAPIs Optionalnon-paymentAPIs
‘RegulatedPIS/AIS’
PSD2XS2A
ExampleAPIs
PSD2XS2A• SCTinitiation• Transactiondetails&balance• Confirmationavailabilityoffunds
Additional PIS• Paymentguarantee• ‘Real-time’payment• Refund/refuse services• Conditionalpayments• Disputeresolvingservices
Additional AIS• Intradaybankstatement• PaymentStatusReport• E-Mandatemanagement
DIGITALIDENTITY• Authentication• Onlinecontracting• Age verification• Attributeprovisioning
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32 Banksand FinTech – Forced marriage,romancestill to be discovered?Innopay.May2016.©InnopayBV.Allrightsreserved.
SomebanksarealreadyexperimentingwithOpenAPIsandFinTechs
EXAMPLES
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33 Banksand FinTech – Forced marriage,romancestill to be discovered?Innopay.May2016.©InnopayBV.Allrightsreserved.
1.CUSTOMERBEHAVIOUR 2.FinTech &COMPETITION
Newplayerscapturingmarketsharedrivenbytechnologicalinnovation
Seamlesspaymentsanytime,anywhere,anydevice
3.EUROPEANREGULATION
Regulatoryreformsdisruptingtraditionalvaluechain
(PSD2,IFR,GDPR, AML4,eIDAS)
WhatistheultimaterelationshipstatusforFinTechs andbanks?
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34 Banksand FinTech – Forced marriage,romancestill to be discovered?Innopay.May2016.©InnopayBV.Allrightsreserved.
1.BanksareincreasinglyactinglikeFinTechs andhavedeeppockets
BANKSORGANISEFORCONSTANTCHANGE• Fromcost/marginorientedstructuretocustomer
focusedculture
• Bankshavethe(financial)resourcestomakethetransition
• Implementationofagileoperatingmodeltospeed-updecisionmakingandtime-to-marketfornewservices
• DevelopmentofOpenAPIoffering/community
• Set-upofinnovationcentersincludinghackathons,incubators
• Banksinposition todecideonengagementwithFinTechs (ignore,collaborate,compete,acquire)
PicturefromMoney20/20presentationRalfHamers (ING)
Source:Innopayanalysis
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35 Banksand FinTech – Forced marriage,romancestill to be discovered?Innopay.May2016.©InnopayBV.Allrightsreserved.
2.SinglelifeofFinTechs canbedifficult,despiteagility&technologyadvantages
CHALLENGESOFFINTECHS
• FinTech seekworlddominance
• Costsof‘surviving’andscaling-upisalwayshigherthanexpected
• Incumbentshavemassivescaleadvantages
• Customersandtheirloyaltyisdifficulttoobtain
• Fragmentationofservicesincreasescompetition
Source:Innopayanalysis
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36 Banksand FinTech – Forced marriage,romancestill to be discovered?Innopay.May2016.©InnopayBV.Allrightsreserved.
3.BenefitsofBank- FinTech marriagemayoutweighthepro’sofstayingsingle
AS WITHMOSTMARRIAGESITCOMESWITHCHALLENGES...
Preservingacquiredcompany’sagility,cultureandinnovation,whilemarryingittothecontrolsand
assetsofthebank
BANK – FINTECHMARRIAGE
‘Fintegration’unlocksforbothFinTechs andbanksoptimalusageofrespectiveassets
Source:Innopayanalysis
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Tomorrow’s transactionstoday
WelookforwardtoitContactus Shikko Nijland
Managing Partner
+31653741465