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In a new report, McKinsey explores how fintech is transforming Germany’s financial sector, offering new opportunities for both entrepreneurs and banks.
“All the indications are that these #FinTechs will also gain an even stronger foothold on the German market over the next years. Customers are open to change as never before,” the report #says.
&8220;By 2020 almost half of all German bank customers will have opened a digital bank account. The share of mobile banking is increasing rapidly. FinTechs are strong in these areas. In the mid-term they can challenge but also partner with banks.&8221;
Successful fintech companies have a few things in common. Firstly, they are lean, agile and innovative. They require fewer but highly specialized staff, and hardly any physical infrastructure. Secondly, they focus on individual segments of the value chain and can often substantially undercut the fees charged by incumbents.
Two examples are Auxmoney, the startup that runs one of the largest marketplace lending platforms in Germany with over a million registered users. The company leverages Big Data for better credit scoring.
Another example is Number26, the startup behind Germany&8217;s the first digital bank that lets customers manage their finances from a smartphone. Users can open an account in just eight minutes thanks to real-time identification provided by IDnow.
The report points out that fintech companies have so far primarily targeted private customers, leaving German corporate customers as a substantial untapped opportunity.
&8220;The key reasons for the focus on private customers are the low barriers to entry and that less expert know-how is required for founding a fintech,&8221; it says.
&8220;Solutions for corporate customers are harder to realize. In the corporate arena it is not enough to be cheaper, more convenient and more user friendly. Fintechs also have to also be familiar with many nuances, invest more time in rather complex products, and build up specialist know-how for marketing them.&8221;
The report suggests that in Germany at the end of 2015, there were over 200 reasonably sizable fintechs, some sponsored by domestic incubators such as FinLab and FinLeap.
For banks, the growing competition with fintech companies represents a challenge which could potentially cost them between 29% to 35% of their revenues.
That said, if banks undertake digital transformation of their value chain, they could increase their returns.
&8220;The prime requirement is to keep an eagle eye on key pioneering developments,&8221; the report advises. &8220;Proactive market surveillance is essential.&8221;
&8220;The market is in constant upheaval – this applies to FinTechs and banks alike. Each player should investigate new technical opportunities and build its strategy on its own strengths. Customers in Germany are open to change as never before. Companies that have a compelling customer proposition with transparent products and superior service will continue to succeed in the future.&8221;
Get McKinsey and Company&8217;s full ‘Fintech – Challenges and Opportunities: How digitalization is transforming the financial sector&8217; report: http://www.mckinsey.com/industries/financial-services/our-insights/fintech-challenges-and-opportunities
Featured image by NicoElNino via Shutterstock.com.
As the specter of a financial slowdown in China looms, economic effects are beginning to cascade through the entire Southeast Asian archipelago, heightening the unease of investors and businesses. #Banks are braced for dwindling dividends and financial conventions are under threat from the growth of #Fintech. According to #McKinsey’s 2015 Global #Banking Annual Review, in 2014 VC investments in Fintechs leapt to $12.2 Billion compared to 2013 and in 2015, with more than 12,000 Fintech companies moving into every banking activity and market.
For the penurious villager in Cambodia, however, the peaks and troughs of economic cycles bear miniscule impact. Driven to the periphery by the financial ecosystem, this burgeoning class represents the least financially-educated of the social hierarchy. Due to a lack of financial structure, this band of individuals – comprised of micro businesses and the financially challenged – encapsulate Asia’s economic paradox.
Despite the growing realization that long-term economic growth needs to be built on the foundation of financial inclusion, the World Bank’s recent report revealed that only 27% of citizens in Southeast Asia have access to a bank account. Cut off from conventional resource channels, a significant number of the region’s population have no avenue to raise capital or apply for credit. The promise of social mobility remains elusive for the “#unbanked”, perpetuating the vicious cycle of poverty for generations.
The emergence of Fintech has disrupted a host of industries, fronting new opportunities and striving to fix old problems. FinTech has shown a potential in driving economy and gradually upgrade the welfare of more than 600 million people in the region. Harnessing the potential of data analytics, Fintech has chartered new paths; amalgamating business know-how and social networks to fill barren gaps left by commercial banks.
However, most platforms, which includes P2P lending and crowdfunding, target small and mid-sized businesses with high-growth potential. While these additions supplement commercial banks and enhance the capital financing ecosystem, the clientele hasn’t shifted dramatically.