Market Share Truth: Fintechs focus on getting more control

In June I considered whether the involvement of banks in Fintech could end up being a Trojan horse in the longer term. I assumed that since the new market entrants, Fintechs had an almost perfect understanding of the language of the internet, banks would end up capitulating.

Are Banks poised to lose market share to Fintechs?

Well, I have to say I am actually pleasantly surprised. They are now markedly learning and adopting the strengths and particularly the monetization strategies of the successful digital ecosystems. The number of banks that are working towards transforming themselves into platform-based, digital banking ecosystems has exponentially grown. Maybe it´s a race against time. Well, it would have been a fallacy to assume that Fintech would just steamroll the banks into giving up more market share.

What has actually happened or is happening at an obviously slow pace (or perceived to be a slow pace) is that the threat of a reduced market share is stirring banks into action.

Some of the findings I highlighted in June were:

  • The preferred strategy for most banks is to create startup programs to incubate Fintech companies with just under half of them doing so or to set up venture funds to fund Fintech companies with 20% of them choosing this strategy.
  • Alternatively, one fifth of the banks analyzed have adopted to partner with Fintech companies directly while a few banks have adopted different strategies by acquiring Fintech companies or launching their own Fintech subsidiaries.
  • Approximately 60% of the Fintech companies that the banks engaged with as part of any of the mentioned strategies are enterprise Fintech companies that offer technology solutions to banks while 40% of the Fintech companies they engaged with offer financial services on their platforms directly to the retail and small business market.
  • European banks dominate Fintech related engagement with over 80% of the banks analyzed headquartered in Europe. In North American they account for only 20% of the banks. Based on the little information available, banks in Asia Pacific seem to be adopting a more conservative strategy and are working with a few leading traditional IT firms who have their own Fintech innovation programs. Additionally, almost all of them in the list are large Tier one banks with deep enough pockets.
  • It must be noted that banks are also increasingly engaging with Fintech via other channels like Industry Associations/Bodies such as Innotribe.

You can read the original outlook from June here.

Fintech companies have opened up a lot of battle fronts against banks. Should they really be investing only in collaborations?

However there is the lingering factually unsophisticated truth that new technology alone isn’t enough to tip the scales towards banks or Fintechs. Click To Tweet

Do you think Fintechs have the momentum to now capture enough market share from banks? Let me know how you see the competition between banks and Fintechs playing out.

@Foto – appitierre

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