Fintech firms have a reason to celebrate. It has been reported that a large number of people are already using the innovative products. This highlights the remarkable growth of the Fintech industry in the last few years. Billions of dollars have been invested in firms such as OnDeck (small business lending), TransferGo (remittance), and Nutmeg (online investments), showing that Fintech is on rise.
If you want to venture into Fintech, it is important for you to show in your business plan, how your business model innovation will create value in your chosen Fintech industry. The goals, reasons and plans of your business should create a unique Fintech product or improve the existing ones.
If you want your business model innovation to create value in a chosen Fintech industry, you should:
- Focus Narrowly
Focused business model innovation is most effective when it has distinct market segments with clearly differentiated requirements. So, if your business serves multiple segments, it may be advisable to divide it into focused units rather than try to apply only one model.
The main disadvantage for a focused business model is that it must depend on a single product, customer, or service segment—and it may fail to satisfy key customer need.
- Look for Commonalities across products in Fintech
Commonalities aren’t just joint components among various products. They may also be the competences required to serve different products, market segments, and customers. Thus, your company can add to its mix services or products that reflect new applications of its capabilities. For example, in 1990s Amazon expanded its products from books into video, games and music—all of which needed similar logistics capabilities that books required.
Another example is PayPal firm. The company does not only allow transfer of money but provide a platform on which buyers can make payments. If you want to send money to a friend, you just need to log in to your account, enter your friend’s mobile number or email and click send. The PayPal Shopping cart system enables buyers to select multiple items online and make payment. Transfer of money and payments are two common services.
- Create a Hedged portfolio.
For your business model innovation to make an impact in a given Fintech industry, try to make portfolios of investments that will separate various risks. Companies can choose an assortment of markets or products to lower the overall risk of a given business model.
Business models innovations are wonderful things, they involve providing existing products that are made by existing technologies to an available market. Since they demand changes are invisible to the outside market, they offer benefits that are hard to copy.