Fintech strategies are continuously changing especially when new innovation relies on offering niche service to create market share and then grow out. One common competitive strategy of the dominant role-players in Fintech innovation is Fintech firms partnering with investment or broker firms. These two entities then work together and provide customers with the most effective services.
Investment firms provide the key infrastructures that Fintech needs to grow. They provide Fintech with capital as well as expert knowledge when dealing with regulators in the financial industry. On the other hand, Fintech companies provide investment firms with the technology needed to make financial transaction easier and efficient. The partnership strategy has driven a growth in cross investments between fintech firms and banks. Last year, the six largest U.S. banks partnered with Fintech companies, including Circle Internet Financial Inc. and Prosper Marketplace Inc.
Another competitive strategy that is being used by the dominant role-players in Fintech innovation is the use of Robo-Advisor. One example is the use of WeChat, a messaging app, to provide investor education and promote funds. Robo-advisors are likely to disrupt the asset management industry in a positive way by offering inexpensive advice to many investors who had been previously ignored because they had smaller accounts. Using robo-advisory strategy, Fintech companies are tapping capital from investors who were unwilling to invest due to lack of advice.
Trends affecting Fintech Innovation
There are three main trends that are affecting dominant role-players in Fintech innovation. First, Fintech firms are using technology to make a better onboarding experience. Fintech firms simplify the process of opening accounts and the new customer onboarding experience. This has eliminated complex paperwork transactions into a much appealing digital experience.
Second trend is the natural language processing to help customers get assistance fast. Commonly, calling for customer service can be time wasting navigating through irrelevant interactive voice response phone trees. Fintech innovation has come to help customers, requiring them only to say what they want . For instance, North side is used by Fintech firms to give customers new experience. Using English conversation, the app enables users to access self-service information or do transactions from computers or mobile devices. USAA, a frontrunner in financial services and insurance, have a free Savings Coach app that allows customers to talk with it about their goals, importance of saving, analysis of saving, and suggestion for saving plan.
Lastly, the Blockchain is being embraced by Fintech firms to make transactions faster and more secure. Blockchain is the technology that employs a network of databases in various computers that keep records of transaction in “blocks”. These blocks give proof of who owns what and at what time. Every computer on the network have to approve a transaction just before it is noted in a new block and added to all the earlier blocks, creating a “chain” of computer code. In Blockchain Technology, the ledger is distributed and public, allowing all participants to check if a transfer comes from the real owner. Distributed ledgers come with two advantages. First, security of payments is improved since the ledgers are shared by many parties. Consequently, it increases transparency and reduces fraud in payments. The second advantage is efficiency in payments: because the middle man is removed and therefore assets are transferred with lower cost and at faster speed.