Traditional financial services firms are confronted with several questions in the face of fintech disruption. How will fintech impact my organization? What can I do prepare for disruption? The same firms are also given a tremendous opportunity: Use the answers to these questions to make proactive and passionate strategic decisions. What was once an obstacle could now be an advantage.
Capitalizing on fintech innovations
Deloitte’s report, Disaggregating the impact of fintech: Brighter shades of disruption, explores the impact that fintech companies will have on six areas within financial services including payments, insurance, deposits and lending, capital raising, investment management, and market provisioning.
The Deloitte Center for Financial Services analyzed the magnitude and timing of these areas across six dimensions:
- Offerings: Products, services, and market segments
- Operations: Middle and back-office client support, product servicing, and risk management functions
- Distribution: Online and physical channels, agents, financial advisers, and other third-parties
- Customer experience: The sum of all experiences with the service provider
- Business economics: Revenue, costs, and margins
- Industry dynamics: Competitive structure and ecosystem
Key findings for executives to consider
Our analysis suggests the following five takeaways for financial services executives to consider:
- A new level of personalization comes to retail financial services products, breaking the grip of stagnant, standardized products.
- Even as technology will force narrowing margins, there may be opportunities to develop new profit pools and forcing some incumbents to “move upstream” to serve more sophisticated and profitable cohorts.
- Incumbents will utilize online social norms and platforms to allow the users to take control of aspects of the financial supply chain, from decision support to financial intermediation.
- The playing field will level as firms of all sizes will be able to take advantage of emerging networks and platform-based services. Ultimately lowering cost, improving compliance, and focusing on markets where they have a true competitive advantage.
- New sources of data will continue to emerge and analytic sophistication will likewise advance. But because the value of the human advantage will remain strong, firms will need to adjust their talent strategies.