While the first FinTech-wave made already existing financial processes more efficient, the second big wave will be much more integrated and will go far beyond the bounds of current financial products. Digitalisation allows state-of-the-art banking services to be offered at a fraction of the cost. Digital foreign currency providers such as Currency Cloud orTransfer Wise offer conditions that scarcely any regular bank can compete with. Online-only banks like Simple or Number 26 offer best-in-class mobile banking which is completely cost and charge free while Robinhood offers fee-and commission-free trading. While `Robo-Advisers` such as Betterment or Wealthfront give retail clients above-average returns at minimal prices, Fairr offers award-winning retirement solutions at extremely favourable conditions. Peer2Peer lending platforms like Lending Club or Prosper cut out the bank as `middleman` between borrowers and investors and as a result can offer very attractive conditions. These are only a few examples that show how digitalisation is reducing banking fees for customers drastically — until the day when costs can’t go any lower, because they’re free. Objections to these developments are as plentiful as are the examples outlined above. But one thing is clear: these objections might hold true today, but by tomorrow they will be irrelevant. The same happened when light bulbs took over from oil lamps or when mobile telephones appeared on the scene. In the long run, the more efficient technology will always win out. Can you think of one instance where old technology has won over a newer, more efficient technology (whether in terms of price, comfort or power)? This first FinTech-wave is all about efficiency — and it won’t be slowing down anytime soon. Eventually, everything that can be mapped as a process will be digitalised. This won’t affect just retail banking, but all standard banking services. The costs for costumers are going to implode. The result is that the classical banks, with their relatively high fixed costs, will no longer make money from standard banking services. However, these banks won’t disappear overnight. Customers (especially in Switzerland) are lazy, so it is more likely there will be more of a steady (but constant), trickling away of customers. What will probably follow then will be saving and fee increases, which will again hasten the outflow of customers. For banks that have missed the digital adaptation, this will mean a vicious cycle. So, the key question for banks and financial services is:

How do banks earn money, if they can no longer make anything from standard banking services?

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The second FinTech wave might answer that question. It’s less about reducing costs, and more about maximizing profit for customers.

Zenefits, the fastest growing business in the Silicon Valley in 2015, is a good example. An all-in-one platform for the personal sector, it stores co-worker master data, tracks working hours and holidays, organises recruiting processes and enables easy onboarding systems. In short: it’s a cloud-solution that relieves SMEs administratively and thus offers a large profit -- and all completely free of charge. Essentially, Zenefits is a Trojan horse. At its core it’s an insurance broker -- of which there are thousands engaged in a fierce price war. Zenefits however dodges the battle by offering its customers a real profit through ist HR software and at the same time by making strong profits from commissions. Another example is Osper, a digital solution that focuses on children and teenagers to help young people manage their savings accounts.

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 Banking is a minor matter for tomorrow’s profitable bank.

The main focuses are digital and integrated solutions, which offer the customer a relevant profit and which go beyond the boundaries of classic banking.

 

It’s clear to me that banks should offer their customers profits far above those of classical banking. This is the only way to guarantee profits in the future. In a completely digitalised and highly efficient market, sooner or later there won’t be any room for classic banking to make money. However, profit means a lot more than just a few nice digital features. The profit needs to be significant enough to compensate clearly for any cost disadvantages.

What is needed for this is a solid understanding of the customer base — not in the context of banking services, but in the far larger context of what customers want and need.

The possibilities for this are endless — for instance, in the areas of tax, financial planning, insurances inheritance and real estate. Or in terms of customer groups, where a strong fragmentation is inevitable. Students and apprentices won’t be able to be lumped together nor will artisans and online-traders, treasurers and collectors, wealthy heirs or self-made millionaires.

Those who want to offer tangible and relevant profits will have to do more than this. Simple ‘one-size-fits-all’ solutions won’t work. But whoever puts in the effort to develop specific solutions with high profit margins will grow profitably and exponentially.

In under 200 hours we’ll solidly research the frequently unconscious needs of potential customers, and from those results we will build digital and disruptive profit solutions - in less than 12 months. 

 

From a blank sheet to market launch --- in under 12 months.


In a Nutshell

  • Standard banking services will no longer make money.

  • Tomorrow’s profitable bank offers its customers relevant, digital and integrated profit solutions beyond the boundaries of classical banking.

  • Banks will have to understand their customers to a higher degree and in a more profound and better way.

  • We offer our customers exactly this: relevant and disruptive profit solutions that are built on researched customer needs. In under 12 months - from a blank sheet to market launch.

Banks & Insurance