The paper discusses how Fintech web-enabled solutions and players, backed by strong VC and seeding investments, helped by digitalized consumer habits and new regulation, can unbundle and break up retail banking sector into different service and product segment streams.
While incumbent universal banks are facing strong regulatory pressure on capital, risk and liquidity ratios, and seem to retrench from global expansion plans new digital comers can successfully challenge the status quo creating new streamlined business models focused on specific areas of banking. This could also allow them to move more rapidly into international expansion plans.
We can identify three core areas where retail banking can be unbundled int verticals. Each of them is a large cluster containing several sub-segments.
The three main verticals can be identified as:
Transactional
Investing
Financing
Each segment is seeing new players targeting not just consumers but also small and medium enterprises. Therefore any vertical can be split by costumer target. Also we can already see the development of new hybrid platforms that move across the vertical segments. In short:
1) Transactional services
They range from basic banking solutions to new p2p transaction platforms, from cross-border money transfer to new digital currencies from m-POS to new digital acquiring.
2) Investment and trading solutions
It ranges from new social/cost effective digital trading platforms to on line advisors, in all forms also digitally targeting small savings investment solutions. Plus all new investment marketplaces not just for consumers but also for corporate investors. Here is one of the key areas of blending across segments.
3) Financing.
From p2p lending platforms to consumer crowdfunding, from microcredit or digital mortgages to funding up to equity crowdfunding.
Each of these segments needs in turn online and real-time software tools such as, as an example, credit scoring, KYC and customer authentication, PFM and PFP, accounting and so on.. The whole machinery stack is to be digitized by new players in a new fashion that will change the industry inside out.
The paper therefore tries to put together all these pieces in an single reading scheme, although not necessarily exhaustive.