Why Fintech Banks Will Rule The World
by: Philippe Gelis
Twitter: @pgelis
We are now experimenting with the first wave of fintech, which sees companies competing with banks on specific products, including loans, payments and foreign exchange, among many other services.
The second wave of fintech, to come in two to five years’ time, will be “marketplace banking” (or “fintech banks”). This will be a type of bank based on five simple elements:
- A core banking platform
- An API layer to connect to third parties
- A compliance/KYC infrastructure and processes
- A banking license, to be independent from other banks
- A customer base/CRM
Fintech banks will directly offer “finds holding” services, including bank accounts, credit and debit cards and an eWallet. However, through the API it will connect customers to all types of third party financial service providers offering a vast array of services.
I have been asked several times about this business model and I think it is a no-brainer. It is a simple mix between an access fee to the “marketplace bank” and a revenue sharing model with the third parties providing additional services.
Fintech banks, thanks to their banking licence, will no longer rely on any bank to be and stay in business, and so will not be at the mercy of incumbents. What is even more powerful, through the marketplace, incumbents will become “clients” of fintech banks, so the system will be completely reversed.
The beauty of “marketplace banking” is that it competes directly with banks on core banking services without the need to build all the products.
Fintech banks will be launched by fintech startups, as the risk of cannibalization is too high to see a bank assuming the risk.
This coming banking transformation is inevitable and fintech banks will eat the lunch of the old banking dinosaurs!
Editors Notes: This entry has been submitted to the FINTECH Book, the world’s 1st globally crowd-sourced book on FINTECH. Readers that enjoyed this initial abstract are invited to share and like it so that it may be featured in a longer version.
The FINTECH Book is due to be released in April 2016 and is available for Pre-Order on Amazon.
