Welcome to Innovation strategy: Developing your Fintech Strategy! As you probably know, this is the third course in a three-part specialization focused on the digital transformation of finance. In this course, we'll aim to bring you insights about how business strategy intersects with innovation in finance. I'm excited to have you in the class and look forward to helping you learn more about this important topic. To begin, I recommend taking a few minutes to explore the course site. A good place to start is the navigation bar on the left. Click Course Content to see what material we’ll cover each week, as well preview the assignments you’ll need to complete to pass the course. Click Discussions to see forums where you can discuss the course material with fellow students taking the class. Be sure to introduce yourself to everyone in the Meet and Greet forum! This course should take about four weeks to complete. You can check out the recommended course schedule below to see a quick overview of the lessons and assignments you’ll complete each week. By the time you finish this course, you’ll have understood the job your Fintech innovation strategy should solve and mastered both internal and external innovation tools to solve the problem. You will also have been exposed to how some of the world’s leading financial companies work with innovation and seen inspirational examples from the digital masters, such as Google, Apple and Amazon. You'll be introduced to the Capstone Project for the specialization and have a chance to form some preliminary solutions for a financial company that needs to re-think its Fintech innovation strategy. The course has a primary focus on the banking sector, with insurance as a secondary area of concern. Most examples are rooted in the North American and European financial markets. Good luck as you get started. I look forward to seeing you in class!
Position your Fintech Strategy
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Из курса от партнера Copenhagen Business School
Innovation Strategy: Developing Your Fintech strategy
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Copenhagen Business School
73 оценки
Курс 3 из 4 — Specialization Digital Transformation in Financial Services
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Competing on technological innovation
In this module, we focus on the problem that your FinTech strategy is supposed to solve. We start at the digital disintegration of finance and how this changed the industry dynamics to an innovation game. We conclude by identifying the new roles for competition in the digital financial marketplace, and how your FinTech strategy is essential to successfully compete in these positions.
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Jonas HedmanAssociate Professor
Department of Digitalization
Stefan HenningssonAssociate Professor
Department of Digitalization
We started this module of the course by looking at how
digitalization disintegrates the financial industries.
We talked about how digital services consist of
layers of modules that can be innovated and combined.
Now, financial services are assuming the same layered module structure.
We also talked about disruptive innovation and the state of
constant disruption in industries with hyper competition.
Digital innovations are constantly sending
questions about market leadership through the system.
In this lesson, we're going to bring these concepts together
to create the frame to position your Fintech strategy.
This is essentially a way to capture the problem
your Fintech strategy is supposed to solve.
Let's start at the disintegration of banking.
The traditional model in banking is that of
an integrated vertical channel from products to
services via distribution to the end customers.
In this role, they're offering to the customers created and distributed by a single part.
Most banks play this role of integrator,
are also done so since the early days of the internet.
For example, account
information and payment services are
distributed by the banks online and mobile channels to the customers.
With digitalization, this vertical is now possible to disintegrate.
And this gives rise to a new horizontal roles and a new strategic questions.
In which position should we compete?
The decision of assuming a different role is across
that road that every bank face in the next few years.
For entrants into the financial industries,
the question is, in which horizontal to enter?
So, what would you like to be?
Production? Distribution? Or someone between the two layers?
Let's have a closer look what the different roles mean.
If we start with the producer role,
the situation here is that offering to
the customer is created by a minimum of two parties.
One party creates the service,
an external party distributes the service of the customers.
The producer role is explored by banks that is setting up accelerators,
incubators, development portals, and hackathons across the globe.
An example of a bank that have assumed the role
of a producer is a French bank, Crédit Agricole.
Since five years, the bank allows
third parties to build distribution services on top of the banking platform.
One advantage of the producer role is the potential revenue from increased market access.
On the negative side are the increased costs and
complexity of providing financial services through third-party providers.
Security is a major issue here.
Also, the increased distance from the customer could be an issue.
This far, customers of
Crédit Agricole's third-party distribution services have to be customers of the bank.
But this can, of course, change over time.
The risk is that financial services become
commodities leading into a price war with close to zero margins.
So, the producer role comes with pros and cons that have to be considered.
A secondary role is the distributor role.
The distributor role is not completely new to the banks.
Banks have been distributing funds of
other actors and credit card services for a long time.
The novelty here lies in the new possibilities to focus
extensively on the distribution role as a main business model.
In Europe, the PSD2 directive from
the European Commission really put the light on the distribution role,
as all banks have to enable access to their account information and payment services.
In theory, Google and Facebook can,
from 2018, decide to aggregate my European financial services.
Will Americans and Asia follow with a mandatory enablement of aggregation technologies?
Well, only time will tell.
But if this structure turns out to be more innovative than others,
chances are that we will see at least some market slide in this direction anyway.
Producer and distributor roles, are in a way,
your scaled down and focused versions of
the fully integrated traditional business models of banks.
The breaking of the finance also give rise to two new roles that
uses the platform concept as the core of the business models.
In the financial stack,
you can see two different platform roles focusing on the demand and supply side.
Both of these platforms roles are still relatively unexplored.
We are starting to see increased activity in both forms.
The company, Leveris, provides the demand-side platform.
For Leveris, the platform is the app that the customer use.
In this app, they act as a platform for
distribution services that integrates as modules in the platform.
Some of these modules are quite innovative.
A counterpart platform on the supply-side will connect producers to distributors.
The Danish firm, Saxo Bank,
is a good example of a supply-side platform.
Saxo Bank is a financial trading platform that enables trade in
thousands of financial instruments on a multitude of exchanges.
Saxo Bank connects all of these trading products to the customer,
to its own distribution channels,
and the app SaxoTraderGo.
But Saxo Bank is also increasingly
connecting these instruments to the customers through its partner.
Saxo Bank expects that
more than 50% of all trades will be generated by partners within soon.
So, that's the repositioning alternatives.
Stay with an integrated model.
Focus on production or distribution.
Or transform to a platform model based on either the supply-side or demand-side.
Its not obvious in which direction to go,
but if we combine this with what we know about
disruptive innovation and the continuous disruption of hypercompetitive industries,
there is at least one thing that appears to be relatively clear.
First of all, it's not likely to be the sweet spot.
This is to fully integrate the stack for most banks and insurance companies are today.
This configuration is less prone to foster
new innovations and harder to respond to moves by others.
It's simply a structural arrangement that generates
less creativity than the disintegrated arrangements.
Just think about it for a second.
If expected that a competitive system would
be hit by digital innovations at a regular basis,
and with every new technology rocking the system,
then the integrator arrangement will lose ground over time.
Because of this, both existing players and
new entrants will have to choose one of the horizontal roles.
Deciding on which role also means that you are
deciding on what your Fintech strategy should do.
So, this concludes our exploration of the problem that our Fintech strategy should solve.
To summarize, the problem starts in the possibilities for
disintegration of the financial industries into horizontals rather than verticals.
Because the disintegrated horizontals are likely to better
foster creative innovation and absorb digital shocks to the system,
these configurations are likely to be more competitive in the digital era.
This, in turn, means that existing players and
new entrants need to identify and successfully compete in horizontals.
To do this, they need to transform both
technically and organizationally to an entity that competes in innovation.
So looking forward, the solution to
our problem has to include the structures and processes that
allow the company to constantly seize
business opportunities enabled by evolving digital technology.
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