A lot of people ask us how we define Fintech. The really short answer is “broadly”. The slightly longer answer is “the reinvention of Financial Services through digitization“. This note gives a more complete answer and defines the different categories within Fintech.
We have 5 Categories:
- Monday = Blockchain, Bitcoin & Crypto
- Tuesday = Wealth Management & Capital Markets
- Wednesday = Small Business Finance
- Thursday = Insurance
- Friday = Consumer Banking & Finance
- Saturday = Blockchain, Bitcoin & Crypto
Blockchain, Bitcoin & Crypto
We devote two days to this subject because it impacts all the other days as well and there is so much to cover.
Our Authors on Monday are Ilias Louis Hatzis writing from Greece, covering the 3 most important news items in the week in the form of CXO level briefing (“the other BBC news“). If all you read is this, you will be well briefed; we work hard to get a high signal to noise ratio. Joining him on Monday is Saurabh Chaturvedi writing from India who gives us a developer view on the major technologies and platforms.
On Tuesday, Efi Pylarinou covers Wealth Management & Capital Markets. We define Wealth broadly as being any amount of capital, small or large, that is allocated to financial assets (private equity, public stocks, bonds, currencies both Fiat and Crypto, real estate, precious metals, art and so on). We include both short-term trading as well as long-term investment. Customers wanting their capital to grow can be passive (leaving it to professionals) or active (spending time to find assets to trade/invest).
Exchanges, brokers & dealers, investment banks, asset managers, private banks, retail and commercial banks, and the entire world within and behind all these front end scenes (such as research, custody & compliance); are all serving wealth creation needs of all sorts and at all levels, ranging from millennials to corporates.
Digital Wealth Management is so intrusive that in a few years we won’t be able to distinguish it from all other basic lifestyle needs. The digitization of Wealth Management affects developed societies and underserved ones.
Small Business Finance
On Wednesday, Jessica Ellerm covers Small Business Finance from a base in Australia.This is a massive opportunity, because banks have ignored small business for so long. Small Business is like a middle child – neither the oldest (big business) nor the youngest (consumer). This illustrates the old adage that innovation comes from those who have been excluded from the old way of doing things. Small business needs the same Corporate Finance products that big business needs (such as debt, equity, payments, foreign exchange) but to serve these efficiently to millions of small businesses requires a far higher degree of automation and different business models. The models for a small business service are just as likely to come from Consumer Finance as they are from Corporate Finance.
On Thursday, Stephen Goldstein covers InsurTech from a base in America. as a category within Fintech rather than separate. It is certainly viewed that way within traditional financial services where universal banks such as Citi grew out of a merger between an Insurance company and a Bank. Insurance has two sides. One side takes in Premiums and pays Claims. It is a customer service business with a focus on sales and marketing, business process management and statistical risk management. The other side of Insurance invests that cash flow to make sure they have the capital to pay Claims as needed. This part of Insurance is really part of the Digital Wealth Management category.
Consumer Banking & Finance
On Friday, Arunkumar Krishnakumar covers Consumer Banking & Finance from a base in the UK. We see innovation coming from two ends of the barbell. One end is the hyper-efficient wealthy cities and countries where digitization is driven by very high levels of consumer adoption and the cost of delivering services the analog way with a lot of labor cost.
The other end of the barbell are the big population high growth countries (such as China, India, Africa) where digitization is driven by the ability to leapfrog legacy technologies and the unmet needs of these large populations. There is a lot of competition for consumers in the West. You could classify this market as the Overbanked. As an entrepreneur would you target a market that is already well served by many competent competitors? Or do you go after the billions of people who are emerging into a global middle class even if the revenue per client is tiny?
We see innovation moving from one to another. Historically we have seen innovation starting in the hyper-efficient wealthy cities and countries and we expect this to continue. However a new trend which we call “first the Rest, then the West” is when innovation starts in one of those big population high growth countries and then propagates globally.
A big ocean with a lot of fish
We envisage Fintech as a big ocean with a lot of fish.
Fintech is big because Financial Services is a big % of GDP (e.g. 7% in USA and 10% in UK), accounts for a big % of corporate profits (as much as 40% by some estimates) and most of it (say 80% to 90%) can be delivered digitally.
Fintech is an ocean, because whatever categories we define, the lines will be increasingly blurred over time and the fish (customers) will move from one part of the ocean to another, even if we can expect more of a certain type of fish in a certain part of the ocean.
One of our mantras is that “bits don’t stop at historical category boundaries”. The business practices & models that evolved pre digitization defined the historical Financial Services categories. However, if you deliver value through a customer centric approach, you ignore artificially defined categories to focus on the needs of real people.
For example, in the big population high growth countries, the distinction between consumer and small business is largely artificial as most people are entrepreneurs. Another example is that the investing part of Insurance really fits within Capital Markets.
Global – 6 locations, 5 Nationalities
Our subscribers come from 130 countries and we have assembled Authors in 6 locations (Switzerland, Greece, India, UK, America, Australia). Our Authors include 5 Nationalities (Greek, Indian, British, American, New Zealand). Our Authors have all lived in multiple countries and have a naturally global mindset. Our mantra is “bits don’t stop at borders, but money has to show its passport” (meaning that KYC and other regs will always be part of our work.
How you can find what you need in our archives
Daily Fintech has been writing every day Mon-Friday since 29 June 2014 (the first post is here). That is 240 posts a year, which means that as of our 3rd anniversary in 2017 the archives had 720 posts. As we are insight-driven not news-driven, many of our posts continue to have value long after they were written.
You can search the archives in 4 ways:
- normal word search (either from a search engine or on our site).
- Categories (for example, all Insurance posts).
- Tags (the terms that end up using a lot in our posts).
- Related content (which you see at the end of each post).