BLOG // Digitalization


News of Fintechs & mobile phone companies

 In our latest book, we state: Banks and credit card companies will have to cede more than 25 percent of funds transfer business to companies such as Apple, Microsoft and others over the next few years. In future, people will pay by smartphone, iPad and related technologies.2

Customers will be able to use their smartphones as a means of payment in shops in Germany as well in the near future. In countries such as Latvia, this is already the norm at tills in grocery stores or retail outlets. Telefónica is collaborating with Munich-based Fidor Bank. The latter financial institution allows many Fintech companies to offer their customers deposits, transfers and loans through shared use of its full banking licence. Vodafone has set its sights on a comparable course and is planning to cooperate with PayPal. Having already shown established banks the way, many in the sector are worried that the US online payment service could edge them out in mobile payment services as well.1

Fintech is the term used to describe emerging Internet companies which aim to make paying and saving easier. Today, the global value of Fintechs is estimated at € 66 billion. The five largest Fintechs are PayPal (USA), Lufax (China), Zhong An (China), Square (USA) and Wirecard (D).

In comparison, the market value of the five largest German private banks is € 32 billion. These are Deutsche Bank, Commerzbank, Aareal Bank, pbb and Comdirect.3

Fintechs such as NUMBER 26 show how quickly customers can be acquired. The company’s advertising slogan is: An account as mobile as you. Money can only be withdrawn as active credit, which means the company is no more than a mixture of a mobile phone account and a payment card. Nevertheless, the company has succeeded in acquiring 160,000 new customers in a short period.

Banks are taking this new competition very seriously. Deutsche Bank will launch its app for smartphones in the next few weeks. After all, 50% of online banking is already transacted via mobile devices. The established banks are wise to get a move on. FLATEX, which started as an online broker, has recently extended its services: customers can now also deposit funds with the company and raise loans.4 Collaborations with established banks such as that with Fidor Bank, are a speedy way of making this feasible. Ideas such as ADVANCED DATA ANALYTICS demonstrate what is actually required in digital banking. It is more a matter of evaluating customer data and the Internet offers the opportunity to get to these data through smart products. Big Data seems to be becoming more important than traditional banking business.

Banks are now looking for options for cooperating with Fintechs. Accordingly, the Association of German Banks has now established the KOMMUNIKATIONSFORUM DIGITAL BANKING. This Forum brings together traditional banks, such as Commerzbank and Deutsche Bank, with more than 30 Fintechs. In their meetings, they discuss issues such as location policy, the national implementation of EU Directives and cooperation with the regulatory authorities.4 There is no doubt that discussions will also focus on possible new collaborations and acquisitions, since, after all, companies such as Google, Apple or Amazon are the real BIG DATA EXPERTS.


References:

1 FAZ, Mobilfunkanbieter drängen ins Bankgeschäft , 7 May 2016, p.24
2 Geschwill, Roland & Nieswandt, Martina, Laterales Management, Das Erfolgsprinzip für Unternehmen im digitalen Zeitalter , Springer 2016
3 Frankfurter Allgemeine Sonntagszeitung, Angriff auf die Bankenwelt , 8 May 2016, p.40
4 FAZ, Jetzt kommen die LEGO-Banken , 20 April 2016, p.30