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The products of banks and insurers such as financial instruments and risk coverage are predetermined for digitalization. Though most of the financial services companies are still focusing on their traditional business model whilst hundreds of ingenious FinTech companies are lining-up to challenge the establishment.

The traditional business model of financial services companies is based on collecting money from individuals or institutions in form of deposits or insurance premiums, managing assets and either lending to other individuals or offering financial protection for unforeseen events. The whole system is based on trust, collectivity and managing assets. In the financial crisis, trust was damaged and so the reputation. Also the interest rates of low-risk financial instruments got close to insignificant.

At the same time, hundreds of FinTechs are reinventing the financial services industry and challenging the traditional players. In Banking many of them focus on payments such as some already established players like PayPal, Google and since iPhone 6 and iOS 8.1 also Apple Pay. Some analysts think the perfect storm will be about Bitcoin and blockchain networks. Insurance is probably one of the last fortresses of the old economy. But the growing number of insurance FinTech companies conveys that that disruption also in insurance is about to happen and will be more exhaustive than replacing traditional brokers and agents by aggregators such as Moneysupermarket our Check24.

Evolution of the business model is not enough

In the past, the evolution of existing products and services and smaller adaptions to the business model was sufficient for banks and insurance carriers to stay in the market or even to increase market share. This proofed Charles Darwin’s theory of evolution and natural selection to be correct in the old economy. But the new economy is different. It is not any longer about slow evolution but about fast transformation.

What the Asteroid for the dinosaurs, I expect the FinTech companies to become for the established Financial Services organisations. We don’t now yet, if it will be one big Asteroid or several small ones. We don’t know when the first really big one will hit the ground hard. But we know they are on their way through time and space will redefine survival of the fittest for the financial services industry.

Three things successful FinTech companies have in common

The most successful FinTech companies do have a few key aspects in common which you won’t attribute to many banks or insurance carriers:

      • They focus first and almost on the benefit for the customer and second on their benefit; their product is a mean to  serve their customer better
      • They are establishing a positive reputation by creating plenty of positive customer interactions; they are likeable brands
      • They are 100% digital and hence omni-present in the internet and social media


It is not only about the business model, it is also about technology to support the business model

Let’s keep in mind that the root cause for the global mega trends causing the new economy such as globalization and digital economy is solely technology. Hence technology is key to interact with the new reality, to leverage it’s opportunities and fight it’s challenges. While the established players are struggling with their legacy technology, the IT foundation of the FinTech companies is modern and state of the art. Technology leaders such as SAP, IBM and others recognized the opportunity and are collaborating with the new players. As a consequence their IT is out-of-the-box enabled for things like customer centricity, big data, social media and internet of things. Most banks and insurers still have a stony way ahead to get their.

The way out is to start from scratch on a greenfield

The smarter and most often wealthier established firms are working on initiatives to tackle the disruption. Here are some methods they are applying:

      • Establishing new brands or channels as spin-off on a greenfield
      • Collaboration with or funding of selected FinTechs
      • Initiating core transformation projects
      • Initiating Omni-Channel projects
      • Setup of innovation teams


Disruption is about radical adaption of the existing business model in financial services. A company needs to be fast, agile, well funded, excellent in organizational change management and free from any legacy technology to become successful. There are some great examples of established firms understanding and reacting accordingly such as Allianz and J.P.Morgan. Both companies were recently mentioned by Boston Consulting to be under the top 50 most innovative companies globally. The other banks and insurers not as innovative as the former examples will need to proof the above thesis wrong …

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  1. Barbara Moog-Emmrich

    I agree and I am sure that several of the established players will lose market shares unless they begin to disassable their business model and compose it for a digital world – the digital transformation is much more than end-to-end processing and technology. And a lot is based on user centricity.

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