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This Palgrave Pivot analyses the evolution of strategies and business models adopted by financial operators that employ technological solutions to deliver financial products and services. The analysis is performed on a proprietary dataset built on different sources that highlight important differences in strategical approaches taken by FinTech companies, TechFin and BigTech, and banks (traditional and digital native). For each type, the authors underline their distinctive patterns, strengths and weaknesses. The main focus of the analysis in on the European market that is investigated also in the light of the difference and similarities with other markets (such as US and China).

The unbundling and re-bundling of productive processes in finance, the treatment of information and the level of innovation in the customer relationship highlight the intense change that the banking activities of new financial services providers are currently dealing with, especially the retail segment. Despite the main international banks’ implementation of innovative strategical approaches to take advantage of the digitalization of business and cope with competition, so far the level of the disruption brought by FinTech is not fully understood or widespread. This holds especially true for the smaller banks: the latter need to take a proactive approach to individuate a business model able to satisfy the new customer needs and the competitive pressure that are destined to increase and further evolve. This book addresses this and would appeal to academics, researchers and students of banking, FinTech and financial innovation alongside policy makers, regulatory authorities, FinTechs and banks.

Inhaltsverzeichnis

Frontmatter

Chapter 1. Introducing the FinTech Revolution

Abstract
The digitalisation of financial markets is having a profound impact on the nature of client financial product and service provision. New entrants (FinTech and BigTech firms) are now operating on the financial markets by leveraging advanced technologies and innovative business models, applying competitive pressure to incumbent firms. This book analyses the business models used by FinTech and BigTech firms and banking institutions in order to highlight differences and analogies, including in the light of current debates over the need for a renewed regulatory framework which balances the potential risks and opportunities generated by FinTech.
Alessandra Tanda, Cristiana-Maria Schena

Chapter 2. FinTech Activities and Business Models: Analogies and Differences with the Traditional Financial Channels

Abstract
Technological progress and the dissemination of innovation have enabled FinTech companies to emerge. These are currently able to offer products and services in all areas of traditional financial intermediation, often outside the regulatory perimeter. Not only do FinTech companies provide new products and processes, but they also enter the market with new business models and services which respond better to customers’ demands and preferences. Via the unbundling and rebundling of financial services, FinTech companies are able to specialise in various business segments and potentially disrupt traditional incumbent activities. Nevertheless, in contrast to BigTech, FinTech companies have to collect and gather information and reach critical masses if they are to become formidable competitors.
Alessandra Tanda, Cristiana-Maria Schena

Chapter 3. BigTech Strategic Approaches: Worrying Competition?

Abstract
By leveraging on the data acquired within their core businesses, BigTech firms have long offered financial services too, starting with payment services and continuing with lending and wealth management services. Strategies involving widening financial services provision can be implemented according to two main development lines: development to support the main core business or development to diversify the services offered. US and Chinese BigTechs, in particular, are offering an ever increasing number and wider set of products on the market, including via the creation of controlled dedicated financial intermediaries, to allow them to respond to customers’ needs with a holistic approach.
Alessandra Tanda, Cristiana-Maria Schena

Chapter 4. Bank Strategies in the Light of the Digitalisation of Financial Activities

Abstract
Incumbent firms are responding to the challenges of digitalisation by adopting a number of strategies. The large international banks are implementing a mixed strategy that includes shareholdings in FinTech companies, partnerships and also in-house development in the different areas of financial intermediation that are being affected by technological innovation. Many initiatives focus on lending, online banking and payments but wealth management and support technologies for middle and back office are also in place. The degree of disruption caused by the initiatives varies, with many banks mainly focusing on the digitalisation of channels. Smaller banks face additional constraints because of their limited size and investment potential, together with their traditional link with the territory they operate in and their traditional approach to customers. Digitalisation has become a key issue for these intermediaries, too, if they are to be able to cope with competition not only from FinTechs and BigTechs but also from larger incumbents and new entrants. Of the latter, digital native banks have started to operate successfully on the market through innovative business models and by offering highly digitalised content and services, which meet customers’ expectations. These can be created by incumbent firms, new entrants or BigTech conglomerate spin-offs.
Alessandra Tanda, Cristiana-Maria Schena

Chapter 5. The Regulatory Framework and Initiatives

Abstract
FinTech activities often take place within an unregulated space or are subject to non-homogeneous regulatory frameworks. After a prevalent approach of “wait-and-see” by regulators, followed by an intense (still ongoing) debate on the opportunity to regulate, national authorities and international regulatory bodies have started to design regulatory provisions. The main aims are to eliminate the space for regulatory arbitrage and ensure the financial markets greater stability and resilience, as well as to provide customers and investors with a higher degree of protection. Co-operation between authorities in this area of regulation is key to the success of the new provisions, given the pervasiveness and innovative features of FinTech. This chapter reviews the regulatory approaches adopted so far and describes the main regulatory actions taken at the European level.
Alessandra Tanda, Cristiana-Maria Schena

Chapter 6. An Attempt at Synthesis: Financial Market Digitalisation Scenarios, Opportunities and Challenges

Abstract
The FinTech revolution has changed the financial markets which are now facing a point of no return. New products, services and processes are being offered by new entrants, be they FinTech, BigTech or digital native financial intermediaries. A competitive power that mainly derives from the new business models adopted for the provision of financial services is forcing incumbent banks to rethink their approach to the market and to customers. BigTech and FinTech represent worrying competitors, but also an opportunity for partnerships, especially for smaller banks. The future development of banking business models will also be shaped by the regulatory steps that will be taken by the authorities. These should aim to level the playing field to ensure financial stability and consumer protection.
Alessandra Tanda, Cristiana-Maria Schena

Backmatter

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