Grow VC Group
  • Home
  • Group
  • Team
  • FAQ
  • Join Us
  • Trainee Program
  • Contact
  • News

Disruption: FinTech is simplifying financing options everywhere

9/18/2017

Comments

 
In many industries – such as airlines, retail, and media – disruption has been linked to new low-cost, almost commodity-type services. Southwest Airlines and Ryanair paved the way for low-cost flights, online news has become a commodity, and retail chains like Walmart, Aldi and Lidl have created a new cheap-prices-always category. The common theme is: cheap basic things, with a better experience available for a premium. FinTech disruption is changing finance in the same way, and when basic finance services become a commodity, they will be integrated to other services.

Some finance services have, of course, been in this category for a long time already. For example, payments are a crucial part of all e-commerce services and brick-and-mortar check out processes. It has become natural that services use third-party payment solutions rather than develop their own. We will see the same development for many other traditional finance and banking services.

Online lending, p2p lending and quick loans have been a fast-growing market. Those new lending services offer many benefits – sometimes a better price, but typically a much better customer experience. Sometimes they offer loans for people who cannot get a bank loan, and they might have more flexibility in terms and conditions. For many loan categories, bank loans are not a very attractive option anymore, especially when you factor in the customer experience, paperwork and time needed to get a loan.

Ford Motor Company just announced that they are going to adjust their car finance process (read more on WSJ). They decided that the traditional credit-scoring model is not very effective or optimal nowadays, and that they could get more customers and sell more with new finance models. Basically, they plan to use more data from new sources to get a more accurate profile of customers and optimize their financing better. It’s worth noting they were forced to do this because alternative lending services are already doing it, and competitive finance is an important component in car sales.

Car sales finance is just one example illustrating that companies outside the traditional finance sector need to develop better new finance solutions. FinTech makes it easier. The real estate sector has adopted a lot of new finance and investment models during the last five years, especially in the UK and the US – but now new real estate finance services are emerging globally. This means there are many new models available to invest in real estate – e.g. in development projects, rented apartments and commercial buildings, and new models to lend and borrow in real estate. Typically, this includes new finance instruments that are then offered through online finance services. These services are offered by some finance companies, real estate development companies and several startups.

At the same time, more inexpensive technology – or even technology-as-a-service – is available to build finance services. You don’t need a $100-million-plus IT back office to set up an investment or lending service – you can get it as a service from cloud, and they can offer access to relevant data sources (including credit ratings and richer data). It is quite easy to develop the actual application and your own investing and lending models.

We will see more:
  1. Services that offer finance with their products as car and real estate companies do already; it can come from their own finance models (including p2p components) or third-party finance providers
  2. Companies that offer finance solutions integrated with third-party marketplaces; for example, finance services with an API enabling integration with an e-commerce platform
  3. Online services that can integrate several financing services into their check-out process; for example, when you purchase something online, one payment choice could be a finance (loan) option, which you could get immediately and finalize your purchase.

​All this is a part of the overall development towards an API and platform economy. Finance is becoming an integrated component for many other services. It means more competition for banks. But it also means significant new competition for credit card companies that have had an important role in smaller online purchases, and their money has typically been expensive.

When we think about FinTech and its impact, it is easy to focus only on the traditional finance sector. Certainly there will be significant impact on the whole finance value chain, as I have written earlier. At the same time, however, finance is shifting to a platform economy, and it is fundamental to adapt to the requirements of that business model by building the business network, offering APIs and utilizing data. After a few years, we will think about the old-fashioned bank loan process, with all these paper forms, and laugh as we do now at the thought of sending a fax or buying printed flight tickets.

This post originally appeared on Disruptive.Asia.

Picture
Comments

    About

    Est. 2009 Grow VC Group is building truly global digital businesses. The focus is especially on digitization, data and fintech services. We have very hands-on approach to build businesses and we always want to make them global, scale-up and have the real entrepreneurial spirit.​

    Read the latest Grow VC Group  FinTech, distributed and crypto finance, and blockchain report
    Read the AI, Asia and FinTech report - including comments about potential trade wars.
    Download

    Research Report 1/2018: Distributed Technologies - Changing Finance and the Internet 


    ​Research Report 1/2017: Machines, Asia And Fintech:
    Rise of Globalization and
    Protectionism as a
    Consequence


    Fintech Hybrid Finance Whitepaper

    ​Fintech And Digital Finance Insight & Vision Whitepaper


    Learn More About Our Companies:
    • Difitek
    • Prifina​
    • RE Bearing
    • Token Index Fund
    • Startup Commons
    • Lost in Translations
    • Robocorp
    • Nodi Liber​

    Archives

    January 2023
    August 2022
    July 2022
    June 2022
    May 2022
    April 2022
    February 2022
    January 2022
    December 2021
    November 2021
    October 2021
    September 2021
    August 2021
    May 2021
    April 2021
    March 2021
    February 2021
    January 2021
    December 2020
    October 2020
    September 2020
    July 2020
    May 2020
    April 2020
    March 2020
    February 2020
    January 2020
    December 2019
    November 2019
    October 2019
    September 2019
    August 2019
    July 2019
    June 2019
    May 2019
    April 2019
    March 2019
    February 2019
    January 2019
    December 2018
    November 2018
    September 2018
    July 2018
    June 2018
    May 2018
    April 2018
    March 2018
    February 2018
    January 2018
    December 2017
    November 2017
    October 2017
    September 2017
    August 2017
    July 2017
    June 2017
    May 2017
    April 2017
    March 2017
    February 2017
    January 2017
    December 2016
    November 2016
    October 2016
    September 2016
    August 2016
    July 2016
    June 2016

    Categories

    All
    Difitek
    Grow VC Group
    Robocorp

    RSS Feed

Digital Intelligence Globally
Picture
© 2009-2023 Grow VC Operations Ltd. All Rights Reserved.
  • Home
  • Group
  • Team
  • FAQ
  • Join Us
  • Trainee Program
  • Contact
  • News