Today we will discuss fintech. Yes, this is the mainstream in innovation that combines both blockchain and AI, and which is talked about more than any other direction. Investors are actively investing in fintech startups, especially mature ones, and modern banks are looking for solutions that can make the customer experience more flexible and customer data more secure.
However fintech also has weaknesses, do you want to know which ones? Or maybe you would be interested to know how ready the banking sector is for innovation? We decided to ask #20 questions to Maxim Nalyutin, director of the consulting department, head of the group providing consulting services to Deloitte CIS financial institutions.
Deloitte is one of the largest consulting companies in the world and regularly monitors trends that affect the development of key sectors of the economy and the business of our clients. When working on strategic and operational projects for them, we use our own analytics on the fintech market, which enables us to identify new promising trends in the development of the financial sector, as well as identify potential partners for the development of new areas.
The analytics we perform is divided into several key areas. As a rule, these are global reports that track global trends in the development of various fintech areas, as well as various local reports that study trends in the markets of different countries in more detail. It is also worth noting that a significant part of the reports is non-public and is produced by order of our clients. Speaking of public reports, the most interesting of them is the regularly updated report Fintech by the numbers, which tracks the main activities in this area around the world.
Our key clients are industry leaders who need the support and experience of our teams during large-scale business transformations.
As a rule, successful fintech companies specialize in creating services with a maximum focus on customer experience, which is a general business development trend in recent years. Also, a number of companies manage to find niches not occupied by classic players, which creates additional opportunities for growth and business development.
Most likely, the trend towards the development of fintech companies will continue to develop. This is due both to the development of new technologies for the financial business and the support of such companies from many international regulators.
The weaknesses of fintech companies include lack of funding, difficulties in dealing with strict government regulation in the provision of financial services, as well as problems in hiring strong employees with relevant experience in the banking sector.
The strengths include the ability to work without the excessive bureaucratization of procedures inherent in large financial institutions, as well as the ability to improve classic financial services and products, increasing their convenience for the end user.
According to international statistics from Deloitte, the largest number of transactions in the fintech market occurs in the third quarter of each year.
As I said earlier, we mainly work with large companies planning or in the process of large-scale changes, which come to us for support for these programs. This is due to the fact that our teams have significant in-house experience in implementing complex projects, as well as the opportunity to attract leading international experts for additional consultations.
Corporate culture and internal procedures are the most difficult moments in the interaction of large banks and companies in the field of fintech. To successfully integrate a fintech project into the system of a large bank, it is necessary to find a complex balance between the interests of both parties, in which fintech will be able to develop at its usual pace, and a major player will gain confidence in achieving the stated indicators.
According to a regular study by Deloitte Digital Banking Maturity, the Russian financial market is one of the most innovative in the world and consistently ranks among the 10 most developed countries analyzed by our experts. However, it should be noted that a number of countries in the Asian region and the Persian Gulf are investing significant efforts and funds in the development of the fintech market in their countries and are active competitors of more classical countries.
A key feature of the development of the market of fintech companies in Russia is their integration with more classical financial market players for further product scaling and development. This is due both to the limited availability of venture capital financing in Russia and the complex regulation of the financial sector.
As a rule, we work with large, already established companies, so the result of our work rather helps to detail the necessary steps in the development of companies, but does not lead to a significant change in the development vector.
Fintech is a separate dynamically developing area in the field of financial services, so it is difficult to name the disadvantages inherent to the industry as a whole.
Sometimes young companies do not have enough knowledge of already formed technologies or features of legislation in a given environment, so they undertake to solve an already solved problem or try to circumvent legal requirements.
It is difficult to single out a country or a region in this area.
In different countries, there are different drivers that contribute to the development of the fintech market. Thus, the United States is traditionally one of the leading markets in terms of private investment in emerging companies, while many European countries also show good growth in the fintech industry, which is associated with support at the level of regulators and extremely conservative product offerings from classical banks. On the other hand, we see significant growth in the Asian sector, where many fintech companies are targeting a mass segment that was previously not fully covered by banking services.
The Russian market certainly has a large number of interesting companies offering both services in one area or another for financial institutions, and services to end customers. Against this background, one can single out a number of neo-banks specializing in providing services for companies in the SME segment.
In recent years, this segment has been one of the most interesting for development, and most of the largest players are actively fighting for it. This is due to the fact that many companies in this segment were not provided with full-fledged financial products before and, accordingly, this provides opportunities for the active development of the “customer's wallet” in case of a correct assessment of the capabilities and needs of individual clients.
This is a driver for the development of the financial services market, which creates full-fledged competition for classical banks and enables to significantly improve the quality of services on the market for end customers.