"Banking is necessary, banks are not" – Bill Gates' famous statement from 1994 was not just provocative but also foresighted. With new technology-based providers, also known as FinTech businesses, a new player has entered the banking market and it contests the predominant role of traditional methods in financial services.
Banks are now forced to ask themselves whether they can provide some additional value in comparison to digitalized FinTech companies. This applies especially to the field of retail banking.
Stephan Hoppe describes the rise of the FinTech industry and outlines its impact on selected business segments of the German retail banking market. In this way his publication elaborates the threats but also the opportunities for the retail banking industry.
Content:
- FinTech;
- retail banking;
- financial services;
- digitalisation;
- financial technology
Table of Contents
1 Introduction
1.1 Problem Description
1.2 Objectives
1.3 Scope of Work
2 Banking and Financial Technology
2.1 Retail Banking
2.2 FinTech: Definition and Description of Relevant Segments
3 Methodology of Analysis
3.1 Selection of the Instruments
3.2 SWOT Analysis
4 Analysis of the Current German FinTech Market
4.1 General SWOT Analysis of the FinTech Industry
4.2 Payment Transactions
4.3 Investment Business
4.4 Credit Business
5 Recommended Actions for Retail Banks
5.1 Response Strategies
5.2 Acquisition
5.3 Cooperation
5.4 Independent Legal Entities
6 Critical Summary and Evaluation
6.1 Target Achievements
Objectives and Topics
This thesis examines the influence of the emerging FinTech industry on the German retail banking market, identifying how established banks can strategically respond to these new market participants to remain competitive. The study outlines key drivers of digitalization and evaluates the disruptive potential of FinTech business models.
- Impact of digitalization on the retail banking value chain.
- Analysis of German FinTech market segments: payments, investment, and lending.
- Strategic response options for traditional banks (acquisition, cooperation, independent entities).
- SWOT analysis of FinTechs as both a competitive threat and a partner for innovation.
Excerpt from the Book
1.1 Problem Description
Nine years after the outbreak of the global financial crisis, the banking industry is facing numerous challenges. In addition to the increasing prudential regulation and the central bank’s zero interest-rate policy, banks have to deal with cost pressure and widespread mistrust of their customers. In this difficult market environment, the progressive digitalisation wave hits the banking landscape with full force. Especially retail banking is facing a variety of new data-based financial products and services, as well as new markets players and changing customer behaviour.
Already in 2001, an important scientific economist dealt the leading question of “do banks have a future” in his scientific study, probably without being aware of the extent of the potential change in the banking industry. However, he questioned the role of the banks in relation to the emerging “e-ages” because it was obvious that other financial intermediaries began to interfere the traditional business model. Nowadays, it is less about other banks and more about new technology-based providers – also known as FinTech businesses – pushing into the banking market. They provide digital solutions to customers’ financial requirements with the ambitious objective target to be “more accurate, more intelligent, easier to handle and cheaper”. This offer leads along the entire value-added chain of the current retail banking market: the deployment and development of digital payment and information systems as well as financing and investment solutions.
Summary of Chapters
1 Introduction: Defines the problem statement and the scope of the thesis regarding the rise of FinTech in the German banking sector.
2 Banking and Financial Technology: Explores the foundations of retail banking and defines the term FinTech within the digital transformation context.
3 Methodology of Analysis: Introduces the instruments used, specifically focusing on the SWOT analysis as a framework for the subsequent investigation.
4 Analysis of the Current German FinTech Market: Conducts a SWOT analysis of the FinTech industry and examines specific sub-sectors: payment, investment, and credit.
5 Recommended Actions for Retail Banks: Details strategic approaches for traditional banks, including acquisition, cooperation, and creating independent digital units.
6 Critical Summary and Evaluation: Summarizes the thesis findings, validates target achievements, and discusses future prospects for the industry.
Keywords
FinTech, Retail Banking, Digitalization, SWOT Analysis, Payment Transactions, Investment Business, Credit Business, Social Trading, Robo Advisory, Crowdfunding, Peer-to-Peer Lending, Banking Regulation, Customer Experience, Digital Natives, Innovation
Frequently Asked Questions
What is the core focus of this publication?
The work investigates the disruptive influence of FinTech companies on the German retail banking market and how traditional institutions should adapt.
Which business areas of retail banking are analyzed?
The study specifically focuses on payment transactions, investment services, and credit business.
What is the primary objective of this thesis?
The goal is to determine the strategic and operational success factors for retail banks to survive in a digitalized environment by either competing with or cooperating with FinTechs.
Which scientific methodology does the author use?
The author uses a situation analysis framework, primarily utilizing a SWOT analysis to identify strengths, weaknesses, opportunities, and threats within the FinTech industry.
What topics are covered in the main section?
The main part covers the status quo of the German FinTech market, including an analysis of specific segments like social trading, robo-advisors, and peer-to-peer lending.
What key terms describe the essence of the work?
Digitalization, FinTech, retail banking strategies, customer-centric innovation, and regulatory challenges.
How do established banks view the rise of FinTech?
Most banks now see the FinTech trend as an opportunity to drive innovation, with 87% of German retail banks already cooperating with FinTech companies.
What are the three response strategies suggested for banks?
The suggested strategies are acquisition of FinTechs, forming close cooperation, or establishing independent digital legal entities.
- Quote paper
- Stephan Hoppe (Author), 2018, The Rise of FinTech. Threats and Opportunities for the German Retail Banking Market, Munich, GRIN Verlag, https://www.grin.com/document/384505
