For a long time, the payment method ‘invoice purchase’ was considered boring. In the meantime, some of the Fintechs have created a worldwide trend based on the principle “Buy now, pay later”. “Buy now, pay later” platforms allow users to buy products immediately and pay for it later.

A wave of large corporations suddenly makes it possible to finance everything from game consoles to hair styling funds with small monthly payments.

And as online retailers continue to grow and consumers are looking for more ways to save money with COVID-19, the Buy Now, Pay Later (BNPL) service has gained popularity.

How does it work?

Some large retailers introduced the principle “Buy now, pay later” decades ago with their catalogues. Customers were able to order, try on clothes and shoes, for example, and send them back. They only paid for what they wanted to keep.

In online fashion retailing a good half of the goods are returned. Invoice buying is particularly suitable for this application. This payment method, which was often considered boring in the past, is suddenly also becoming an international trend. Why? In the meantime, providers can better determine the creditworthiness of customers by collecting data.

In countries with many credit cards, invoice-purchasing was not so widespread in the past, but now a younger generation no longer wants to pay by card alone and is relying more on deferred payment.

With the point of sale loans, consumers can buy something in stages, often without interest. Businesses can charge interest later as well as late payment or processing fees. Like the credit card issuer, they can also receive interest on the transaction price.

‘Buy now, pay later’ companies

Afterpay is one of a handful of promising Fintech companies that are looking to expand into a specific global market. Sweden’s Fintech Klarna – recently valued at around nine billion euros – is also among them. Affirm is one of the most popular and fastest-growing companies in this industry. Earlier this year it announced a partnership with Shopify and is working with 6,000 retailers.

The companies’ payment offers are summarised under the term “Buy now, pay later” – also known as invoice-purchase or in the form of consumer loans.

The success of the companies

In contrast to neo-banks like N26 or Revolut, the providers have already shown that they can make a profit. The companies earn – depending on the product – on merchant fees, interest and late fees.

Klarna (Sweden) and Affirm (USA) have just been able to raise large financing rounds – they illustrate how hot the market is. Klarna doubled its company valuation to around nine billion euros. Affirm, behind which Paypal founder Max Levchin stands, raised 424 million euros – the latest valuation is not known. The company is also preparing for an IPO (initial public offering).

The USA and Europe markets

The high valuations lead to new growth fantasies, which can be achieved mainly through new markets. For the Australian companies, the market is limited, Afterpay is pushing into the USA and Europe. Only recently it has bought a player in Spain and wants to grow strongly in the UK.

The US market in particular, as with the neo-banks, is considered a large future market. Klarna has focused a large part of its forces on it. It now has nine million customers in the USA – out of a total of 90 million.

The growth lever here is the online merchants who integrate the payment services. In contrast to smartphone banks, they do not have to worry as much about marketing to end customers, which is often an expensive business.

Only Klarna has taken this path and wants to reach customers directly with a lot of marketing, a comprehensive app and a bank card. From the app, customers can shop, receive their own offers or get inspiration for new products.

Fintech is also increasingly becoming a banking provider through its offers. Loans for cars or houses will not be able to be financed by Klarna for the time being, but maybe one day – who knows.

Resources:

https://www.coherentmarketinsights.com/market-insight/buy-now-pay-later-platforms-market-4013

https://www.mobindustry.net/buy-now-pay-later-bnpl-market-overview-trends-and-technologies/

One of the most important developments in the financial sector in recent years is the increasing importance of Fintechs. For years now, countless financial services start-ups have been sprouting up from the ground, competing with the established financial institutions with extensive digitalisation and innovative ideas. The growth prospects of this industry are considerable.

A wave of FinTech innovations is driving the race to create ecosystems that offer added value to European consumers.

Therefore, FinTechs and their ecosystems are becoming more mature, and the amount of investment in established financial start-ups is increasing. In the field of consumer finance, established banks should also become even more active in order to be able to compete with FinTechs in a growing and profitable market.

Rise of the Fintech sector

European consumers are big FinTech fans; their enthusiasm inspires new approaches to offering financial services. The use of FinTech applications has increased significantly across Europe in the last two years.

The acceptance of FinTech among digitally active consumers has reached 73 per cent in the Netherlands, 71 per cent in Ireland and the United Kingdom and 64 per cent in Germany, Sweden and Switzerland: this is in line with or even higher than the global average of 64 per cent, as the EY Global FinTech Adoption Index 2019 shows.

The high user rates show that European consumers are increasingly incorporating FinTech offers into their everyday financial life.

The young generation as drivers of FinTech success

The increasing trend of FinTechs and digital solutions around banking plays into the hands of the younger generation’s affinity for technology: young people, who grew up with computers, internet and media, are not afraid to try out innovative solutions that would give them new advantages and comforts in life.

The FinTechs convince with their product solutions with sophisticated innovations, such as special features or easier handling and operation, which arouse the interest of potential bank users. The younger generations in particular feel visibly at ease with the user experience.

Open API economy

As acceptance of FinTechs has increased across Europe, they have grown in size, scope and complexity. FinTechs have evolved from small rebels in the industry to important and serious competitors, often with a pan-European or global reach.

Some European digital banks have gained considerable traction in regional and global markets, attracting millions of customers since their launch a few years ago.

Europe’s irresistible banks and insurers are not standing lazily by in the face of this new competition. In recognition of the powerful role FinTechs can play in improving the customer experience, they have intensified the development of their own FinTech offerings. They have also partnered with FinTechs in ecosystems.

One of the key drivers of FinTech’s rapid growth in Europe is the adoption of the European Union Payment Services Directive, known as PSD 2. The Directive requires banks to establish Open API (Application Programming Interface), i.e. open interfaces for programming applications.

This allows customers to exchange data seamlessly with third-party providers, including FinTechs, who may be able to offer them better and more cost-effective services.

Cooperation to form ecosystems

Intelligent networking has always been an indispensable tool for lasting and sustainable success. But especially in the context of digitisation, the establishment of cooperation networks supports the focus on one’s own core competence and the expansion of the innovative ability of companies.

Future-oriented business models are characterised by targeted cooperation at all levels. The involvement of specialised partners in the development of digital processes not only creates valuable impulses and resources for its own innovation processes, it also significantly increases target group accuracy.

As FinTechs continue to influence the financial industry in Europe, the suppliers of all sizes join forces to form ecosystems. Banks, aggregators and financial management applications that challenge digital technology increasingly offer a market model in which customers – both consumers and small and medium-sized enterprises – have access to third-party suppliers of credit, investment, insurance, mortgage, financing, pensions and much more.

The future of Fintechs is to merge with the old players. They will have to go on a course of cooperation with the traditional financial institutions to be successful themselves. Three-quarters of Fintechs now see their primary business objective as working with traditional financial institutions.

With less speed towards the future

Like many other industries, the financial sector was severely affected by the effects of the Covid-19 crisis. Start-ups that are still in the early stages of their development and those that need capital to expand their business are particularly affected.

In addition, due to the sharp decline in demand in the P2P and retail banking business, some question marks are currently hanging over large parts of the financial sector.

The last weeks and months have once again contributed to the acceleration of the already rapidly progressing digitalisation. In concrete terms, this is reflected in the growing number of users of e-commerce and digital financial services. Both are currently able to capture shares from their stationary competitors which they will probably not be able to give up even after the end of the crisis.

In the coming months, most Fintechs will increasingly focus on keeping as much liquidity as possible together. However, the Fintech sector is likely to be one of the big newcomers at the latest when the next boom begins.

Resources:

Ey.com
KPMG

Consumer behaviour has changed dramatically in recent months as a result of Coronavirus, leading to a phase of hyper-digitisation.

High quality is no longer enough; today’s consumer demands an extreme response to customer needs, a high degree of personalisation and mass customisation.

The shutdown has accelerated the use of digital channels – not only in retail.

This development is not expected to reverse after the pandemic.

Among the winners are the well-known internet giants, but also specialists at the digital customer interface. In the financial sector, for example, neo-banks such as Revolut or N26 are enjoying a steady influx and specialised B2B ingenuity such as Klarna, hand in hand with online retailers, are serving consumer’s financial needs on the digital channels.

A recent study by Capgemini shows how important simple and customer-oriented banking is. According to the study, almost half of young and technology-wise consumers plan to change their bank in the next twelve months because their current one does not cover enough services, does not meet their needs or is not sufficiently integrated with the platforms and apps they use on a daily basis. This increases the pressure on banks to deal with and learn from the successful models of digital competitors.

Customer orientation beyond the own product

Digital companies such as Google, Apple, Facebook and Amazon score points above all with their broad customer access and the uncompromisingly customer-centric design of their offers. They do not orient their services towards a single product request, but rather towards the holistic needs of the customer beyond their own product range in order to create the best possible digital customer experience. Customer centricity and platform philosophy are the basis for their success.

In a digital world, banks must radically put the customer at the centre of their offerings and become the central platform for the customer – or integrate their offerings into their customer’s platforms. They have to serve the customer’s need for holistic financial solutions beyond their own portfolio and integrate the best products and services in the market into their own digital offerings. This requires opening up the bank and networking with partners via open banking.

The neo-banks show how this works. They rely on a focused product range geared to the target group and offer the attractive services and products of Fintechs and other partners in order to provide corresponding added value, such as special loans, foreign transfers, financial analysis or accounting functions for small and medium-sized enterprises.

Three central aspects of the platform model

Platforms are valuable because they open up a whole new source of value creation. They create benefits through economies of scale on the demand side, also known as network effects. These benefits arise when a product or service becomes more valuable to its users, the more people use it.

Banks can learn from the platform thinking of the big internet giants. Three aspects should play a central role in strategic considerations when building a banking platform:

1. Customer centricity

How do I design my digital offer in a customer-centred and holistic way according to the needs of the customer?

What solutions and offers does my customer expect?

Can I meet customer requirements with my products?

2. Choice of partner

It is important to understand which complementary services I can use to complement my digital services as a bank.

This is the basis for offering innovative financial solutions.

This is where banks need to identify and integrate the best partners in the market.

3. Technological basis

You have to look at the foundation of the platform.

Powerful and scalable open banking platforms are the definite success factor and the basis for implementing a networked offering with digital partners.

Traditional banking systems are thus opened up to digital partners and new fintech services are simply integrated into the digital offer.

The ideal way to the digital customer

The customer is king and is more important than ever in the digital age when banks want to arm themselves against the big technology companies, but also against digital challenger banks. Only if the banks succeed in acting customer-centred, they will be able to stand up to the internet giants and specialists at the digital customer interface. The platform idea is the ideal way to attract and retain today’s digital customers.

Resources:

Capgemini
Vivaldigroup

Consumers are looking for efficiency and the best possible customer experience – areas in which marketplaces are traditionally very strong. In addition, the marketplace environment is now very diverse.

In order to stand out from your competitors and follow the market, it is important to understand the developments and to have all the cards in your hand on the different aspects of selling in marketplaces. Here are some marketplace trends that need to be explored to create new business opportunities:

1.  The rise of mobile marketplaces

Mobile marketplaces are very successful because they allow merchants of all sizes to sell on smartphones without having to develop their own app. They also simplify the customer journey and give customers access to a wider range of products than is the case with pure retail apps, saving them time (and space on their smartphones!)

The number of app users is growing exponentially, and the consumers who use the apps are often the most valuable.

Alibaba, for example, recently announced that it makes more money with its “mobile customers” than with customers who do not use their smartphone to shop. These apps for retailers are completely changing the shopping experience and are becoming an important personal shopping tool for many consumers around the world. The good news is that 4 out of 5 global shoppers said they had already used a retailer’s app, according to the latest UPS Pulse Online Shopper Report. Pure players who offer a buy app make 31% of their sales through this channel, while physical retailers have an average of 21% of their apps. This report also shows that mobile apps have higher conversion rates than traditional Web sites because they offer a better product search experience.

In the following, three trends can be observed which result from the changeover to the smartphone and which will certainly pave the way for many new marketplaces:

• On mobile devices, marketplaces can collect new data in bulk to improve their recommendations and operational efficiency.
• Mobile developers will have access to better APIs and SDKs to deliver additional functionality that will enhance customer loyalty, make operations easier or improve the customer experience.

Users expect smoother and more consistent mobile experiences, no matter how often they are used.

2. Progressive Web Apps continue to assert themselves

Progressive Web Apps (PWA) continue the idea of responsive web pages. They enrich the mobile pages with additional functions that were previously only offered by native apps. With a PWA, for example, customers can determine their location with the smartphone’s GPS sensor for local services. In addition, a marketplace can offer its mobile visitors a barcode scanner that uses the smartphone’s camera for quick reordering.

One of the many advantages of this is that apps no longer need to be developed for every operating system. The starting point is the responsive website, which is only extended by the desired extras of a progressive web app.

3. Content is written by robots (not recommended)

If you offer many products in many variations, it is difficult to write sales-boosting texts for each variation and category. Meanwhile, text robots are also providing easily readable and search engine relevant descriptions. A prerequisite for this is structured data, for example, datasheets, attributes and similar. Text robots can use this data to create texts for each product.

Two different approaches have emerged: Natural Language Generation and Template-based text generation, in which gap texts and sentence patterns are used. In both cases, the marketplace has to do some preliminary work, namely, teach the robot the basics such as the desired language style and choice of words or create templates.

Unlike a robot, real people are able to discover the target audience, research keywords to make sure they point to the appropriate terms and understand and generate the tone of voice. We need to be sure that we are writing the way that other people want to read. Writing is the analysis and interpretation of this information for effective message delivery.

4. The new development of B2B marketplaces

Research firm Frost & Sullivan estimates that the B2B e-commerce market will reach $6,7 trillion worldwide by the end of 2020. And according to Forrester, B2B e-commerce is expected to exceed $1,8 trillion in the US market by 2023.

As with B2C, the growth of B2B e-commerce is already being driven by marketplaces that bring new visibility, fluidity and liquidity. Many e-commerce platforms have adapted to this market and offer services that meet the specific needs of professionals, such as SAP Hybris, Magento 2 B2B, Intershop, OroCommerce, Insite Software or IBM.

B2B marketplaces offer the same opportunities as traditional B2C marketplaces, while at the same time adapting to the business environment:

• Buyers can view the certification of suppliers.
• Pages dealing with company information are available.
• It is possible to open accounts for several users.
• The prices displayed to take into account the specifics of B2B.
• A credit line service is available.
• Companies have the possibility to create offers.
• There are modules that facilitate integration with the company’s information system.
• Traders benefit from a tax exemption program
• Etc.

5. Google’s Shopping Actions program

After its launch in the USA, Google is bringing its Shopping Actions program to Europe. With this program, buyers will be able to buy a product directly from Google’s search results lists. The second country to launch Shopping Actions is France: Launched in France in March 2019, Google’s Shopping Actions service is designed to make the customer experience easier and better by enabling consumers to make purchases directly on Google, including the Google Shopping tab on their smartphone and desktop and in the Google Assistant.

Shopping Actions creates a seamless shopping experience by using a shared list, a single shopping cart independent of the Google platform, and instant payment when payment information is stored. If the test country France is successful, many other European countries can be expected to follow.

Shopping Actions can be seen as Google’s answer to Amazon and will bring more competition to the marketplace.

Online businesses will flourish significantly in 2020, shaping the way we buy and sell.

Technical progress and the unlimited possibilities of the Internet has led to a lasting change in people’s shopping behaviour. Online marketplaces are particularly important in this context, as they sell products from various manufacturers and can, therefore, offer customers a particularly wide range of products.

The world’s leading online top marketplaces include the market leader Amazon, the online auction house eBay and the Chinese Internet giant Alibaba.

Online marketplaces share the highly competitive market on the Internet primarily with the websites of manufacturers and brands.

The different types of online marketplaces

In the case of online marketplaces, the main distinction is made between the horizontal, vertical and hybrid versions of the marketplace.

The horizontal online marketplace

Horizontal online marketplaces cover a broad spectrum of product classes and provide customers with a cross-industry shopping experience. Online shoppers are able to find all the products they want in one and the same marketplace, from food, electronics and fashion to furniture. A prominent example of a horizontal online marketplace is Amazon.

The vertical online marketplace

In contrast to the horizontal, a vertical marketplace concentrates on a very specific industry or product class. This strategy convinces the customer to buy on the platform through a clear differentiation and a unique selling point. These marketplaces often offer a special, product-related service that differentiates them from horizontal marketplaces. This makes customers feel at ease with this merchant and they trust in his expertise.

The hybrid online marketplace

The hybrid marketplace offers its own products as well as products from other manufacturers. By expanding the own product range, the reach is increased and customer interest is raised. A typical example of the hybrid online marketplace is the App Store.

Top online marketplaces

More and more consumers are using the Internet for shopping and increasingly often start their product search directly at Amazon. Only a few years ago, this gatekeeper function in e-commerce was reserved for the search engine Google. In addition, Amazon has managed to establish an extremely attractive customer loyalty programme with Prime.

For a fee, its approximately 100 million members worldwide benefit from free and fast delivery, media offers such as Prime Video or Prime Music, exclusive discount campaigns (e.g. Prime Day) and special shops (e.g. Amazon Fresh).

The platform is so deeply anchored in the relevant set of customers that they order on average twice as often from Amazon as non-members. As a target group for acquiring new customers for other webshops, these customers are practically no longer accessible.

Market research shows that suppliers who sold their products via Amazon in 2017 recorded an increase in turnover of more than 20 per cent compared to the previous year, twice as high as the overall growth in online trade in the same period. The processing of shipping, billing and warranty via the marketplace also makes it easier for smaller retailers and manufacturers to enter international markets. This means that every supplier can use the familiarity and trust of customers in the global brand promise of Amazon, eBay or Etsy to its own advantage.

Which products are purchased online or offline?

What factors make customers decide whether to buy a particular product from an online marketplace and have it conveniently shipped to their home or buy it directly from the store? A PwC study done in 2018 came up with interesting results:

Entertainment media are preferably bought online

Books, music, movies and video games are the most popular online product categories by a wide margin: Around 60 per cent of those surveyed prefer to buy entertainment media online. Only 28 per cent of the participants in the study would accept a trip to a bookstore or electronics store. There is a simple reason for this clear weighting: entertainment media are usually available in online marketplaces directly via download and are not first physically sent to the customer by post.

For consumer electronics, personal advice is the key

In the case of consumer electronics products (mobile phone, computer or the latest generation tablet) the proportion of online and offline consumers is almost equal. While 51 per cent of those surveyed prefer to buy directly in the store, 43 per cent tend to prefer the online shopping experience. In contrast to entertainment media, when buying consumer electronics it is important for customers to inform themselves about the product on-site and to obtain competent advice. Though more and more people inform themselves online before placing an order.

Try on clothes and shoes before or after purchase?

Clothes and shoes are also increasingly being bought on the Internet. Already 40 per cent of all fashion fans prefer shopping online than going to their favourite boutique. However, the majority of the study participants still want to try on the clothes in the store – around 51 per cent prefer this option.

A change can be observed in everyday consumer goods

Food and other everyday goods are still purchased preferably in the offline business of trust. Around 70 per cent of all consumers prefer to go to the grocery store and choose food themselves. But there is a clear trend towards online shopping in food retailing, especially during COVID-19 situation.

The four success factors of online marketplaces

The turnover of online marketplaces increases by a double-digit percentage every year – growth rates that other industries can only dream of. But what are the success factors that motivate users to make purchases on the Internet?

1. Product variety

Customers can choose from millions of products – more than offline merchants could ever offer. The overwhelming variety of products is probably the most important success feature of online marketplaces.

2. User ratings

Many buyers appreciate the fact that they can obtain detailed information on the Internet about the positive and negative experiences of other consumers.

3. Independence of time and place

Nothing is impossible in an online age. Many users appreciate the complete independence from shop opening hours and therefore prefer to shop in the online marketplace.

4. Price comparisons

Online marketplaces often offer the same product from many different merchants. The fierce competition among online merchants creates a real price war that customers can use to their advantage.

What does the future of online marketplaces look like?

The many advantages of digital distribution channels have led to the fact that online marketplaces have become an integral part of e-commerce today. But how does the future look like? Are there signs of a replacement or can online marketplaces continue to expand their position?

Have a  look at 2 alternative forms of shopping:

Social commerce

Conventional online marketplaces are characterised by a rather distanced relationship between platform and customer – there is little or no interactive exchange. This is exactly the gap where social commerce comes in and actively involves potential customers in the shopping experience. The shop is transformed from a marketplace into an active social community that can exchange information about products and make recommendations.

No-Line Commerce

No-Line Commerce is a new trend in digital commerce. Regardless of the sales channel, the consumer is always the focus of attention. It connects online and offline system worlds and  allows a user to return a product purchased online to the store, for example.

Online marketplaces in constant change

In the highly competitive online marketplace, retailers and manufacturers must constantly reinvent themselves to provide a better shopping experience for customers. Even classic online marketplaces like Etsy or Amazon are not spared this development and must not rest on their laurels. Experts expect that the sales of online marketplaces will continue to rise strongly. However, in view of new sales approaches such as social commerce and no-line commerce, it is important to continually review one’s own offering and to break new ground.

The term FinTech is an abbreviation for “Financial Technologies“.

By definition, FinTech is, therefore, a collective term for modern technologies in the field of financial services, often implemented by young companies or startups: It is about innovative solutions that digitalise the processing of financial transactions. In other words, these companies create an alternative solution in the financial market.

Fintech has changed the financial industry, but the revolution has turned out in favor of evolution. Indeed, large Fintechs have emerged, which make use of the bank’s revenue. But in the end, the existing banks were not replaced by technology-driven startups. Banks that went digital in time, such as BBVA in Spain, or JP Morgan in the USA, are better off than they were in the pre-fintech era.

Is Fintech evolution very innovative?

The Fintech evolution has so far been driven by process and business model innovations based on existing digital technologies. Digitisation has also changed the basic infrastructure. Banks today still work with the same core banking and securities management systems, which are linked via payment, clearing, and settlement networks. Fintechs have equipped this basic infrastructure with new, mobile front-ends that have been added to the banking systems. Fintechs and banks generally entered into cooperation agreements for this purpose. In these co-operations, the accounts and securities accounts remained with the traditional banks, which continued to handle the transactions.

Only a few Fintechs developed their own back-end and front-end systems and acquired their own banking licenses for their operations. Although their core banking systems are state-of-the-art, they basically function in the same way as the core banking systems used to.

New business models

The digitalised processes allowed new business models such as platform or context banking, which were implemented more by fast Fintechs or the large technology companies than by banks. These business models partly assigned new roles to banks and turned them into technical, regulated infrastructure providers. Some banks were incorporated into these new forms of banking, while others saw this trend and developed accordingly.

Blockchain modifies financial industry

The blockchain – all decentralized crypto technologies – is revolutionizing the technological core of the financial industry: it is fundamentally changing the way values are generated, processed, and distributed. The blockchain can also be described as “second” digitization.

From a technical perspective, the blockchain makes banks unnecessary in many areas. Their task of storing and sending funds, handling payment transactions, and acting as a neutral, trustworthy party whose account and securities account accounting is recognised by all can, in principle, be performed entirely by a blockchain with decentralised account management and automatic consensus procedures. The technical systems with which banks have performed these tasks up to now are completely needless. A similar situation can be predicted for the capital market sector, which is currently determined by costly and inefficient coordination processes between the parties involved and their systems. A blockchain infrastructure, which all participants assume to determine the current ownership of securities, also makes the current systems, processes, and not all, but some participants unnecessary here as well.

Does this mean that banks will become useless and the crypto techs will take over?

Banks will certainly continue to exist after the blockchain revolution, but this is not because they would outperform crypto techs in adopting the technology. Even if the blockchain makes banks superfluous from a technical point of view, they will remain indispensable as regulatory hubs and macroeconomic transmission belts through which the entire financial system can be controlled and managed. Governments continue to need banks as money laundering enforcers to ensure that money laundering, terrorist financing, and other crimes are prevented.

In the same way, they are needed by central banks which, by setting monetary policy parameters, influence the money creation and lending of commercial banks and thus ensure the stability of the economy and money. For this reason, the bank will survive the technical revolution. It may then be allowed to do other things, such as manage customer wallets, operate euro blockchain nodes, etc. It is not clear whether today’s banks are also tomorrow’s blockchain-based banks.

Crypto techs

It is unclear whether the banks of today are the banks of tomorrow. Perhaps it is the crypto techs who are taking their first steps into the regulated world today with a license as crypt-value custodians. At least they are in the process of developing the blockchain-based infrastructure elements to operate them for or with banks.

The disappearance of counterparty risk

Clients will notice that money and value transfers will become faster and cheaper and trading processes of all kinds will become easier because payments will be technically synchronized with the exchange of goods or values. The counterparty risk in trading transactions disappears. In securities trading, for example, settlement times will fall to T+0, which, together with the disappearance of counterparty risk, will lead to radically new investor experience.

Slowly recognition process

Companies and customers will not experience and feel the true effects of the blockchain revolution for a few years.

Existing processes are blockchained, and only then come to the blockchain-based business models, with the difference that regulation will require licenses for these business models. The possibilities of decentralized money creation, programmable money, smart contracts or the tokenization of values of all kinds will only be recognized by the banks of the next generation and implemented in new business models that we cannot even foresee today – or the other way around: The banks of the future will be blockchain-based.

The Fintech revolution will come quietly and slowly, but it will change the way we deal with values and money.

From the customer’s point of view, it is of course basically irrelevant how money is transferred. The main thing is that it works. But if new basic technology allows completely new execution contexts for the basic human interaction “payment“, this is highly relevant for the customer. Basically, the movie watcher also doesn’t care which technology is used to deliver the movie to his TV. But digital technologies have ensured that video today is integrated into the context of life in a completely different way than in videotape times and that new large companies like Netflix have emerged on this basis. Similar developments, perhaps not yet foreseeable, will also come from blockchain technology.

Digitisation refers to the integration of digital technologies into business/social processes with the aim of improving them.

Already in recent years, a tendency towards more digitalisation has been visible in many companies. However, the developments are definitely accelerated by the current situation. Companies are realizing the risks they run if they do not have a digital strategy and cannot switch to alternative working methods and sales channels in an emergency. Many are only now realizing the importance of digital transformation for their economic survival. Accordingly, numerous measures for the digital transformation of individual areas are likely to be introduced in the coming months. Companies are offered great opportunities by this drastic trend. However, the path to digitalisation is full of challenges. In this article, we will introduce you to what digitization is and what it can mean for your business.

Opportunities & challenges

Digitisation is both a challenge and an opportunity. On the one hand, it puts pressure on companies that do not have the necessary structures to adapt quickly and flexibly to market changes. On the other hand, it holds growth potential for those companies that consistently implement their digital transformation.

However, this can only succeed if companies take a holistic approach. In the long term, digital transformation is a process that affects all business areas, from product development and manufacturing to customer departments such as marketing and sales. Companies that see the use of digital technologies only as an opportunity to increase efficiency and save costs fail to recognize the potential for change offered by digital transformation. In the long term, structures that enable companies to develop new products and revenue models quickly and flexibly are more important.

The potential benefits of digitisation are better workflows, greater efficiency, improved products, and completely new services that are part of the process. These benefits give rise to others, such as improved competitiveness.

If digitisation is done right, companies also benefit in:

• New customer acquisition channels.
• Improved working conditions and better employee retention.
• Improved decision making.
• More willingness to innovate.
• Better teamwork.

Advantages of digitisation

The advantages of digitisation are:

• Improved manufacturing processes.
• Products can be brought to market faster.
• Reduced reaction times to customer feedback.
• Improved insights.
• Entire supply chains can benefit from end-to-end integration.
• Lower production costs.

Development processes

The individual business digitization processes can be divided into different levels: from completely manual to completely software-driven.

Every company has a fixed number of processes that are supported by software to varying degrees. Basically, the degree of digitization of a company corresponds to the sum of the digitization levels of its processes.

The levels represent the development from a completely analog to a completely digital company.

Your digital possibility plan:

Creating the conditions for home office

Remote Work and Digital Workplace are not empty words of the New Work movement, but an important building block of digital resilience. In order to be able to work remotely, technological requirements, such as the setting up of a VPN and cloud-supported SaaS, such as collaboration tools like WebEx, Slack, or teams, must be fulfilled as quickly as possible. The integration of telephony into IP- and IT-based communication solutions is also essential.

Anchoring collaboration and activity in the corporate culture

In the current tense situation, cross-functional and decentralized teams offer significantly higher problem-solving competence than homogeneous, local ones. Such virtual teams are already used to communicating remotely with each other. The changeover is not too big for them. It is also advisable to create dashboards that allow the board of directors and management to see the status quo in real-time. This can include progress on specific projects, but also variations in order intake or cash flow, to name just a few.

Establish cloud computing and manage data decentrally

Companies that are already well on their way to the cloud have a clear competitive advantage in the crisis. When revenues are declining and less IT capacity is needed, costs fall with an on-demand model. On-premises networks do not offer this scalability option. A further advantage of the cloud is data storage in decentralized data centers. Even if problems arise at one location, the impact is minimal. In addition, cloud computing offers flexibility in the use of individual services and APIs, so that not only can innovations be driven forward even in times of budget cuts, but day-to-day business can also be kept running more easily.

Data Analytics enables transparency, traceability, and forecasting

If a company has been developed in the direction of a Data-Driven Company, it pays off now at the latest. AI and analytics significantly improve simulation and forecasting capabilities so that decisions can be made based on facts. Stress testing provides insight into how unforeseen situations can affect inventory levels, delivery dates, and staff availability, for example.

Focus on digital products and IoT

Companies whose products are available digitally are less affected by crises. Online trade, for example, has seen significant growth since the outbreak of Corona, especially in urban locations. Digital self-services such as chatbots or live chats also support customers who have not previously shopped online. In the industrial sector, service providers offering remote maintenance services, for example on the basis of augmented reality, or manufacturers of networkable machines are now in particular demand. Innovative technologies offer the possibility of maintaining operations even in cases of illness among the workforce because they allow certain procedures and processes to be automated.

The COVID 19 epidemic shows how digitalisation can at least soften crises. As a result, companies are well-advised to invest in new technologies. Instead of panicking in the face of this frightening situation, the establishment of an emergency plan is the strategy of the hour. IT, in particular, plays an important role in this.

Innovation – a word that is on everyone’s lips.

Companies, regardless of whether they are large or small, locally or internationally oriented, agree that innovations are deciding their competitiveness. Product, process or service innovations are the desired goal of organizations to improve their ability to cope with rapidly changing environments and with rapidly changing conditions.

Every company from every industry needs an innovation strategy – be it high-tech product innovations, packaging innovations for consumer goods or process innovations for financial services companies.

Today more than ever, innovation is the key to achieving growth, competitive advantages and a long-term increase in shareholder value.

What is needed most nowadays are solutions that handle personal concerns quickly, easily, reliably and can be used anytime, anywhere.

Service innovations

Do-it-yourself trend

ATMs replaced the walk to the counter a few years ago. Self-service terminals at airports allow passengers to check-in independently. After ATMs and terminals, the Internet has increasingly become the focus of service solutions.

In the meantime, it is mobile terminals that make digital service even easier and more independent for customers. Everyday tasks should be able to be carried out independently without much effort using the appropriate technical solutions. Interaction with a service employee becomes unnecessary.

This will become easier and simpler for customers with modern technical help such as smartphones and tablets. E-tickets, banking via an app, opening an account via video chat, shopping on billboards using a barcode scan, sending medical statements to the health insurance company directly via smartphone – all this is no longer a dream of the future.

The do-it-yourself trend is constantly and unstoppably transforming the way customers live and work.

Context service

The phenomenon of increasing mobility is more and more creating demand among customers for services tailored to their specific situation. This is because, in the future, customers will no longer reward standard information, but will demand an individual service based on their specific situation, i.e. their particular context.

The improved positioning possibilities offered by GPS, Near Field Communication (NFC) or Beacon technology in combination with context-sensitive apps and wearables now make it increasingly easy to offer situation-specific information as an individual customer service using sensor control. The more background data about people’s daily activities, interests, appointments, whereabouts, and priorities become digitally available via mobile devices, the more precise information, product suggestions, and services can be provided for specific customer situations.

Networked service

Service is changing and slowly but surely conquering the world of new technologies such as the Web, mobile and cloud. Only a modern service provider delivers the services the customer wants.

Centralized mobile and cloud-based service management solutions simplify the administrative tasks in service – from incoming customer calls to the organization and access to customer data, service technician scheduling, and repair work at the customer’s site. Overcrowded, confusing archives with folders full of service reports are a thing of the past.

And the interaction and integration of these new technological approaches is the necessity for a successful service transformation. Intelligently networked service makes a significant contribution to pursuing a consistent, results-oriented marketing strategy. And that, in turn, is crucial to building and consolidating an intensive relationship between customers and companies.

The availability of networked devices, machines, and systems allows manufacturers to offer active, predictive maintenance and services. Appropriate system solutions provide appropriate insights into the current machine status and, by analyzing the machine-generated data, the service can be scheduled in a targeted manner.

Customers of today

The customers of today are enlightened, informed and media competent. They also often use customer self-services because they want more independence. These services free the customer from existing restrictions – such as going to the store or keeping opening hours. The smartphone, which is available 24/7, is increasingly becoming a key technology for meeting customer’s desire for greater flexibility.

Nowadays customers find the “traditional” service less efficient. Active participation in self-service gives them the feeling of being more effective and efficient. Customers also appreciate active participation in the service creation process, as it gives them a feeling of control and independence. The customer is independent of third parties – such as service personnel.

Future

More and more companies – regardless of size and location – will discover and implement the advantages of networking and the use of modern technology (cloud, mobile, web).

The service will become much more individual in the future due to new areas of application for digitization. A central role will be played by the increasing inclusion of the user’s context. New symbiotic connections between customers and companies will emerge. In the future, customers will no longer reward standard information but will demand an individual service based on their specific situation, i.e. their particular context.

The creation of new competencies in companies will be decisive for the implementation of individual customer service. This is because, with the classic organisational structures and processes, it will be difficult to achieve active cooperation between the very differently oriented disciplines.

However, companies that want to generate added value or secure competitive advantages should start looking at offers and solutions now. This is the only way they can successfully transform the service sector with a focus on customer success and the implementation of successful business strategies and processes.

Offering successful service with the right technology or software solution is not easy – but with good implementation – definitely a worthwhile undertaking. Companies that invest in new service innovations prove that they have understood what their customers really want in today’s world. And sooner or later, their customers will thank them for this by simply doing it themselves in the future.

The Fintech sector is constantly changing. According to data from the Observatory of Financial Digitalization Funcas – KPMG and the Spanish Association of Fintech and Insurtech, in the last three years, the companies operating in this field have multiplied by four. In Spain, there are already 2% of Fintech companies in the world and they employ 3,500 people.

In this context, new technologies and market demands are emerging that make the sector change and move towards new challenges. Marketpay, a Fintech smart payment solutions company, analyzes the main trends that will mark the development of Fintech in the coming years.

Biometrics

Without a doubt, 2018 was the launch of biometrics applied to remote customer identification. The forecast is that this technology will consolidate and advance until it is definitively established.

In fact, as highlighted by Marketpay, there is talk that passwords will soon disappear and will give way to facial or voice recognition of the user. “We are working on an increasingly secure type of identification, in order to prevent fraud and impersonation”, says Ricard Forn, CEO of Marketpay.

Blockchain for the financial market

Blockchain technology allows authentication of transactions without the need for third parties or entities. This way, it creates a more agile and effective system.

In addition, it provides new conditions of security and trust, something basic in the financial field. “The application of the blockchain in the Fintech sector will be increasingly important. It will bring about a major reduction in costs and eliminate the possibility of fraud and errors,” says Ricard Forn.

Robotic Process Automation

Massive adoption of RPA (Robotic Process Automation) is expected. RPA will allow banks to increase efficiency and eliminate wasted time. According to KPMG, financial institutions that adopt RPA realize up to 75% cost savings.

Bots can perform repetitive administrative tasks quickly and accurately. This means greater efficiency. In addition, their adoption can go further and contribute to improved customer experience.

The talking bank

One of the trends that are being implemented the most is the implementation of conversation interfaces with the user. More and more, the user demands to be able to have direct communication through chat messages.

For this reason, the “Conversational User Interfaces” is here to stay, and they are even starting to experiment and work with voice conversation as a tool for more direct communication with the financial institution. We have moved from telephone banking to online banking, and now we are talking about voice messaging and conversation.

Artificial Intelligence and Fintech

Finally, another technology that has revolutionised and will continue to revolutionise the Fintech sector is artificial intelligence. Thanks to it, mechanisms can be created to solve problems or perform a service as a human expert would. AI will be very much present in the coming years both in the services offered to the client and in the management of the banks themselves.

The evolution of IoT: invisible payments

They are those that require the least possible human intervention. Today it is no longer necessary to take out the card to make each payment, it is enough to do it only once. The card is tokenized (it is kept encrypted, in a very safe way, without anyone being able to access it).

The rules of transparency and fraud on the platforms are improved, so that the customer can make payments with a simple click on an app, or by bringing the card or mobile phone close to the cash desk or machine, with the peace of mind that there is no risk and absolute traceability of all movements.

In the next few years, what is already a reality today will go one step further: human intervention will be eliminated to the point that payment will no longer even have to be accepted. This is the evolution of the IoT: machines make decisions for humans based on business rules configured with complex algorithms, including payment decisions.

For example, a refrigerator recognizes the products it has inside and automatically gives an order to replenish what is needed, with the generation of the corresponding automatic payment order based on a card already tokenized, belonging to a customer who has, of course, accepted the use of such system.

In the words of Marketpay’s CEO, Ricard Forn: “It is still a mystery to what extent and at what speed invisible payments will affect the payment models on the platforms, but Marketpay is already taking advantage of the opportunity to define a start-up model that will serve as a reference for the sector”.

The Fintech Smart Payments Marketpay solutions company provides smart payment technology for digital businesses. Three years after its launch, it has more than 50 national and international clients of very diverse types, ranging from marketplaces or crowdfunding platforms to other fintech or neo-banks or large companies such as telcos or energy companies. It has been rated by Early Metrics, an independent rating agency in the United Kingdom, as one of the most promising startups in Europe, placing it in the top 20% after evaluating more than 1800 companies.

Disruptive innovation is a process that begins in a small, low-profile niche industry. Based on a new technology or new business model, products or services are developed that initially target only a small number of customers. This offer then gains momentum, becomes the dominant market factor and eventually displaces many established companies and their products. Disruptive innovations disperse established markets and alter the rules of the game for entire industries. They usually arise through trial and error.

Clayton M. Christensen’s landmark theory

The patterns of the development of disruptive innovations were described by the US economist Clayton M. Christensen, who is a Harvard Business School professor and renowned author and innovation expert. He describes the development of the process whereby a product or service first takes root in simple applications at the ground of the market then moves steadily up the market, eventually displacing established competitors.

These breakthrough innovations are rewriting the rules of entire industries. For example, digital cameras have become an innovation that began competing with film cameras about 20 years ago in quality and price. Kodak engineer Steve Sasson invented the digital camera in the 1970s, but the company gave it up. Today, mobile phone cameras have disrupted the entire photography market and fundamentally changed the idea of what it means to take a picture and who has access to technology.

The Internet, in particular, has enabled completely new business models in many other industries. Mostly it is small start-ups that profit from it. Large, established groups, on the other hand, are rarely the drivers when it comes to disruptive innovations.

Large companies vs. small companies

Large companies often don’t risk catching up with emerging breakthrough innovations of smaller companies or positioning new products on the market on their own initiative. Why? There are some reasons for this. First, they meet the needs of their large and important customers. Also, they pay too little attention to trends and new customer segments. They do not recognize niche offers. And they consider the growth potential of niche offers to be too low and expect too small contribution margins and too low returns.

As a result, they prefer to leave the risks of market entry to small, low-profile companies. They rely on still being able to enter if the market for disruptive technologies is large and attractive enough. Or they secure their share of the new growth markets by acquiring small companies and their groundbreaking innovations.

Disruptive innovations examples

From traditional mobile phone to smartphone

An often example of market disruption is the iPhone, which, as a greatly improved smartphone, declared the end of the traditional mobile phone and ultimately led to the collapse of the mobile phone manufacturer and former market leader in this product category, Nokia.

The initial success of the iPhone was attractive product features, which shortly afterwards made the iPhone a new market disruption for the entire mobile phone industry, as it was increasingly used by consumers as a PC replacement, for example, to surf the Internet in an uncomplicated way and to send short messages and e-mails quickly. APPLE has continued to promote flexibility by providing better software through the App Store and its ecosystem.

This successful new business model, in turn, increased the popularity and sales of the iPhone. Nokia overlooked these developments and was unable to oppose this new platform-based business model. Rather, it attempted to bring better products to market through evolutionary innovations and thus became a victim of the innovator’s dilemma.

From DVD rental to video streaming service

The same applies to video streaming services. With the invention of the video formats for the digitalization of films, completely new possibilities developed to bring video from the “movie makers” to the “user”. For many decades this was only possible with the help of video rental stores like a market leader Blockbuster and cable TVs. What happened next..: Netflix came and virtually erased video stores. Not just Blockbuster’s, but all of them as well. Blockbuster finally filed for bankruptcy in 2010. Netflix’s current market value, on the other hand, continued to climb. And currently stands at 44 billion dollars.

When the faster Internet came, video streaming finally became state-of-the-art. This brought new competitors such as HBO, Amazon Prime Video and videos could now also be streamed in HD quality.

DVDs are gradually becoming a rarity and more and more video libraries are having to close. In addition, their services also affect conventional television. Many people prefer to watch movies without commercials, and especially at any given time, rather than following the daily schedule.

From barter transactions to digital payments

If we look at the development of payment methods, it becomes clear that from the earliest times, quite simple barter transactions were the usual payment method. In the 17th century, heavy coins became a threat, and we switched to banknotes. That’s the money we still use. The free circulation of a centrally controlled currency has been established since the 18th century, but it is basically based on a relatively simple system of value exchange.

A similar instance had to be created for banknotes, now known as payment by cheque, which was first introduced into the economy by London bankers and had been common practice for a long time. However, it was clearly advantageous that the payment was secured and could only be used by the recipient.

Finally, Visa enters the credit card terminal and networks for card payments came into being, the basic idea was to have less cash to carry and still be able to pay almost anywhere. When the Internet appeared and electronic POS terminals were introduced, they became so easy for customers to use that cards were quickly accepted by consumers as payment vehicles. And digital payments let the system to recognize you and the value of the money you have.

The aim of modern payment traffic has always been to speed up and personalize the transmission – unlike previous payment methods where this was not yet possible.

In the 21st century, digital payments have developed rapidly. Escrow payments, one-click payments, electronic wallets, and crypto-currencies are just some of the new concepts in today’s payment industry. Digital payment is the ultimate payment method for today’s world. The system is intelligent enough to recognise the customer and at the same time to solve all the problems that have arisen in this area in recent years. It is even easier than cash because no material exchange is required.

The ultimate goal of the new technologies in today’s payment system is to make payments attractive and to make their processing smooth and “invisible”. However, cash, check and credit card payments are still part of our daily activities.

Trial-and-error process

Radical innovations are not so much the result of defined, successive steps, but rather of a lengthy trial-and-error process. A high level of fault tolerance is advantageous for this purpose – which does not mean fault tolerance in production at the expense of product quality, but fault tolerance with regard to research and development.

Innovators and rule-breakers in an industry examine new opportunities for their potential. They observe and pay attention to details – inspect customers, suppliers, and other companies to identify their needs or trends and like to experiment constantly. Apart from that, they want to gain experience, discover the possibilities of their industry and network with people and companies from other fields.