August 17, 2017

How deep is your Fintech?

Mikael Wallgren

Sales and Delivery Executive, Financial Services,, Tieto

With all the buzz-words floating around, one may become a bit uncertain what is really meant with the concept of Fintech. Working for a Finnish technology company such as Tieto, one may even be forgiven for thinking it’s just another nickname of our company. But luckily, there are people with better insight who has studied this phenomena, and come up with some really useful definitions and tools for a better understanding of Fintech and its uses.

In a recent article, Thomas Puschmann (Springer, 2017), discusses the topic of Financial Technology – or Fintech – and its impact on the Financial Services industry. One reason why Digitalization, another buzz-word, and Fintech has such a strong impact on this industry is because financial products are almost exclusively based on information. You no longer need a good solid copper plate to perform your daily payments, as you did with the Riksdaler. This coin was first minted in 1604, and for a period of about 100 years, the Daler was the currency of Sweden. By the way, any similarities with the foreign currency today known as the Dollar are intentional. 

Today, our wallets are sadly reduced to a few small pockets, glued to the casings of our Mobile phones, for holding pieces of plastic, and most transactions are made over the Internet, using only software as a control mechanism.

The term Financial technology, or Fintech, reflects the ongoing development of an IT-induced transformation where we see a fundamental reorganization of the financial services value chain. Automation of processes often goes hand in hand with new business models, such as robo-advisors and new actors entering the market.

Fintech is the fusion of Fin (ancial) and Tech (nology) first mentioned in the early 90’s….

Puschmann states that Fintech is often used as an umbrella term, to encompass both innovative financial solutions enabled by IT and the start-up companies that often deliver these solutions. However, incumbent financial services providers, like banks and insurance companies, are also included in the usage.

As Fintech solutions are often associated with innovations, several researchers have suggested that it could be described according to three different dimensions:

  • Innovation object
  • Innovation degree
  • Innovation scope

The dimension of Innovation object is described in 5 different categories, namely Business models, Products and services, Organization, Process and System.

As an example of the first category, Business model innovation, Puschmann mentions crowd-lending or crowd-sourcing solutions, such as FundedByMe or similar solutions.

Organizational innovations can be represented by the trend to outsource, internally or externally, many of the supporting functions inside an organization to a Shared Service center or a partner. This trend has been described by yours truly in Shared Service Management (Kron & Wallgren, 2015), where we have interviewed 30+ different organizations, amongst them banks, regarding how they become more reliant on partners in a network.

The use of Blockchain technology as a part of the new financial infrastructure is a good example of the category Systems innovations.

Innovation degree is concerned with the question whether you are dealing with incremental or disruptive innovation. Incremental Fintech innovations can help an organization to shave off let’s say 5 % of their cost for a specific process, whereas a truly disruptive innovation can send ripples through the whole value chain. Naturally, both kinds of innovation has their place and their purpose to fulfill in a real world environment.

When judging how disruptive a solution is, one always has to take the timing aspect into consideration. Remember that in 1604 the Riksdaler was seen as a fairly advanced concept. Today we require at least a peer-to-peer Bitcoin payment transaction solution to get a single retweet.

Last, but not least, Innovation scope deals with the question if this is an intra-organizational change only reorganizing your own flows and processes, or if it is an inter-organizational innovation, adding new partners into the value-chain and network mix. A recent example of the latter kind of innovation is Siirto, the newly launched cross-bank peer-to-peer payment system that Tieto has developed together with several Finnish banks.

So, how deep is your Fintech commitment? Are you surfing the surface to get cost efficient processes from automation, or are you diving into the deep waters of disruptive innovation with completely new business partners? If you want to discuss Fintech from a strategic, solutions or implementation perspective you are more than welcome to contact us at Tieto. We want to be your partner when you are changing the Fintech scene.



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