One of the key findings of the recently released Intuit 2020 Future of Financial Services research report is that the financial services industry will see a wide range of new entrants in the coming decade. These new competitors will include both Davids and Goliaths. Expect to see some of the world’s largest corporations and some of the best funded venture-backed startups enter as new financial services players.
These new entrants are attracted to the financial services industry for 4 key reasons:
1. New technologies and the shift to online and mobile banking provide an opportunity to disrupt existing competitors and win customers with new methods, approaches and business models.
2. Consumers and business customers are becoming more comfortable managing their finances online and are increasingly willing to trust online providers with important financial data and transactions. Gen Y (born 1980 to 2000) is especially open to using online financial services products, even from new startups.
3. Technology now allows highly customized online banking services to be delivered seamlessly to customers, both virtually and at brick-and-mortar establishments.
4. The size and scale of the financial services industry makes it a very attractive target for new entrants.
Wal-Mart is an example of a non-traditional, new entrant. They offer a growing array of financial products, including small business and consumer credit. Wal-Mart has even gained regulatory approval in Canada to open a bank focused on consumer credit.
Some of the largest technology companies are also adding financial services products, with many targeting electronic payments. Facebook, for example, recently created an electronic payments division and Google, Amazon, Apple and Microsoft have all either announced or are rumored to be announcing products in the payments space. There are also dozens of startups targeting electronic payments.
The financial services industry is so attractive to startups that specialized incubators focused on building new financial services companies are being developed. FinTech Innovation Lab was created by a consortium of large banks and venture capital firms to find, fund and develop the next generation of financial services companies. It is just one example of the many approaches venture capital firms are using to fund financial services startups.
New entrants using new technology, business models and, in some cases, regulatory advantages will target the most profitable and attractive market segments. Financial institutions that don’t recognize and respond to these new competitors risk losing their best customers.
About Steve King: Steve is a Partner at Emergent Research. His current research and consulting is focused on economic decentralization, the growth of small business and the future of work and workplaces. Steve has extensive consulting, marketing and general management experience with both large and small companies. Steve is a senior fellow and board member at the Society For New Communications Research, a research affiliate at the Future of Work and an advisory board member at Pond Ventures.
About Carolyn Ockels: Carolyn is the Managing Partner at Emergent Research. Her current research and consulting is focused on economic decentralization, the growth of small business and Gen Y. Carolyn has extensive consulting experience, and prior to Emergent Research managed Cambridge Energy Research’s Asian energy consulting business, led market research in Japan for RCM Capital Managment, and held a variety of domestic and international consulting positions with the economic forecasting and planning consulting firm Data Resources, Inc.