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New report: Embedded Finance is reshaping #fintech
* Banks core business model is broken
* New players are disintermediating the bank relationship
* Banks that that lean in can capture a $trillion opportunity
How? New @11FS report
https://11fs.com/insights-banking-as-a-service
tl;dr
* Banks core business model is broken
* New players are disintermediating the bank relationship
* Banks that that lean in can capture a $trillion opportunity
How? New @11FS report
https://11fs.com/insights-banking-as-a-service
tl;dr
2. Banks business model is broken
* Over two decades net interest margin has been falling
* Way to make money for banks falls with interest rates
* It's more likely to get worse than get better
* Over two decades net interest margin has been falling
* Way to make money for banks falls with interest rates
* It's more likely to get worse than get better
3. This is why bank share prices are suffering
* Only energy performed worse than bank stocks over 3yrs
* Banks the worst performing stock of 2020
* Only energy performed worse than bank stocks over 3yrs
* Banks the worst performing stock of 2020
4. The pandemic has made this worse
* Consumers now used to operating 100% digitally
* Banks carry the cost of obsolete infrastructure like ATMs and branches
- And setting aside massive amounts for loan losses
* Consumers now used to operating 100% digitally
* Banks carry the cost of obsolete infrastructure like ATMs and branches
- And setting aside massive amounts for loan losses
5. But fintech's are growing massively
* Ignore the share prices, look at the earnings line
* There is huge value creation in finance happening
* Banks aren't capturing it
* Ignore the share prices, look at the earnings line
* There is huge value creation in finance happening
* Banks aren't capturing it
6. This is changing the shape of the market
* Again share prices aren't everything BUT
* This chart looks a lot like the advertising industry in 2003
* Change is slow then sudden
* Again share prices aren't everything BUT
* This chart looks a lot like the advertising industry in 2003
* Change is slow then sudden
7. Because banks starting assumption is to sell a product
* Banks start at their business model
* Fintechs start at the customer problem
* Banks start at their business model
* Fintechs start at the customer problem
8. Two layers have emerged above banks
* Intelligent services: solve customer problems with digital
* Embedded journeys: Wrap services together into a context (e.g. Shopify, help me run a business)
* Intelligent services: solve customer problems with digital
* Embedded journeys: Wrap services together into a context (e.g. Shopify, help me run a business)
9. But not everyone lower down on this stack is losing
* Visa and Mastercard are doing very well serving the layers above
* Instead of competing with the new entrants, is there a better way?
* Visa and Mastercard are doing very well serving the layers above
* Instead of competing with the new entrants, is there a better way?
10. This could create massive opportunities for the whole market
* Customers want finance at the point of need
* Brands can use finance to create engagement
* Finance isn't engaging, but it enables engagement
* Understanding this shift is crucial
* Customers want finance at the point of need
* Brands can use finance to create engagement
* Finance isn't engaging, but it enables engagement
* Understanding this shift is crucial
11. This is a multi $ trillion value creation opportunity
- Banks move from dumb pipes to smart pipes
- By enabling the layers above them
- And providing tools to manage regulated activity globally
- And see finance as supporting other products vs being the product
- Banks move from dumb pipes to smart pipes
- By enabling the layers above them
- And providing tools to manage regulated activity globally
- And see finance as supporting other products vs being the product
