Leadership Styles in Traditional Financial Service Providers and FinTechs
Which Organization Provides the More Favorable Conditions for the Development of an Ethical Corporate Culture?
Written by Torben Kramp
Business Administration>Banking & Insurance
Bachelor Thesis 2. This extra part of the Fintech Movement covers the "fintech" movement, because it is a recent emergence of Fintech, and there is very little scientific research covering this topic. On the other hand, there is no additional section that explains the characteristics of traditional financial service providers in more detail. This paper uses a broad concept, referring to traditional financial service providers as companies that have been operating in the financial sector for a relatively long time, employing hundreds or thousands of people, and maintaining multiple departments. To understand why the phenomenon of “financial technology” is widely covered in business, politics, and media, this article gives a definition, explores the reasons for its development, briefly shows the business areas of fintech operations, and explains the business model of fintech. 2.1 Definition Since financial technology is a recent phenomenon, there has not been much scientific research on the subject so far. Therefore, there is no consistent scientific definition of the term “financial technology”, but there are many methods on the Internet. Gimpel, Rau, and Röglinger (2016: 39) define fintech as start-ups in the financial industry that provide financial services on the basis of technology and data. Therefore, the term fintech represents the combination of "financial services" and "technology". 2.2 Statistics As investors expect fintech to play an important role in the financial industry in the future, the investment and foundation of fintech have grown substantially in the past six years. According to the analysis of consulting firm Accenture, global investment in financial technology reached US$22,265 billion in 2015, an increase of 67% from 2014. One of the bright spots is Germany, where total investment increased by 840% from 2014 to 2015, reaching US$770 million. 2.3 The development of financial technology and its reasons The financial industry is one of the most regulated industries, which makes the entry of new market participants difficult and deterrent. In addition to new financial products, innovation is rare. After the recent global financial crisis, some favorable conditions emerged that supported the start of the Fintech movement. Created a "perfect storm" (Aner, Barberis and Buckley 2015: 18). Therefore, the 2007-2009 global financial crisis was a major turning point in the development of financial technology, and it was also a tide of technological innovation in the financial sector. In addition, lower incomes and difficult job market conditions make setting up an own company and working in the fintech industry more attractive to graduates and former bankers. Combining knowledge of financial markets and technology, many highly skilled talents have joined the financial technology movement. On the other hand, traditional financial institutions have lost their human capital and competitive advantages (Aner, Barberis and Buckley 2015: 16). The so-called "millennials" are not only entering the job market, but also occupying an increasing share of the overall consumer. They are particularly technically friendly and demanding for digital terminal user-friendly services and products. Fintech companies that provide such services take advantage of population development to attract these customers more than banks. An empirical study conducted by Transferwise shows that more than 75% of consumers predict that they will use fintech services every day for ten years. Figure 3 – Consumers’ predictions of their own acceptance of fintech in the next 10 years (Transferwise – the future of banking 2016). Last but not least, the distrust of banking activities leads to the perception of fintech as a kind of Appropriate alternatives, it provides better customer service and a more convenient way to conduct private banking. Third, banks have lost their integrity and credibility, which has always been their traditional competitive advantage. 2.4 German FinTechs FinTechs do not operate in one branch; in fact, they provide many different technical services specifically for different branches. A study of the accounting firm Ernest & Young outlined all the different branches operated by German fintech companies. Therefore, the branches of traditional financial service providers and financial technology mostly overlap. There are also branches such as eMarketplaces that only operate financial technology, and there are branches such as mergers and acquisitions that only operate traditional financial service institutions. According to E&Y's research, fintech can be divided into eight different clusters: Figure 4-German fintech world: cluster breakdown (Ernest & Young-German fintech landscape: opportunities in Rhein-Main-Neckar 2016) Banks and loans : Fintech provides standard banking services, including loan services and products, as well as alternative financing such as crowdfunding (B2B, B2C and P2P) and account management. Electronic markets, aggregators and intermediaries: Electronic markets are financial technologies that support the direct purchase of financial services or products. Aggregators and intermediaries are platforms that provide third-party products and generate fee income (B2B and B2C). Read Less