Is the long-term survival of financial institutions inextricably linked to the current rise of FinTech companies ?

Details

Supervisors

Colmant, Bruno

Faculty

Louvain School of Management

Degree label

Master [120] en ingénieur de gestion

Abstract

A revolution in the financial industry is happening. The financial industry has been during a long time ruled by a few leaders. Technology is shaking the industry and revolutionizing the way people deal with financial services. Thousands of new entrants have emerged. Those new entrants, called FinTech companies, have quickly been adopted. The main reasons for this are the 2008-2009 financial crisis, new regulations, the fact that banks are technologically lagging behind and slow in implementing new technologies, enhanced customer expectations and investments in FinTech companies. FinTech companies can be classified into 4 main categories: the banking sector, insurance sector, asset and wealth management sector and lastly the RegTech sector. The confrontation between the old and new world raises the central question of the thesis « Is the long-term survival of financial institutions inextricably linked to the current rise of FinTech companies? ». Based on research papers and interviews, it has been demonstrated that the survival of FinTech companies depends on traditional banks and incumbents. The main reasons for this are that firstly, FinTechs’ most important weaknesses match banks’ core strengths. Secondly, FinTech companies would not be able to take over banks’ core activities. Thirdly, banks benefit from internal resources to become self- disruptors. The failure or success among banks however depends on innovation, a threat for banks would be to not collaborate with a FinTech company. Three collaboration models exist: white labeling, acquisition and partnership however some integration problems might always arise. The most important ones are the banks’ structures and systems.