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
* 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
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
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
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
7. Because banks starting assumption is to sell a product
* 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)
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?
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
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
DM or drop me an email simon@11fs.com to chat :)
👋
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Am loving @peepethApp code of conduct, all of the interactions with it are likeable. 🙌
It's really cool that this real world service will run with any front end, anyone can fork it, and its truly resilient. This is how to explain what decentralisation is...
My only complaint is the obvious slowness of confirmations to @IPFSbot and @ethereum (must be some way to mask that for the user) and the lack of instant follows / gratification