Luxembourg: Three Opportunities For Fintech Companies

Last Updated: 5 July 2018
Article by Markus Lamest
Most Read Contributor in Luxembourg, September 2019

Recently I attended the Future of Fintech Conference, where a major theme was the disruption of the financial services industry by clouds, machine learning, blockchain, and other technologies. Speakers reflected on how the bigger fish (e.g. NASDAQ, Bank of America, MunichRE) and smaller fish (e.g. Robinhood, Affirm, SoFi) have acted on and reacted towards these phenomena.

Three opportunities for fintechs stuck out from the conference. Read on for what they are.

1. The customer relationship with traditional financial institutions is broken

Harit Talwar, Head of Marcus by Goldman Sachs, cited a survey of 10,000 individuals that broke down the issues customers face today regarding the financial establishment, e.g. large banks, into three factors:

  1. Consumers' relationship with money is broken: they are confused by the number of available accounts, cards, and other financial products.
  2. Those who need to borrow are forced to enter a cumbersome, sometimes humiliating process.
  3. Those who save, in contrast, feel disrespected by the financial industry due to the lack of return opportunities provided.

As a result, customers have developed a level of distrust towards traditional financial institutions.

Fintechs can perhaps take advantage of this situation to design financial services that fulfil customers' true needs. For example, a business model that counts on customers not paying back their loans on time (thus causing late fees) would not address customers' true needs; but tailoring a service to customers' capability to pay loans back on time would.

The latter is the approach taken by Affirm, a fintech company from San Francisco. Founder and CEO Max Levchin says Affirm's mission is to provide simple, clean, low interest, tailored loans as an alternative to traditional credit card transactions, according to the mantra, "Let's do things that are good for consumers". Similarly, Anthony Noto, CEO of SoFi, describes his firm's business model as reinventing the relationship with consumers in order to help them "get their money right" through analytics-enabled tailored services.

2. Transparency as a unique selling point in the financial services industry

Customer distrust is largely caused by the lack of transparency from traditional institutions on their services. According to Andy Rachleff, Co-Founder and CEO of Wealthfront, traditional large financial institutions are constantly looking for excuses to keep their data hidden from customers, especially when it comes to fee structures. Unsurprisingly, this is particularly true in areas in which disclosure is not covered by regulation.

This in turn provides opportunities for fintechs to enter market gaps by creating trust through transparency. Indeed, trust is the magic ingredient. It came up suspiciously often at the conference. I heard, for the first time in this context, the term "trusted commerce", which Alipay President (Americas) Souheil Badran used in his speech when describing how Alipay customers use the app 30 to 40 times a day across an array of services and locations. Alipay is able to follow customers' footsteps, enabled by GPS data every smartphone provides, and to suggest offers that are geographically close. These offers can (no surprise here) then be processed via Alipay.

Remember back in the '90s when a lot of people wouldn't go near online shops, fearing payment fraud and shipping problems? Listening to Badran speak, it struck me that trust is now possible in a huge, huge way—if companies earn it. Alipay is currently valued at around $60 billion, which proves my point.

So, fintechs: think about being transparent and about earning customers' trust. Why not provide encryption, asks Symphony CEO and Founder David Gurle, to protect customer data and allow clients to delete their personal data if they want to?

3. The blockchain market is saturated, but there is opportunity there

While the concept of decentralisation is undeniably going to shape the future of financial services, and while demand for blockchain specialists is still rising, many of the speakers—including Robinhood Co-Founder and Co-CEO Vlad Tenev—commented that there are currently too many players entering the market with blockchain solutions. Given this upward trajectory, having the related cryptocurrency in your portfolio of financial services (e.g. on a trading platform) could be a promising strategy in acquiring customers to whom, in a second stage, a wider range of financial services could be cross-sold. Indeed, demand for cryptocurrency trading opportunities seems healthy: take eToro, who has benefited from adding cryptocurrency trading to their product portfolio.


Overall, the best strategy to avoid being one of the companies consumed by the ongoing disruption (see the first picture in this post) is to be aware of disruptive developments, says Catherine Bessant, COO of Bank of America.

Learn more about the conference at its website.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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