The economic impact of FinTech companies on the traditional banking sector and possible future scenarios

Table of Contents

1 Introduction

1.1 Purpose of this thesis

1.2 Scope

1.3 Structure

2 Theoretical foundations

2.1 Business model

2.2 Value chain

2.3 Traditional German banking sector

2.3.1 Retail Banking

2.3.2 Sources of income in retail banking

2.3.3 Cost situation in retail banking

2.4 FinTech – emerging challengers of traditional banks

2.4.1 FinTech definition

2.4.2 FinTech business models

3 Economic impact and possible future scenarios

3.1 Driving forces behind FinTech companies

3.1.1 Customer behavior in transition

3.1.2 Trends in banking technologies

3.1.3 Cryptocurrencies

3.2 Core areas of FinTech companies

3.2.1 Payment

3.2.2 Lending

3.2.3 Personal finance management

3.3 Economic impact

3.3.1 Selected key performance indicators of a bank

3.3.2 Predictions about the future development of the selected KPIs

3.4 Possible future scenarios of banks

3.4.1 Ignore FinTech

3.4.2 Investments in the banks’ own products and incubators

3.4.3 Cooperation and acquisition

3.5 Results

4 Conclusion and outlook

Objectives & Core Themes

This thesis examines the economic influence exerted by technology-driven FinTech companies on the traditional banking sector, with the goal of projecting future market developments and strategic scenarios for established financial institutions.

• Digital disruption and its impact on the financial services industry.
• The evolution of the traditional German banking sector and its business models.
• Analysis of FinTech business models, including payment services, lending, and personal finance management (PFM).
• Assessment of changing customer behavior and the role of new banking technologies.
• Prognostic future scenarios for traditional banks, ranging from ignoring competitors to active cooperation or acquisition.

Excerpt from the book

Summary of Chapters

1 Introduction: Provides an overview of digital disruption across various industries and sets the stage for the structural changes currently impacting the financial sector.

2 Theoretical foundations: Defines essential business models and value chain concepts, while characterizing the traditional German three-pillar banking system.

3 Economic impact and possible future scenarios: Analyzes the driving forces behind FinTech, investigates specific service areas, and evaluates three strategic paths for traditional banks to address competitive pressure.

4 Conclusion and outlook: Summarizes the thesis findings and provides a forward-looking assessment of whether traditional banks can successfully adapt to the competitive challenge posed by FinTech firms.

Keywords

FinTech, Digital Disruption, Traditional Banking, Retail Banking, Value Chain, Business Model, Customer Behavior, Digital Transformation, Payment Services, P2P Lending, Personal Finance Management, Robo-Advisor, PSD2, Return on Equity, Innovation

Frequently Asked Questions

What is the core focus of this research?

The research investigates how technology-oriented FinTech companies are impacting the traditional banking sector and identifies possible future scenarios for established banks in response to these changes.

What are the primary thematic areas covered?

The study covers the transformation of the German banking sector, the emergence of FinTech business models (payment, lending, PFM), driving forces like changing customer demographics, and the strategic responses of traditional banks.

What is the central research question?

The research seeks to determine to what extent FinTech companies influence the income and cost structure of traditional banks and which strategic paths banks should adopt to survive in the digital era.

Which scientific methods are utilized?

The thesis utilizes theoretical foundations of business models and value chains, analysis of existing market statistics, and a DuPont analysis model to simulate financial impact scenarios for banks.

What topics are discussed in the main part of the thesis?

The main part analyzes the traditional value chain of banking, the specific threat posed by FinTech competitors, the influence of the PSD2 directive, and the implementation of strategic scenarios like cooperation and incubation.

Which keywords characterize the work?

Key terms include FinTech, digital disruption, traditional banking, P2P lending, customer behavior, and the DuPont analysis model.

How does the PSD2 directive affect the competitive landscape for traditional banks?

PSD2 obligates banks to open their API interfaces to third-party FinTech providers. While this promotes innovation and safety, banks criticize it as it provides competitors direct access to sensitive customer information.

What are the three strategic scenarios identified for banks?

The scenarios are: ignoring FinTech (the status quo), investing in internal products and incubators, or pursuing cooperation and acquisitions of existing FinTech companies.

Why is the "fear of change" significant for German banks?

Germany ranks high on the uncertainty avoidance index according to Hofstede. This cultural trait leads to a sluggish response to innovation and makes the transformation toward agile business models more time-consuming for traditional banks.