For a long time, Fintechs were viewed as slicing and dicing various services that banks and other financial services firms provided as part of a cafeteria of offerings. Take online lending for example, marketplaces and direct lenders targeted SME loans and consumer credit as a single vertical. Today, some of these online lenders are morphing to provide a broader portfolio of services with some even becoming digital banks.
Sudheshna Karukula, Fintech Analyst at GlobalData, explains that the change in the venture capital funding over the last few years has encouraged the most successful Fintech startups to gradually re-bundle their offerings in existing as well as new geographies, across the financial services value chain, by leveraging emerging technologies.
“The Fintech companies kick-started by unbundling banking services, which threatened the market share of traditional banks. However, now the trend has changed evident from the Fintech startups re-bundling their services as well as expanding into new geographies. Such trends are expected to continue in 2020 and beyond given the uncompetitive traditional banks in providing more unified platforms.”
The report cites several well-known Fintech names as emblematic to the theory.
For example, India-based One97 Communications, the parent company of Paytm, the first Fintech unicorn in India started as an online mobile recharge and bills payment platform. The Fintech has gradually scaled up into other digital financial services businesses such as banking and insurance. The company now intends to use the latest funding to merchant expansion in both online and offline modes as well as make an aggressive push into the digital banking and insurance businesses.
Robinhood is a Fintech that launched as a commission-free stockbroker in the US. Robinhood recently expanded into the UK but it is now offering more traditional banking services like cash management helping users to earn interest on money held in their accounts or allowing users to spend it via Robinhood-branded debit card account.
There are plenty of more prominent examples like LendingClub in the US – now a full-stack digital bank and Zopa in the UK that has long messaged its ambition to become a leading challenger bank transitioning from its peer to peer lending ancestry.
Perhaps this is just about survival and providing what the market wants or maybe because digital finance lends itself to expansion both horiztonally and vertically. Regardless, the entire financial services industry is moving onto the internet.