Changing customer needs are caught in the conflict between traditional business models and technological innovation. Time to go new ways.
“FinTechs – full frontal attack on the banking business model” or “First kill off the branches, then the banks” are two of the countless headlines that have appeared over the last two years. Like no other topic, the continual advance of new technologies is currently a cause of consternation among the banks. From apocalyptic scenarios to aggressive joint ventures – the reactions have so far been quite diverse. One common denominator unites all banks: they need to do something about it. Because FinTech is no longer a trend but a separate, independent, established – though still young – sector.
Already, the five largest FinTechs (which also include PayPal) are worth much more than the five largest listed German banks. No surprise, then, that 60% of banks consider FinTechs a threat to their core business. Above all, they are achieving one thing: they are accelerating digital transformation and making the banks painfully aware that the sector is on the verge of fundamental change. This is a definitely positive side effect, because, while banks excel in their advisory and regulatory expertise, which continue to attract a broad customer base through the accompanying sense of trust and security, FinTechs contribute the requisite speed and technology that will shape the finance and banking sectors over the long term. Firmly convinced that both business models perfectly complement each other, Hauck & Aufhäuser decided in April 2016 to take a step toward the supposed “attackers” and purchase easyfolio, one of the leading online providers in the investment arena. But why make such apparently surprising steps?
To answer this question, one needs to take a closer look at the two companies. Hauck & Aufhäuser excels as a result of its long tradition and associated expertise in fund management and securities trading. easyfolio, on the other hand, builds on its systematic, easily understandable, customer-friendly investment strategies. The risk appetite of each customer is established right at the start of each investment cycle, and, in the second step, used as the basis for assembling a tailored product portfolio. Like easyfolio, Hauck & Aufhäuser does not focus solely on market capitalization-weighted indices, but rather on the interplay of regional economic forces. Additionally, asset allocation in both cases is based primarily on ETFs. These parallels in the development of investment strategies enable both companies to gain the maximum benefit from each other. For Hauck & Aufhäuser, the focus is primarily on experience with a digital solution while easyfolio gains market expertise – added value not only for both companies but also for their customers.
Thus, from a commercial perspective, the focus is on transfer of expertise. But what does the purchase of easyfolio mean from a strategic perspective? The rationale is to be found in the 220-year long history of the bank. Looking back, it becomes quickly evident that digital transformation and FinTechs are by no means the first challenges that the bank has faced throughout its history. Each success was built on the firmly held entrepreneurial conviction that the only way to develop is to try things out, to explore new fields, and to constantly learn. Companies can only learn when they realize that supposed challenges are in reality opportunities. And, hence, the “threat” posed by digital transformation and FinTechs is not in the march of progress itself, but the way in which it is viewed. Because the way it is viewed does not only influence how progress is perceived, but the reality that it becomes.