Une définition scientifique française de «Fintech»

Supplement Bilan avril 2017

Avec son numéro d’avril 2017, le journal suisse «Bilan» a récemment publié un supplément sur Fintech en Suisse. J’étais ravi de constater que l’éditeur a cité ma définition de Fintech, précédemment publiée dans le Journal of Innovation Management. Comme la publication originale était en anglais, la traduction française publiée par Bilan est la suivante:

«Fintech est une nouvelle industrie financière qui déploie la technologie pour améliorer les activités financières.»

(Patrick Schueffel tel que cité par Comment la suisse se profile comme un centre Fintech compétitif, Bilan 4/2017, supplément Fintech – Construire la finance de demain, p.6)

Pour votre référence, prenez également note de la version originale en anglais de la définition qui a été publiée dans l’article scientifique suivant: Schueffel, P. (2016). Taming the Beast: A Scientific Definition of Fintech. Journal of Innovation Management, 4(4), 32-54. 

Fintech is a new financial industry that applies technology to improve financial activities”(Schueffel, 2016; p. 45)


Dr. Patrick Schüffel, Professsor, Institute of Finance, Haute école de gestion, Fribourg Chemin du Musée 4, CH-1700 Fribourg, patrick.schueffel@hefr.ch,www.heg-fr.ch

A Scientific Definition of Fintech


“Fintech is a new financial industry that applies technology to improve financial activities.” (Schueffel, 2016; p. 45)

This is the definition I derived after examining more than 200 scholarly articles that were published over a period of 40 years and which are referencing the word Fintech in one way or the other. Building on the commonalities of the definitions that found entry into those peer-reviewed journals I distilled the definition provided above.

I am proud that my work withstood the rigorous double-blind peer review process of the Journal of Innovation Management and was published these days.

As the Journal of Innovation Management is an open access journal you can retrieve the full text by using the following link:


A big thank you goes out to the two anonymous
reviewers for their highly constructive comments and to the editors of the Journal of Innovation Management, Anne-Laure Mention, João José Pinto Ferreira and Marko Torkkeli!

Schueffel, P. (2016). Taming the Beast: A Scientific Definition of Fintech. Journal of Innovation Management, 4(4), 32-54.

Dr. Patrick Schüffel, Professsor, Institute of Finance, Haute école de gestion, Fribourg Chemin du Musée 4, CH-1700 Fribourg, patrick.schueffel@hefr.ch,www.heg-fr.ch


Why do seasoned private bankers not understand the Blockchain? It’s in their DNA, stupid!

Seasoned private bankers often do not grasp the idea of the Blockchain. It was not until I understood that I was using the wrong vocabulary that I could convey what the Blockchain was all about.

Have you even tried to explain the Blockchain concept to a seasoned private banker? Have you tried to describe the notion of a distributed ledger to this type of auditorium? And have you experienced the same result as I have over and over again: have you, too, just banged your head against a brick wall? I pondered the question why it was so much harder to explicate the concept to alleged banking experts than to first-year business students.

Use the right vocabulary

After numerous futile explanation attempts, it dawned on me. I was using the wrong vocabulary. Using the word ledger is counterproductive to the cause. When talking about a ledger, the traditional banker immediately translates that term into “bankbook” and that is the book in which the bank keeps all records of all customers adding and taking money from their bank accounts. It is thus the holy grail of private banking. Distributing the holy grail is inconceivable to many a private banker.

At that point it then hardly matters if you continue to explain that the users of the Blockchain are typically anonymized. It is almost futile to further explicate that, for instance, Bitcoin accounts are not tied to the identity of users and that anyone can create new and completely random Bitcoin accounts at any time, without the need to submit any personal information to any party. You have lost them already. Hence, what I found helpful in this situation is to refrain from using the term “ledger” altogether. Instead I call it distributed data base or distributed accounting system.

Give them a hands-on example

A friend of mine and design thinking pioneer, Michael Lewrick recently recommended me to do a hands-on exercise in particularly tough cases. Individually assign a random yet different number to every one of the ten bankers that are sitting in a room with you and have each of them note down their number and favourite colour on a separate sheet of paper. Have them pass on the paper to another participant and everyone repeats the exercise. Do so altogether ten times. In the end, everyone holds a list of 10 numbers and favourite colours in their hands. At this stage you can ask a) “What is Bob’s favourite colour?” – the others shouldn’t be able to tell as Bob’s identity has been anonymized. Yet you can also ask Bob, whether the correct colour is listed on his sheet – which should clearly be the case. And b) you can ask someone to now commit a “fraud”, i.e. to change the favourite colour of one participant – which should be nearly impossible unless the tasked fraudster does so on ten sheets of paper with the nine remaining group members agreeing. This exercise nicely explains some of the key features of the Blockchain and monies based thereon.

It’s worth trying

These two measures combined, using audience specific language and a hands-on exercise should therefore do the job. It certainly deserves a try. The Blockchain concept is too important as we could afford leaving private bankers behind. Happy explaining!

Dr. Patrick Schüffel, Professsor, Institute of Finance, Haute école de gestion, Fribourg Chemin du Musée 4, CH-1700 Fribourg, patrick.schueffel@hefr.ch, www.heg-fr.ch

The IBank

The personal balance sheet
The personal balance sheet

The number and diversity of Fintech offerings is soaring. As banking clients increasingly often enjoy not only a better user experience, but also cheaper rates at Fintech firms, their willingness to be locked-in with one or two universal banks diminishes. Henceforth clients will gradually assemble their own individual “banks”, comprising a range of offerings from different Fintech companies. Those firms which will be able to provide an overarching structure to seamlessly wrap the multitude of Fintech offerings will experience their heydays.

Modern production technology allows what would have been inconceivable only a few decades ago. If we want, we can have products of mass production tailored to our needs nowadays. Dell made only the beginning when first assembling PCs to our requests on a large scale. Today we order our tailored sneakers at Nike ID, wear a unique t-shirt from Spreadshirt and eat M&M’s sporting our very own initials. Yet, the trend of mass customization did stop in the manufacturing sector. We can already observe its ramifications in the financial services industry where Robo-Advisors offer retail customers to tailor their client portfolios. But this is not the end point of the evolution. It is the mere beginning which will eventually lead to tailored banks.

The personal balance sheet

Like it or not, every single one of us carries his or her own very personal balance sheet: On the asset side, we have liquid asset positions such as the cash that we have in our wallets, the money on our current accounts, our savings accounts or money market instruments. Our personal investments may comprise medium term notes, bonds, stocks, mutual funds, pension savings and/or alternative Investments. Finally, we may possess highly illiquid real estate investments such as our primary residences, vacation homes or even property that we rent out.

On the liability side we may also have a variety of items. Current liabilities may include unpaid bills, credit card balances, taxes due, installment loans due in the short run, consumer loans, car loans, student loans, mortgages due within one year etc. Non-current liabilities may include any consumer, car or student loan that is due after one year. Last but not least, we may have mortgage debt for our primary residence and/or vacation homes and/or rental property.

Hence, as individual as we are as human beings, as individual are our personal balance sheets. Yet, what we do have in common is that we willingly or unwillingly manage these balance sheets. We carry out treasury functions on our personal balance sheets by paying bills and installments, transferring money from one account to another, by investing in shares or by redeeming mutual funds etc.

The Fintech Alternative

So far many consumers in the western world have ties to one or two banks, oftentimes universal banks, that cater to all of the needs resulting from these treasury transactions. Yet, the service offerings of universal banks are increasingly rivaled by Fintech firms that offer a narrow, yet highly specialized service or product.

If you have a little cash to spare, Fintech firms such as Creditgate24, LendingClub or Crowdcube, have offerings for optimizing liquid assets. To manage longer term investments one can turn to providers such Wealthfront, Moneyfarm, Nutmeg, Addepar etc. On the liability side, too, there is a vast array of Fintech companies jockeying for position. Current and medium term liabilities may be optimized by using Affirm, Borro, Lendable, Prosper etc.

In order to transfer money from one provider or account to another the consumer can chose among dozens of payment providers such as TransferWise, LiquidPay, Paypal and the likes. For trading purposes the client may want to turn to eToro or Robinhood. Even donating money becomes easier and less burdensome with Fintech providers such as Elefunds.

These new type of financial services providers that found their niches on specific links of the value chains of universal banks typically not only promise their clients a better user experience, but also lower costs. What is thus foreseeable for the near future is that clients will no longer accept to be locked-in with one or two banks, but that they will make use of a range of financial service providers. Eventually every user will assemble his or her very own bank, the IBank* as I call it.

Assembling the IBank

The IBank will comprise a selection of services provided by specific Fintech companies handpicked by the individual client. This can happen dynamically and on an ad-hoc basis or on a more permanent base. The client – or an overlaying algorithm for that matter – may decide on a case-by-case basis which payment service would be optimal for a specific transfer. On a more longer term basis one mortgage provider may be chosen until the renewal of the mortgage is due.

What is important to note, however, is that clients will make use of tailored “banks” which may be as personal as their individual balance sheet. The challenge and opportunity in this future banking world will be to provide the glue that seamlessly keeps together these services provided by different providers. Those providers who manage to assemble and maintain an overarching structure that smoothly integrates the multitude of service offering of Fintech providers will have a bright future in finance services world which is being ever more atomized.

*IBank like “I bank” – not to be mistaken with the iBank offerings by Barclays, The Bank of Georgia, Fransabank, BCU and so on.

Dr. Patrick Schüffel, Professsor, Institute of Finance, Haute école de gestion, Fribourg Chemin du Musée 4, CH-1700 Fribourg, patrick.schueffel@hefr.ch, www.heg-fr.ch

Bundling: The Next Big Fintech Race

Moneyshelf ad

Bundling will be the next big Fintech topic after unbundling and platformization. Just as consumers got used to buying different food items at one single supermarket long time ago, they will expect one-stop-shops for financial services. Those “bundlers” that manage to seamlessly offer cost-efficient and dynamic bundles are well poised for success in this next race in the Fintech arena. Some important lessons can be learned from previous bundling attempts, such as Deutsche Bank’s “Moneyshelf”.

In 2002 Deutsche Bank started an immensely ambitious e-commerce project. The objective of the project by the name of „Moneyshelf“ was to establish a financial super market. The goal was to create a one stop shop for virtually any financial product a retail client could wish for – across any provider existing. The underlying idea was to provide off the shelf financial products from any makers and brands. The reasoning behind it was that consumers would also frequent supermarkets to conveniently buy various products across brands and manufacturers. A modern consumer would visit a single supermarket to purchase bread, sausages, apples, beverages, canned food and cleaning liquid. He or she would no longer go through the ordeal of visiting a bakery to buy bread, a butcher to shop for sausages, a local market to get some apples and then drop by yet another store to buy beverages and food before visiting the local drug store to buy cleaning liquid.

Creating a financial supermarket

In order to use such a financial supermarket the client was requested to deposit his access information to any other banking service with the Moneyshelf platform. Moneyshelf would then let the client consolidate and manage all of his or her accounts in one highly user-friendly frontend. In the background online banking interfaces programmed by Deutsche Bank developers would ensure the interoperability. Moneyshelf promised a quantum leap in transparency and price efficiency. A client who would have a securities account with bank A and be invested in mutual funds from fund provider B could then not only shop for a more cost-efficient securities account, but also a better performing and less costly mutual fund und would only be a mouse click away. All of this was paired with features such as personal financial planners which offered insights on the clients’ spending and financial behavior and a rich offering of financial information and possibilities of analysis.

Deutsche Bank ahead of times

Moneyshelf as it was envisioned by Deutsche Bank was offering the client a tremendously versatile platform to choose among a vast range of providers and products such as current and savings accounts, mutual funds, brokerage services, mortgages, even life insurances. Deutsche Bank sensed that clients would become more tech savvy and consider the threat to be very real that Deutsche Bank may soon be disintermediated as far as their retail segment was concerned. With the emergence of online brokers and their strong growth Deutsche Bank feared of getting skinned and decided to take the bull by the horns. Hence, should a client decide to do business with a different bank, then Deutsche Bank would make sure that it would at least get a share of those revenue streams bypassing them.

The bone of contention: depositing client data

In the end this business model failed big time. The other banks, especially the rather dominant German savings banks warned their clients that it would be a violation of their contractual obligations to deposit account access information with any third party, including Moneyshelf. The savings banks maintained that they would not only refuse any liability in case of fraud, but that they would reserve the right to cancel the banking relationship with the client altogether should he or she access the account via Moneyshelf. Moreover the marketing campaign for Moneyshelf which depicted procreating animals was not very appealing to a largely conservative German retail banking segment.

Bundling as the central value propostion

Yet, Deutsche Bank got something right: the topic of bundling. As much as Fintech is about unbundling of banking services, a convenience loving customer does not want to sign up with Fintech Firm A to buy DJI stocks, with Fintech company B to convert some FX and with Fintech enterprise C to set up a financial plan. The levels of user experience and thus user expectations have never been higher than today. Hence, the emancipated banking client of nowadays would expect all of these services offered by one single provider and being accessible via one user interface (UI). Banking platforms such as N26, Moven, Bankin’ and Simple prove that the theme of bundling is highly topical as they oftentimes put together the services of a range of Fintech firms and offer them seamlessly through one UI.

The sophisticated future of bundling

However, the future of bundling will be much more sophisticated than that. Clients will expect not only expect cost-efficient but dynamic bundles. For instance, whereas payment provider A may be ideal for one money transfer from country X to country Y, it maybe payment provider B for the next transaction. Clients will not care which contractual obligations the platform is tied to, but the customer will expect the most cost-efficient Fintech firm to take over the task at hand. The same goes for stock brokerage or financial planning. The client will rightly demand to execute via the most cost-efficient broker and to set-up the financial plan with that one Fintech firm he or she sees most suitable. It will be the task of the platform owner or “bundle”, to tap into the Fintech eco-system to always find the most suitable service provider. The bundler must to put together these services for the consumer seamlessly and in a highly transparent fashion.

The race for bundling is on

The race for the best bundler will be open to Fintech firms and incumbent banks alike. This time, however, banks will no longer have a head-start for two reasons: first, a range of highly professional financial data aggregators such as eWise exist nowadays which can provide the necessary services off-the-shelf. Secondly an overhaul of EU legislation will update the rights and responsibilities of account information service providers, permitting intermediaries to obtain the account access information from clients. This change in legislation will come into effect in 2018 and it will be the starter’s gun for a European bundlers’ race in financial services.

Dr. Patrick Schüffel, Professsor, Institute of Finance, Haute école de gestion, Fribourg Chemin du Musée 4, CH-1700 Fribourg, patrick.schueffel@hefr.ch, www.heg-fr.ch

Moneyshelf ad

What is Fintech? [Attempting] A Definition

What_is_Fintech_A_DefinitionIncreasingly often I am being asked by students, colleagues, investors, even friends and family “What is Fintech?”. I then typically answer “Fintech is an industry made up of organizations using novel financial technology to support or enable financial services”. And then, to avoid misunderstandings I add “A Fintech is an organization that uses novel financial technology to support or enable financial services”.

Yet, what sounds like a pretty straight-forward answer, was a hard nut to crack. In fact, the term Fintech is so often and widely used that some people even increasingly shun using it altogether.* To them the concept of Fintech has become too comprehensive and too ubiquitous to have any conclusive meaning any longer. For me it required quite a thought process to come up with a telling definition. This is due to several reasons.

Definitions are never true or false

First, a definition is never true or false per se, but more or less useful in a specific context. For instance, think about the term “power”. How would a physicist define it? How a politician? Which definition would a judge provide? Which explanation would an athlete give? Moreover, even within the domain of sports you are likely to receive different answers, depending on whom you ask. A weight lifter will most probably provide you with a different answer is than the fellow athlete from the same Olympic team who competes in synchronized swimming. Hence, we have to accept that – contingent on the counterparty you ask – one may well receive varying answers on the identical question. The same applies to the expression Fintech.

Looking at the most popular encyclopaedia of our times, Wikipedia, we can read that “[f]inancial technology, also known as fintech, is an economic industry composed of companies that use technology to make financial services more efficient.” (Wikipedia, 2016a). Conveniently enough for the reader, Wikipedia also provides us with the source for their definition. Wikipedia refers to the Wharton FinTech Club which provided this definition (Wharton Fintech, 2014). In a similar vein Susanne Chishti and Janos Barberis state in their landmark book on Fintechs that “Financial Technology or FinTech is one of the most promising industries in 2016” (Chishti & Barberis, 2016, p.5). The Oxford Dictionary tells us that Fintech is a mass noun (Oxford English Dictionary, 2016). More specifically this most authoritative source for British English suggests that Fintech are “Computer programs and other technology used to support or enable banking and financial services: fintech is one of the fastest-growing areas for venture capitalists”. In this context it may also be noteworthy that the most widely used dictionary and thesaurus for American English, Merriam-Webster, does not offer any definition for the term (Merriam-Webster, 2016).

On one popular Web sites in the Fintech sphere one can find the following definition “Fintech is a line of business based on using software to provide financial services.” (Fintech Weekly, 2016). Interestingly enough on that very Website reference is made to Wikipedia which – at least today – provides a different definition. On another blog from the finance world one can read a definition provided by Harry Wilson of Claro Partners: ”FinTech is an ecosystem of startups” (Wilson, 2015).

We could almost indefinitely continue this exercise of extracting definitions for the term Fintech from various authors. Yet, already from this very short although not representative selection of definitions, we can conclude that there is a vast range of meanings of the word Fintech: from “computer programs” and “other technologies” over “line of business” and “ecosystem” to an “industry”. This plethora of connotations makes it hard, if not impossible, to distil one commonly accepted explanation.

Interestingly enough even some of the biggest consultancies which certainly employ some of the smartest minds on the planet shy away from defining the term Fintech. Regularly one can find reports on Fintech related topics which do not provide any definition of the term Fintech itself; see for instance the McKinsey report on the effects of Fintech on banks by Dietz, Khanna, Olanrewaju & Rajgopal (2015) or the BCG report on the opportunities Fintech provides to corporate banks by Dany, Goyal, Schwarz, Berg, Scortecci & Baben (2016).

Definitions change over time

The second reason, why it is so inherently difficult to define the concept of Fintech is because definitions change over time. Also here we have some analogies. As an illustration think about the expression “information technology” (IT). In the early days of computing IT stood for items such punched tapes and cathode ray tubes. Today, however, we much rather associate things such as Motion User Interfaces, Bots and the Internet of Things with IT. Consequently, it is also safe to assume that the expression Fintech undergoes change. The definition provided by Investopedia pays tribute to this fact: “Fintech is a portmanteau of financial technology that describes an emerging financial services sector in the 21st century. Originally, the term applied to technology applied to the back-end of established consumer and trade financial institutions. Since the end of the first decade of the 21st century, the term has expanded to include any technological innovation in the financial sector, including innovations in financial literacy and education, retail banking, investment and even crypto-currencies like bitcoin.”  So, for the authors of Investopedia, Fintech was originally an expression describing banking backend technology, but widened over time to also encompass technological innovations in financial services and related areas (Investopedia, 2016). Following the authors of Investopedia Fintech is not just a mere industry, but also a technology and an expression for innovation.

The big difference of a small article

So far we have been talking about “Fintech” – without prefixed article. However, during conversations, but also in texts one also regularly encounters the expression “a Fintech”. Is there a difference between “Fintech” and “a Fintech”? If so, what is the difference? To my experience people typically refer to a Fintech company or more specifically to a Fintech start-up when they talk about “a Fintech”. Hence, the difference is the “level of analysis” as the scientist would say. As explained above “Fintech” without article typically relates to an entire a group of objects whereas “a Fintech” is just one single entity. This apparently small difference by the prefix “a”, can give rise to serious misunderstandings. To a politician, for instance, it will make a world of difference, whether he or she is asked to support creating an industry cluster or even entire industry or just one single firm. The same goes for a venture capitalist albeit with opposite signs.

Definitions vary across languages

Fourth and last, confusion about the term Fintech emerges from the fact that definitions can vary across languages. To illustrate this fact, I recommend to take a look at the various definitions of Fintech provided by different language versions of Wikipedia. The Italian site, for instance, states that Fintech is the “provision” of financial products and services using information technologies [“La tecnofinanza, o tecnologia finanziaria (in inglese Financial Technology o FinTech) è la fornitura di servizi e prodotti finanziari attraverso le più avanzate tecnologie dell’informazione (TIC)”] (Wikipedia, 2016b).

By contrast, the German Wikipedia definition of Fintech suggests that Fintech is an umbrella term for “modern technologies in the area of financial services” [“Finanztechnologie (auch verkürzt zu Fintech bzw. FinTech) ist ein Sammelbegriff für moderne Technologien im Bereich der Finanzdienstleistu ngen”] (Wikipedia, 2016c).

The French Wikipedia version is much closer to the English one, yet it does not define Fintech as an industry, but more loosely as an “area of activity” [“La technologie financière, ou FinTech, est un domaine d’activité dans lequel les entreprises utilisent les technologies de l’information et de la communication pour livrer des services financiers de façon plus efficace et moins couteuse”] (Wikipedia, 2016d).

Hence, just by comparing across languages one can already fathom the potential for misunderstandings. While the Frenchman may be talking about Fintech as a business segment, the German may be speaking about technologies, the Italian about a delivery channel and the native English speaker may refer to an entire industry. Being aware of potential pitfalls is all the more important as the term Fintech is derived from the English words Financial Technology and also used as such in various other languages. Thus people may automatically assume that they talk about identical things whilst they are not. In addition one should bear in mind that Fintech is a global phenomenon. Running into questions of semantics across languages may happen easier than anticipated.

Coping with ambiguity

However, we can live with this ambiguity in definitions. In fact we have been living with this ambiguity for years, if not decades, in other fields of business and academia. For example, think about the term “strategy”, “innovation” or “business model”. We use them on a daily basis, yet we have not established one common definition for any of them. Hence, having not one single definition for the word Fintech has not and should not prevent us from using it. However, when talking about Fintech we should make clear to our audience what we mean by Fintech. Providing a little explanation for our audience may therefore significantly improve the efficiency of communication and reduce the potential for misunderstandings. If you want to be extra polite you may also want to explain to your vis-à-vis why you use one specific definition and not another.

Once more I want to stress that none of the definitions provided above are right or wrong as such. Rather than that they are more or less useful in certain contexts. The definition I provided above, “Fintech is an industry made up of organizations using novel financial technology to support or enable financial services”, is very similar to the one provided by the Wharton Fintech Club and which is being promoted by the English Wikipedia site. Yet, I prefer to use the more broadly defined word organization instead of company. Companies are typically profit seeking and hierarchically organized. More and more often, however, we see non-hierarchical organizations such as The DAO to play a major role in the Fintech domain (The DAO, 2016). I purposely want to include these organizations in my definition. What is more, I tightened my definition in comparison to the Wharton definition by extending it for the word “novel”. I did this because otherwise the more comprehensive Wharton definition would also include just any incumbent bank running on Cobol-coded host systems as they are using this (admittedly ancient) technology to be more efficient. Lastly, I added the verb enable to my definition of Fintech as I am convinced that Fintech is not just about enhancing efficiency, but also more fundamentally about enablement. The distributed ledger rendered possible by Blockchain technology or micropayments made available through telecommunication systems are just examples for theses empowering technologies. Attention should be paid to the fact that innovation emanating from Fintech can be anything from purely complementary to highly disruptive. If the innovation is barely supporting an existing business model in financial services it is likely to be complementary, whereas it will receive the label disruptive if it jeopardizes existing business models.

I am well aware of the fact that the definition I use is far from perfect. For instance, it does not provide definitions for its components. Hence, one could rightly ask, “So what do you specifically mean by  ’industry’ and what by ’novel’”? And how do you delineate ’industry’ from ’ecosystem’?”. Moreover I am certain that also the definition I use nowadays will change over time with the advancement of technology and the evolution of business. Last but not least, there are many terms up and coming that constitute for spin-offs of the overall Fintech theme. Among those are “InsurTech”, “WealthTech”, “RegTech”, just to name a few. Time will show how are they will be used.

Nicolas Steiner, one of the founding members of Level39 recently shared an anecdote about a meeting with a couple of French speaking experts from the telecommunication industry who asked him whether Fintech stood for “the end of technology”. The reasoning for that being that they believed that Fintech was short for the French expression “la fin de la technologie”. I hope by providing and spreading sense making definitions of Fintech we will encounter less and less of such misunderstandings in the future.

Spiros Margaris, who is often referred to as one of the Key Influencers of Fintech scene, once stated “Fintech will never disappear, only some fintech startups will disappear.” No matter which definition was used here, it is almost safe to say that this statement will come true.

*At this point greetings go out to Nasir Zubairi who is considered to be one of the big Fintech minds of Luxembourg


Chishti, S., & Barberis, J. (2016). The FinTech Book: The Financial Technology Handbook for Investors, Entrepreneurs and Visionaries. Chichester, UK: John Wiley & Sons Ltd

Dany, O., Goyal, R., Schwarz, J., Berg, P. v. d., Scortecci, A., & Baben, S. t. (2016). Fintechs may be corporate banks’ best “Frenemies”.

Dietz, M., Khanna, S., Olanrewaju, T., & Rajgopal, K. (2015). Cutting through the FinTech noise: Markers of success, imperatives for banks. In G. B. Practice (Ed.): McKinsey & Company,.

Fintech Weekly. (2016). Fintech Definition.   Retrieved from https://www.fintechweekly.com/fintech-definition

Investopedia. (2016). Fintech.   Retrieved from http://www.investopedia.com/terms/f/fintech.asp

Merriam-Webster. (2016). fintech.

Oxford English Dictionary. (2016). fintech.   Retrieved from http://www.oxforddictionaries.com/definition/english/fintech

The DAO. (2016). Overview.   Retrieved from https://daohub.org/about.html

Wharton Fintech. (2014). What is FinTech?   Retrieved from https://medium.com/wharton-fintech/what-is-fintech-77d3d5a3e677#.kczb2jawk

Wikipedia. (2016a). Financial Technology.   Retrieved from https://en.wikipedia.org/wiki/Financial_technology

Wikipedia. (2016b). Tecnofinanza.   Retrieved from https://it.wikipedia.org/wiki/Tecnofinanza

Wikipedia. (2016c). Finanztechnologie.   Retrieved from https://de.wikipedia.org/wiki/Finanztechnologie

Wikipedia. (2016d). Technologie financière.   Retrieved from https://fr.wikipedia.org/wiki/Technologie_financi%C3%A8re

Wilson, H. (2015). The new shape of FinTech is making the world a better place.   Retrieved from https://www.finextra.com/blogposting/11518/the-new-shape-of-fintech-is-making-the-world-a-better-place

Professor Dr. Patrick Schüffel

Haute école de gestion Fribourg
Institute of Finance
Chemin du Musée 4
CH-1700 Fribourg

[posted on LinkedIn on July 20th]


What would happen if Google was to found a “Google Bank”?

GoogleBankWhy it could be worthwhile to look at the banking world over the rim of one’s tea-cup

Most likely the music industry would have never dreamt of Apple becoming their biggest competitor. In a similar vein established mail order businesses had never imagined that the auction house Ebay and the book store Amazon would suddenly pull the rug from under their feet. And the camera manufacturers of this world carefully watched each other’s every move but obviously lost sight of the digital competition. For Kodak this ended deadly.

But how about today’s banks? What would happen if an industry outsider would enter the banking industry and would pose a serious competition for the established players?  For instance, what would happen if Google would decide to setup a bank?

First of all it should be noted that the necessary cash is available. With approximately 60 billion US Dollar Google has a pile of cash at its disposal that is waiting to be assigned to a specified use. The entry hurdle cash is thus negligible. One could even go as far to say that Google could easily absorb a total write-off in case the banking venture should fail.

Moreover, cost advantages may arise through the technology leadership that Google possesses. Incumbent banks regularly struggle with IT legacy systems that had often been built in the eighties of the previous century. These core banking systems had not only been developed in programming languages which are hardly known these days any longer, but they are based on a process oriented approach which is antiquated given today’s object oriented program codes. Merely keeping those systems alive already eats up a fair share of the entire IT budget of many banks. Google would not have these legacy problems. Google could build a new bank based on the latest IT technology on a green field or – to be more precise – in a green cloud.

But does Google have the necessary reputation to do banking? Conventional wisdom has it that banks should be serious, conservative, maybe even a little bit outmoded. At first glance this notion does not sit well with a playful service provider whose corporate identity was coined by the colours of Lego bricks and that grew large in the Internet. At closer inspection, however, one can observe that already today clients entrust Google with almost any information. The trust in Google appears to be boundless as far was data is concerned. Why should that be different in money matters? 

But what about Google’s potential clients? Who would entrust a Google Bank with his or her money? In this context it must be noted that as of today Google has already more than 400 million clients with user accounts that source various products and services from Google, from email accounts over translation or navigation services to hardware such as the Google tablet. The list is almost open-ended. If only a fraction of these clients would become clients of a Google Bank it would mean millions.

To put it at its simplest the business model of Google consists of collecting, condensing and editing data in a user-friendly fashion. Google has honed this model to perfection. Should Google now decide to offer banking services we could also expect to see this type of sophistication in banking. As an extreme case Google could for example scan the mail box of a client (as is already happening today). If there are any indications that the client may want to purchase a house, Google could proactively offer a mortgage to this client. Google has the potential to reveal client needs and to make corresponding offers even before the client is clear on his or her need himself or herself.

Last but not least Google has an outstanding reputation as an employer. When it comes to winning employees for a new Google Bank, Google could easily keep up with incumbent banks – at least as far as the under 35 year olds are concerned. As the banking industry’s neophyte Google could differentiate itself from the alleged causers of the financial crisis. It is safe to assume that Google could fight the war for talent from a vantage point.  

If the preconditions are so favorable for Google why has Google then not long entered the banking industry? A plausible explanation could be that Google still considers the banking sector as too unattractive. But this could change soon as Google has already made first steps towards banking with the Google Wallet and by obtaining a license as an Electronic Money Institution. This leaves incumbent banks with two options in the meantime: one could be entering a partnership with Google and forming an alliance with the technology giant. The second option would be to swiftly whip finances into shape, to polish up the image of the bank, to increase the customer base, to improve client service and to enhance the relationship with the employees – quite simply to be geared to Google in these matters.

Hence, when looking at the own position in the banking industry, it could be worthwhile to get one’s bearings not solely by looking at the other competitors in the banking business. Looking at the banking world over the rim of one’s tea-cup could thus be a valuable exercise.


Note from the author:

This is the English translation of a German post that was published on the Swiss financial blog ‘Inside Paradeplatz’ on 04 March 2015. Due to numerous feedback on the German post, manifold requests of non-German speakers to translate the text, but also due to the fact that I attended some utmost inspiring presentations by Patrick Warnking and Sandra Emme of Google Switzerland in the meantime, I decided to also publish the English version of this post.


Dr. Patrick Schüffel, A.Dip.C., M.I.B., Dipl.-Kfm.
Adjunct Professsor
Haute école de gestion Fribourg
Chemin du Musée 4
CH-1700 Fribourg
patrick.schueffel@hefr.ch, www.heg-fr.ch

Luxembourg is on a FinTech Journey

PwC Press Release, 21 April 2016

According to the PwC Luxembourg Report, the Grand Duchy is an emerging FinTech innovation hub

FinTech, a game-changing alloy of technology and finance, blends innovation-focused technology companies with traditional financial sector players. The merger of these two different business approaches, the tech and the traditional one, is the bedrock of the future financial sector landscape. Luxembourg, with its modern financial institutions, is well positioned to take reigns of the FinTech revolution.

Adapting to change: rising FinTech awareness in Luxembourg

With its vibrant ecosystem of financial institutions, technology companies, R&D centres, and a highly diversified and specialised economy, Luxembourg is an emerging FinTech innovation hub. “The country already provides factual support to innovation by encouraging private and public funding, and by building up a true start-up support ecosystem: the government put FinTech as one of the six key domains of the Digital Lëtzebuerg Strategy launched in 2014, aimed at turning Luxembourg into a digital nation, and mandated Jeremy Rifkin to examine and advise on how the Grand Duchy can leverage its FinTech potential” says Gregory Weber, FinTech Leader at PwC Luxembourg.

The Grand Duchy provides an attractive ecosystem not only for FinTech companies, but for business in general. Adding its innovative and responsive regulatory environment, Luxembourg is the epitome of a FinTech aware business environment. Local market players seem to perfectly understand that by embracing the FinTech business model, the Grand Duchy is on the right path to further strengthen its recognition and reputation among investors, clients and the start-up community.

Internet, mobility, social networking and the rise of price comparison websites have changed the game over the past decade and have created a new generation of customers who demand simplicity, speed and convenience in their interactions with financial providers and even with their peers” highlights Gregory Weber. Traditional market players have started adapting to new market demands. The need to meet changing customer expectations with new offerings (resulting in an increased focus on the client experience) is top-of-mind for 86% of Luxembourg respondents when asked about the most important impact of FinTech on their business.

Business at risk: 26% of the traditional financial sector in Luxembourg may be lost to FinTechs

According to the survey, nearly all (94%) respondents from the traditional financial industry believe that part of their business is at risk of being lost to standalone FinTech companies. Incumbents believe that more than a fourth part (26%) of their business could be at risk due to further development of FinTech, though FinTech companies anticipate that they will be able to take over only 10% of incumbents’ business (compared to 33% globally). “In this regard, the asset & wealth management industry is feeling particular pressure from FinTech companies” adds Gregory Weber.

On the other hand, insurers in Luxembourg may be underestimating the threat posed by FinTech with an estimated share of business at risk of only 10%, compared to 21% for global insurance participants.

However, not only are traditional financial industry providers concerned about losing part of their business to FinTechs, they are also aware that their ways of working and product offerings will be challenged and possibly transformed.

Blockchain: high on the agenda in Luxembourg, but still underexplored

Blockchain represents the next evolutionary jump in business process optimization technology. If blockchain gains wider acceptance, it could lead to significant changes in back-office roles, as ownership could be transferred without the need for intermediaries and reconciliations would disappear once there is a shared ledger that all parties agree on. “In Luxembourg, the majority of respondents (60%) recognises blockchain’s importance and is much more willing to respond to blockchain when compared to global respondents (except for asset & wealth managers). However, none of the respondents declares being extremely familiar with the technology. Only 17% believes being very familiar with it while one in five Luxembourg industry players is not familiar with blockchain at all” highlights Gregory Weber.

The ability to collaborate, at both a strategic and business level, with a few key partners could soon become a competitive advantage of Luxembourg financial industry.

How is the Luxembourg financial sector dealing with FinTechs?

Almost half (44%) of Luxembourg financial sector players believes that FinTech is integrated at the heart of their corporate strategies. However, more than 50% either does not have a fully aligned corporate FinTech strategy or FinTech does not have any role or impact within the strategic corporate agenda.  There is no clear industry-wide trend in terms of how traditional players deal and engage with FinTechs. More than a third (34%) engages in joint partnerships with FinTech companies, 31% buys and sell services to FinTech companies, 14% rebrands purchased FinTech services (white-labelling), 14% launches their own FinTech subsidiaries, one in ten establishes start-up programs to incubate FinTech companies and 7% sets up venture funds to fund FinTech companies. Surprisingly, 21% of Luxembourg participants does not deal with FinTech at all. When both parties (traditional financial and FinTech companies) are asked about the biggest impediments when dealing with one another, incumbents name regulatory uncertainty (68%), IT security (45%) and differences in operational processes (45%). FinTechs, on the other hand, are mostly concerned about different management culture when dealing with incumbents (67% of respondents) and IT security (50%) is also a concern.

While the responses from Luxembourg participants are generally aligned with the global ones, the required financial investments for Luxembourg FinTechs when dealing with traditional financial companies (50%) clearly stand out. Globally, this issue is FinTechs’ smallest concern, raised only by 28% of survey participants.

FinTech is re-shaping the financial sector at such a pace that those players that stay behind today might not even recognise the sector in five years. With their potential, Luxembourg players, however, have all the capabilities to stay at the heart of the FinTech revolution. The golden rule: start embracing FinTech now” concludes Gregory Weber.


Legend:Gregory Weber, FinTech Leader PwC Luxembourg – Nicolas Mackel, CEO Luxembourg for Finance – Jonathan Prince, Co-Founder Digicash Payments SA – Romain Godard, Partner PwC Strategy& – Patrick Schüffel, COO, Saxo Bank AG – Nasir Zubairi, Entrepreneur/Investor

Notes to Editors:

About the report :

The 2016 PwC Global FinTech Survey gathers the view of 544 respondents from 46 countries, principally Chief Executive Officers (CEOs), Heads of Innovation, Chief Information Officers (CIOs) and top management involved in digital and technological transformation, distributed among five regions.

The Luxembourg-focused cut was based on the responses of 36 respondents from the financial industry’s major market players.

For a copy of the report and to see the full results, please visit www.pwc.lu