IS 2020 THE CRITICAL YEAR FOR THE FINTECH ECOSYSTEM? - Kutay Yalınkılınç
WHAT IS FINTECH-AS-A-SERVICE (FAAS) BUSINESS MODEL?- Burak Elgin
Companies have been taking actions to adopt new business models for years in order to keep up with the new world. We can deduce that these actions should not only consist of business methods that are automated or based on digital infrastructure, since many of the world's largest companies in the Fortune 500 list that have taken important steps in digitalization are not active today. More than 50% of the companies on this list have disappeared in the last 50 years, and it is expected to disappear at a rate of close to 50% in the next 10 years. Certain steps were taken by all of these companies regarding automation and digitalization, but they were not involved in the financial transformation process that we call “digital financialization”. However, the focus of today's most successful companies is to dominate their customers and dealer channels. In parallel with this, product and service oriented business models have evolved and started to be replaced by customer focus over time. The gains of the new world in this field are the adoption of interaction-oriented approaches instead of customer-oriented. When companies have the ability to meet the needs of customer and dealer channels in their own ecosystems in accordance with the conditions of the period, they can achieve customer ownership at the highest level with the loyalty system they have created.
Within the scope of Digital Financialization, the financial products offered by a bank to users are now available to technology companies to their ecosystems. The most prominent examples in the world regarding the concept of Banking of Institutions; It belongs to giant technology companies such as Google, Amazon, Facebook, Apple. When we look at Turkey, today many companies in the technology / retail sector offer financial services or provide short-term interest to customers and dealers / suppliers networks. In the case of Amazon, it is possible to say that Amazon takes its product to the end user like a bank on the financialization side. As it can be understood from this example; from Amazon payments to lending, from insurance to checking accounts, it applies its own financial services without resorting to being a traditional bank. While Amazon's expectations about banking are increasing, it is important to understand Amazon's current strategy in financial services.
In this context, Amazon's strategic goal is to develop financial service products. In order to achieve these goals, there have been some tools that the Company has established and adopted, and it has also launched these tools: Increasing the number of salesmen on Amazon, increasing the sales of the sellers and increasing the number of customers on Amazon and ensuring that customers spend more. To summarize Amazon's strategy in financial services, its main goal is actually from both sides; To increase participation on both the vendor and the customer side. However, Amazon has also made financial technology investments, which consist of business partners that the Company can achieve its main strategic goal, and the focus of these investments has been parallel to this, mostly international points (Mexico, India, etc.) All these findings show that, Amazon actually does not act like a traditional bank. On the contrary, Amazon has adapted these inferences to both its sellers and customers by taking the most basic features of a traditional bank. At this point, Amazon has built a bank, which is suitable for itself.
Many institutions in Turkey has entered the Digital Financialization process, in order to meet its financial needs in the short, medium and long term and to place its business models on a more technological infrastructure of the customer base they have, dealer networks, online / offline management of the channel. For example, with the banking services offered by the institution; The dealers / suppliers of the institution can spend their premiums and progress payments anywhere with financial products such as digital wallets or prepaid cards without going to any bank, and can benefit from instant discounts at contracted points. Thanks to this system that makes money more valuable in the ecosystem, institutions can gain 360 degree customer / dealer ownership. Factors such as development costs of Fintech products and services, qualified human resources required for innovative projects, risk management, regulatory compliance and fraud prevention make this process costly and time-consuming; makes Fintech companies that have adopted the vision of financial technology service platform provider (FaaS) the best possible solution partner today. Strategic solution partnerships with FaaS companies have many positive effects on Creating new revenue items for the institution, providing easier access to its customer base and potential customers, and increasing existing customer / dealer loyalty through data tracking.
On the developments in the banking legislation referred to as PSD2 in Europe, Turkey has been a lot of positive impact, and continues to do so. With the expansion of the scope of Open Banking, which is defined as allowing banks to allow fintechs or third-party institutions to develop financial services with the APIs they offer, and banks become more meaningful data sharing; The customers will be able to share their data in the bank with the 3rd parties that they allow, as they will have full control over their data. In this way, we will see that products that are more innovative and support the customer experience enter our lives in the near term by diversifying and expanding with the FaaS business model.