The Blurred Lines of Fintech
Today, anything that is related to finance and technology in the slightest way has the FinTech label slapped on to it. With so many ventures striving to achieve different goals, it is sometimes hard to keep a clear head and distinguish one from the other.
To make this process easier, one of the most straightforward distinction to make is the difference in audience focus. Is the venture targeting end users, hence B2C or is the audience another business, hence B2B? Some fintech companies are clearly on one end of the spectrum, while others are a blend of both. What characteristics do the different business models embody and why has the constellation of fintech companies come to be as it is? When looking at the 50 most successful fintech companies on KPMG’s top 100 list, 30 follow the B2C and 12 the B2B model. 8 are a blend of both. As it stands, the industry seems to be trending towards the B2C customer focus.
How do the business models differ?
A good place to get an idea of the B2C fintech products out there is in mobile phone app stores. An app store will yield almost exclusively B2C fintech products. Thus, B2C fintech will often focus more on personal finance. Solutions will include E-wallets, expense trackers or payment apps. In addition to this, many high street banks have deployed mobile banking apps. If we move away from mobile phones, more comprehensive solutions such as personal loan platforms surface. These are becoming increasingly popular.
One explanation for the large number of B2C FinTech products is the lower entry barriers for developing apps. An individual can relatively easily develop a personal finance app. Becoming indispensable to large corporations however requires much more than technical knowledge. It requires connections and persistence. The low entry barriers yield a very competitive B2C market. According to CurrencyCrowd, B2C products are and should be very focused on aspects such as a high level of service, low costs and easy access to the product.
On the other end of the spectrum, B2B solutions are characterised by transparency, accountability, stability or API access. Large corporations usually heavily rely on a very niche FinTech solution. B2B fintech often builds on partnerships and operates from behind the curtains in a very small market with low threat of new entry. Mature companies will have applied much patience to secure their spot in the market. They thrive on being indispensable to many big corporations and their customer bases.
CurrencyCrowd’s article suggests that the lines between B2B and B2C are blurring. If we take crowdfunding as an example, an argument can be made that it is both a B2B and a B2C product. It is a B2C product because it drastically reduces the entry barrier to become an investor and effectively own a stake in a privately held business. It is however also a B2B product in that it allows SME’s to raise funding alternatively and in some cases more effectively compared to traditional financial solutions such as bank loans or becoming a publicly listed company.
OFF3R is another great example of a blend between B2B and B2C. Of course OFF3R is targeted more at the B2C end of the market, allowing different types of investors to discover in very personalised investment opportunities. However, if we look at it from the point of an equity crowdfunding, property or peer to peer lending platform, OFF3R can act as a valuable means to increase awareness and users.
As consolidation and collaboration in the FinTech market is thought to increase, the blurring line trend is likely to remain. With smaller players being mopped up by larger ones, we are likely to end up with fintech companies that have multiple products targeted at different ends of the market.