Fintech: Ecosystem, Business Models, Investment Decisions, and Challenges SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
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Case Study Description of Fintech: Ecosystem, Business Models, Investment Decisions, and Challenges
Fintech brings about a new paradigm in which information technology is driving innovation in the financial industry. Fintech is touted as a game changing, disruptive innovation capable of shaking up traditional financial markets. This article introduces a historical view of fintech and discusses the ecosystem of the fintech sector. We then discuss various fintech business models and investment types. This article illustrates the use of real options for fintech investment decisions. Finally, technical and managerial challenges for both fintech startups and traditional financial institutions are discussed.
Swot Analysis of "Fintech: Ecosystem, Business Models, Investment Decisions, and Challenges" written by In Lee, Yong Jae Shin includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Fintech Ecosystem facing as an external strategic factors. Some of the topics covered in Fintech: Ecosystem, Business Models, Investment Decisions, and Challenges case study are - Strategic Management Strategies, Disruptive innovation, Entrepreneurship, Financial management, Financial markets, IT and Technology & Operations.
Some of the macro environment factors that can be used to understand the Fintech: Ecosystem, Business Models, Investment Decisions, and Challenges casestudy better are - – increasing commodity prices, increasing inequality as vast percentage of new income is going to the top 1%, increasing energy prices, talent flight as more people leaving formal jobs, cloud computing is disrupting traditional business models, there is increasing trade war between United States & China, increasing household debt because of falling income levels,
supply chains are disrupted by pandemic , digital marketing is dominated by two big players Facebook and Google, etc
Introduction to SWOT Analysis of Fintech: Ecosystem, Business Models, Investment Decisions, and Challenges
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in Fintech: Ecosystem, Business Models, Investment Decisions, and Challenges case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Fintech Ecosystem, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Fintech Ecosystem operates in.
According to Harvard Business Review, 75% of the managers use SWOT analysis for various purposes such as – evaluating current scenario, strategic planning, new venture feasibility, personal growth goals, new market entry, Go To market strategies, portfolio management and strategic trade-off assessment, organizational restructuring, etc.
SWOT Objectives / Importance of SWOT Analysis and SWOT Matrix
SWOT analysis of Fintech: Ecosystem, Business Models, Investment Decisions, and Challenges can be done for the following purposes –
1. Strategic planning using facts provided in Fintech: Ecosystem, Business Models, Investment Decisions, and Challenges case study
2. Improving business portfolio management of Fintech Ecosystem
3. Assessing feasibility of the new initiative in Technology & Operations field.
4. Making a Technology & Operations topic specific business decision
5. Set goals for the organization
6. Organizational restructuring of Fintech Ecosystem
Strengths Fintech: Ecosystem, Business Models, Investment Decisions, and Challenges | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Fintech Ecosystem in Fintech: Ecosystem, Business Models, Investment Decisions, and Challenges Harvard Business Review case study are -
Innovation driven organization
– Fintech Ecosystem is one of the most innovative firm in sector. Manager in Fintech: Ecosystem, Business Models, Investment Decisions, and Challenges Harvard Business Review case study can use Clayton Christensen Disruptive Innovation strategies to further increase the scale of innovtions in the organization.
Diverse revenue streams
– Fintech Ecosystem is present in almost all the verticals within the industry. This has provided firm in Fintech: Ecosystem, Business Models, Investment Decisions, and Challenges case study a diverse revenue stream that has helped it to survive disruptions such as global pandemic in Covid-19, financial disruption of 2008, and supply chain disruption of 2021.
Effective Research and Development (R&D)
– Fintech Ecosystem has innovation driven culture where significant part of the revenues are spent on the research and development activities. This has resulted in, as mentioned in case study Fintech: Ecosystem, Business Models, Investment Decisions, and Challenges - staying ahead in the industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
Highly skilled collaborators
– Fintech Ecosystem has highly efficient outsourcing and offshoring strategy. It has resulted in greater operational flexibility and bringing down the costs in highly price sensitive segment. Secondly the value chain collaborators of the firm in Fintech: Ecosystem, Business Models, Investment Decisions, and Challenges HBR case study have helped the firm to develop new products and bring them quickly to the marketplace.
Operational resilience
– The operational resilience strategy in the Fintech: Ecosystem, Business Models, Investment Decisions, and Challenges Harvard Business Review case study comprises – understanding the underlying the factors in the industry, building diversified operations across different geographies so that disruption in one part of the world doesn’t impact the overall performance of the firm, and integrating the various business operations and processes through its digital transformation drive.
Learning organization
- Fintech Ecosystem is a learning organization. It has inculcated three key characters of learning organization in its processes and operations – exploration, creativity, and expansiveness. The work place at Fintech Ecosystem is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders in Fintech: Ecosystem, Business Models, Investment Decisions, and Challenges Harvard Business Review case study emphasize – knowledge, initiative, and innovation.
Analytics focus
– Fintech Ecosystem is putting a lot of focus on utilizing the power of analytics in business decision making. This has put it among the leading players in the industry. The technology infrastructure suggested by In Lee, Yong Jae Shin can also help it to harness the power of analytics for – marketing optimization, demand forecasting, customer relationship management, inventory management, information sharing across the value chain etc.
Ability to lead change in Technology & Operations field
– Fintech Ecosystem is one of the leading players in its industry. Over the years it has not only transformed the business landscape in its segment but also across the whole industry. The ability to lead change has enabled Fintech Ecosystem in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Strong track record of project management
– Fintech Ecosystem is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
Digital Transformation in Technology & Operations segment
- digital transformation varies from industry to industry. For Fintech Ecosystem digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Fintech Ecosystem has successfully integrated the four key components of digital transformation – digital integration in processes, digital integration in marketing and customer relationship management, digital integration into the value chain, and using technology to explore new products and market opportunities.
High switching costs
– The high switching costs that Fintech Ecosystem has built up over years in its products and services combo offer has resulted in high retention of customers, lower marketing costs, and greater ability of the firm to focus on its customers.
Successful track record of launching new products
– Fintech Ecosystem has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Fintech Ecosystem has effective processes in place that helps in exploring new product needs, doing quick pilot testing, and then launching the products quickly using its extensive distribution network.
Weaknesses Fintech: Ecosystem, Business Models, Investment Decisions, and Challenges | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Fintech: Ecosystem, Business Models, Investment Decisions, and Challenges are -
High operating costs
– Compare to the competitors, firm in the HBR case study Fintech: Ecosystem, Business Models, Investment Decisions, and Challenges has high operating costs in the. This can be harder to sustain given the new emerging competition from nimble players who are using technology to attract Fintech Ecosystem 's lucrative customers.
Workers concerns about automation
– As automation is fast increasing in the segment, Fintech Ecosystem needs to come up with a strategy to reduce the workers concern regarding automation. Without a clear strategy, it could lead to disruption and uncertainty within the organization.
Employees’ incomplete understanding of strategy
– From the instances in the HBR case study Fintech: Ecosystem, Business Models, Investment Decisions, and Challenges, it seems that the employees of Fintech Ecosystem don’t have comprehensive understanding of the firm’s strategy. This is reflected in number of promotional campaigns over the last few years that had mixed messaging and competing priorities. Some of the strategic activities and services promoted in the promotional campaigns were not consistent with the organization’s strategy.
Low market penetration in new markets
– Outside its home market of Fintech Ecosystem, firm in the HBR case study Fintech: Ecosystem, Business Models, Investment Decisions, and Challenges needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
Need for greater diversity
– Fintech Ecosystem has taken concrete steps on diversity, equity, and inclusion. But the efforts so far has resulted in limited success. It needs to expand the recruitment and selection process to hire more people from the minorities and underprivileged background.
High cash cycle compare to competitors
Fintech Ecosystem has a high cash cycle compare to other players in the industry. It needs to shorten the cash cycle by 12% to be more competitive in the marketplace, reduce inventory costs, and be more profitable.
Skills based hiring
– The stress on hiring functional specialists at Fintech Ecosystem has created an environment where the organization is dominated by functional specialists rather than management generalist. This has resulted into product oriented approach rather than marketing oriented approach or consumers oriented approach.
Interest costs
– Compare to the competition, Fintech Ecosystem has borrowed money from the capital market at higher rates. It needs to restructure the interest payment and costs so that it can compete better and improve profitability.
Slow to harness new channels of communication
– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, Fintech Ecosystem is slow explore the new channels of communication. These new channels of communication mentioned in marketing section of case study Fintech: Ecosystem, Business Models, Investment Decisions, and Challenges can help to provide better information regarding products and services. It can also build an online community to further reach out to potential customers.
Aligning sales with marketing
– It come across in the case study Fintech: Ecosystem, Business Models, Investment Decisions, and Challenges that the firm needs to have more collaboration between its sales team and marketing team. Sales professionals in the industry have deep experience in developing customer relationships. Marketing department in the case Fintech: Ecosystem, Business Models, Investment Decisions, and Challenges can leverage the sales team experience to cultivate customer relationships as Fintech Ecosystem is planning to shift buying processes online.
Capital Spending Reduction
– Even during the low interest decade, Fintech Ecosystem has not been able to do capital spending to the tune of the competition. This has resulted into fewer innovations and company facing stiff competition from both existing competitors and new entrants who are disrupting the industry using digital technology.
Opportunities Fintech: Ecosystem, Business Models, Investment Decisions, and Challenges | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities highlighted in the Harvard Business Review case study Fintech: Ecosystem, Business Models, Investment Decisions, and Challenges are -
Building a culture of innovation
– managers at Fintech Ecosystem can make experimentation a productive activity and build a culture of innovation using approaches such as – mining transaction data, A/B testing of websites and selling platforms, engaging potential customers over various needs, and building on small ideas in the Technology & Operations segment.
Reconfiguring business model
– The expansion of digital payment system, the bringing down of international transactions costs using Bitcoin and other blockchain based currencies, etc can help Fintech Ecosystem to reconfigure its entire business model. For example it can used blockchain based technologies to reduce piracy of its products in the big markets such as China. Secondly it can use the popularity of e-commerce in various developing markets to build a Direct to Customer business model rather than the current Channel Heavy distribution network.
Using analytics as competitive advantage
– Fintech Ecosystem has spent a significant amount of money and effort to integrate analytics and machine learning into its operations in the sector. This continuous investment in analytics has enabled, as illustrated in the Harvard case study Fintech: Ecosystem, Business Models, Investment Decisions, and Challenges - to build a competitive advantage using analytics. The analytics driven competitive advantage can help Fintech Ecosystem to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
Lowering marketing communication costs
– 5G expansion will open new opportunities for Fintech Ecosystem in the field of marketing communication. It will bring down the cost of doing business, provide technology platform to build new products in the Technology & Operations segment, and it will provide faster access to the consumers.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Fintech Ecosystem can build a diversified supply chain model across various countries in - South East Asia, India, and other parts of the world. This reconfiguration of global supply chain can help, as suggested in case study, Fintech: Ecosystem, Business Models, Investment Decisions, and Challenges, to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Fintech Ecosystem to expand its talent hiring zone. According to McKinsey Global Institute, 20% of the high end workforce in fields such as finance, information technology, can continously work from remote local post Covid-19. This presents a really great opportunity for Fintech Ecosystem to hire the very best people irrespective of their geographical location.
Identify volunteer opportunities
– Covid-19 has impacted working population in two ways – it has led to people soul searching about their professional choices, resulting in mass resignation. Secondly it has encouraged people to do things that they are passionate about. This has opened opportunities for businesses to build volunteer oriented socially driven projects. Fintech Ecosystem can explore opportunities that can attract volunteers and are consistent with its mission and vision.
Finding new ways to collaborate
– Covid-19 has not only transformed business models of companies in Technology & Operations industry, but it has also influenced the consumer preferences. Fintech Ecosystem can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Fintech Ecosystem can use these opportunities to build new business models that can help the communities that Fintech Ecosystem operates in. Secondly it can use opportunities from government spending in Technology & Operations sector.
Buying journey improvements
– Fintech Ecosystem can improve the customer journey of consumers in the industry by using analytics and artificial intelligence. Fintech: Ecosystem, Business Models, Investment Decisions, and Challenges suggest that firm can provide automated chats to help consumers solve their own problems, provide online suggestions to get maximum out of the products and services, and help consumers to build a community where they can interact with each other to develop new features and uses.
Leveraging digital technologies
– Fintech Ecosystem can leverage digital technologies such as artificial intelligence and machine learning to automate the production process, customer analytics to get better insights into consumer behavior, realtime digital dashboards to get better sales tracking, logistics and transportation, product tracking, etc.
Changes in consumer behavior post Covid-19
– Consumer behavior has changed in the Technology & Operations industry because of Covid-19 restrictions. Some of this behavior will stay once things get back to normal. Fintech Ecosystem can take advantage of these changes in consumer behavior to build a far more efficient business model. For example consumer regular ordering of products can reduce both last mile delivery costs and market penetration costs. Fintech Ecosystem can further use this consumer data to build better customer loyalty, provide better products and service collection, and improve the value proposition in inflationary times.
Learning at scale
– Online learning technologies has now opened space for Fintech Ecosystem to conduct training and development for its employees across the world. This will result in not only reducing the cost of training but also help employees in different part of the world to integrate with the headquarter work culture, ethos, and standards.
Threats Fintech: Ecosystem, Business Models, Investment Decisions, and Challenges External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study Fintech: Ecosystem, Business Models, Investment Decisions, and Challenges are -
Instability in the European markets
– European Union markets are facing three big challenges post Covid – expanded balance sheets, Brexit related business disruption, and aggressive Russia looking to distract the existing security mechanism. Fintech Ecosystem will face different problems in different parts of Europe. For example it will face inflationary pressures in UK, France, and Germany, balance sheet expansion and demand challenges in Southern European countries, and geopolitical instability in the Eastern Europe.
Aging population
– As the populations of most advanced economies are aging, it will lead to high social security costs, higher savings among population, and lower demand for goods and services in the economy. The household savings in US, France, UK, Germany, and Japan are growing faster than predicted because of uncertainty caused by pandemic.
Environmental challenges
– Fintech Ecosystem needs to have a robust strategy against the disruptions arising from climate change and energy requirements. EU has identified it as key priority area and spending 30% of its 880 billion Euros European post Covid-19 recovery funds on green technology. Fintech Ecosystem can take advantage of this fund but it will also bring new competitors in the Technology & Operations industry.
Easy access to finance
– Easy access to finance in Technology & Operations field will also reduce the barriers to entry in the industry, thus putting downward pressure on the prices because of increasing competition. Fintech Ecosystem can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
New competition
– After the dotcom bust of 2001, financial crisis of 2008-09, the business formation in US economy had declined. But in 2020 alone, there are more than 1.5 million new business applications in United States. This can lead to greater competition for Fintech Ecosystem in the Technology & Operations sector and impact the bottomline of the organization.
Technology disruption because of hacks, piracy etc
– The colonial pipeline illustrated, how vulnerable modern organization are to international hackers, miscreants, and disruptors. The cyber security interruption, data leaks, etc can seriously jeopardize the future growth of the organization.
Technology acceleration in Forth Industrial Revolution
– Fintech Ecosystem has witnessed rapid integration of technology during Covid-19 in the Technology & Operations industry. As one of the leading players in the industry, Fintech Ecosystem needs to keep up with the evolution of technology in the Technology & Operations sector. According to Mckinsey study top managers believe that the adoption of technology in operations, communications is 20-25 times faster than what they planned in the beginning of 2019.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry in the industry are lowering. It can presents Fintech Ecosystem with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the sector.
Regulatory challenges
– Fintech Ecosystem needs to prepare for regulatory challenges as consumer protection groups and other pressure groups are vigorously advocating for more regulations on big business - to reduce inequality, to create a level playing field, to product data privacy and consumer privacy, to reduce the influence of big money on democratic institutions, etc. This can lead to significant changes in the Technology & Operations industry regulations.
High level of anxiety and lack of motivation
– the Great Resignation in United States is the sign of broader dissatisfaction among the workforce in United States. Fintech Ecosystem needs to understand the core reasons impacting the Technology & Operations industry. This will help it in building a better workplace.
Increasing wage structure of Fintech Ecosystem
– Post Covid-19 there is a sharp increase in the wages especially in the jobs that require interaction with people. The increasing wages can put downward pressure on the margins of Fintech Ecosystem.
Consumer confidence and its impact on Fintech Ecosystem demand
– There is a high probability of declining consumer confidence, given – high inflammation rate, rise of gig economy, lower job stability, increasing cost of living, higher interest rates, and aging demography. All the factors contribute to people saving higher rate of their income, resulting in lower consumer demand in the industry and other sectors.
Stagnating economy with rate increase
– Fintech Ecosystem can face lack of demand in the market place because of Fed actions to reduce inflation. This can lead to sluggish growth in the economy, lower demands, lower investments, higher borrowing costs, and consolidation in the field.
Weighted SWOT Analysis of Fintech: Ecosystem, Business Models, Investment Decisions, and Challenges Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers in the HBR case study Fintech: Ecosystem, Business Models, Investment Decisions, and Challenges needs to zero down on the relative importance of each factor mentioned in the Strengths, Weakness, Opportunities, and Threats quadrants.
We can provide the relative importance to each factor by assigning relative weights. Weighted SWOT analysis process is a three stage process –
First stage for doing weighted SWOT analysis of the case study Fintech: Ecosystem, Business Models, Investment Decisions, and Challenges is to rank the strengths and weaknesses of the organization. This will help you to assess the most important strengths and weaknesses of the firm and which one of the strengths and weaknesses mentioned in the initial lists are marginal and can be left out.
Second stage for conducting weighted SWOT analysis of the Harvard case study Fintech: Ecosystem, Business Models, Investment Decisions, and Challenges is to give probabilities to the external strategic factors thus better understanding the opportunities and threats arising out of macro environment changes and developments.
Third stage of constructing weighted SWOT analysis of Fintech: Ecosystem, Business Models, Investment Decisions, and Challenges is to provide strategic recommendations includes – joining likelihood of external strategic factors such as opportunities and threats to the internal strategic factors – strengths and weaknesses. You should start with external factors as they will provide the direction of the overall industry. Secondly by joining probabilities with internal strategic factors can help the company not only strategic fit but also the most probably strategic trade-off that Fintech Ecosystem needs to make to build a sustainable competitive advantage.
