FinTech Strategy: Linking Entrepreneurship, Finance, and Technology (Palgrave Studies in Democracy, Innovation, and Entrepreneurship for Growth)

"This book explores how new and small ventures with comparatively fewer financial resources have been able to compete with big banks and financial institutions. It discusses entry, competition, and growth strategies based on new business models enacted by current FinTech ventures. An analysis of strategies for Fintech and of cases from banked as well as non-banked and underbanked customer segments produces a framework based on effectuation, resulting in a final discussion of the broad societal outcomes of FinTech related to financial inclusion, the digital divide, and the UN's Sustainable Development Goals. This book, linking theory with practical application, offers scholars a comprehensive strategic view on FinTech from effectual, causal, and entrepreneurial innovation standpoints."--Back cover Preface 7 Acknowledgments 12 Contents 13 Abbreviations 18 List of Figures 19 List of Tables 21 Part I The Financial-Entrepreneurial Innovation-Technology Convergence 22 1 How Fintech Was Born? 23 1.1 The “Fin” in Fintech: Recent Evolution of the Financial Industry 23 1.2 The “Tech” in Fintech: The Internet and Data Revolution 27 1.3 A Growing Cohort of Pushing Entrepreneurs 28 1.4 The Fintech Ecosystem 30 1.5 The Fintech Product Line 32 1.5.1 Payments 33 1.5.2 Crowdlending 33 1.5.3 Investments 34 1.5.4 Insurance 34 1.5.5 Regulation 35 1.6 Conclusion 35 References 36 2 Technology as a Resource for FinTech 37 2.1 The Resource-based View of the Firm 37 2.2 Dynamic Capabilities 40 2.3 Consequence: Sustainable Competitive Advantage 43 2.3.1 Brands 44 2.3.2 Value Proposal 45 2.3.3 Customer Relationships 46 2.4 A Case Study Connecting Resources and Capabilities in Fintech 46 2.5 A Survey of Technologies 47 2.5.1 Block Chain 48 2.5.2 Big Data 48 2.5.3 Artificial Intelligence 49 2.5.4 Applications Programming Interfaces 50 2.6 Conclusion 50 References 51 3 Entrepreneurship in the FinTech Industry 53 3.1 Is There Anything Left to Innovate? 53 3.2 Taxonomy of Innovations 54 3.3 Methodologies for Innovation Management 57 3.3.1 Drivers of Innovation Methodologies 58 3.3.2 Innovation Stage-Gate Process 61 3.3.3 Agile Methodologies 63 3.4 Open Models of Innovation 63 3.4.1 Sources: R&D, Employees, and Customers 64 3.4.2 Open Banking 66 3.4.3 Influence of Financial Regulation in Fintech Innovation 67 3.5 Entrepreneurial Innovation 70 3.6 Scaling and Exit Values 72 3.7 Conclusion 76 References 76 Part II Exploring and Exploiting Opportunities in Fintech 78 4 Dynamics of Fintech and the Broad Financial Industry 79 4.1 Financial Industry 79 4.2 Traditional Dynamics: Incumbents 80 4.3 Altered Dynamics: New Fintech Players 81 4.4 Fintech Entry Strategies 83 4.4.1 Entering the Market 85 4.4.2 Growing in the Market 85 4.5 Competitive Reactions 87 4.5.1 Compete 87 4.5.2 Collaborate 88 4.5.3 Co-opete 89 4.6 Factors to Consider When Engaging in Fintech Alliances as Growth Strategies 90 4.7 A Framework to Assess Alliance Opportunities in Fintech 93 4.8 Conclusion 96 References 97 5 Financial Consumer Behavior and Decision-Making 99 5.1 Consumer Goals 99 5.2 Self-Efficacy and Self-Control 101 5.3 The Role of Financial Education 102 5.4 Prospect Theory 104 5.5 Heuristics 108 5.6 Cognitive Biases and Goals 109 5.7 Credence 111 5.8 Technology Adoption 112 5.9 Risk and Trust 115 5.10 How to Understand Consumer Behavior in Fintech 117 5.11 Conclusion 120 References 121 6 Consumer Segments in the Fintech Market 124 6.1 Consumers Segments and Market Orientation 124 6.2 Models and Frameworks to Understand Consumer Segments 125 6.3 Clustering Techniques 129 6.4 A Value-Based Segmentation 132 6.5 Segmenting by CLV 135 6.6 Strategic Framework to Address Segments in Fintech 136 6.6.1 Find Markets 136 6.6.2 Select the Segment 137 6.6.3 Prepare to Talk to Your Segment 138 6.7 Conclusion 138 References 138 7 Differentiation and Sustainable Competitive Advantage 141 7.1 Attributes of Fintech Products That Make a Difference 141 7.1.1 Generation of Unique Datasets from Fintech Products 142 7.1.2 Intensive Data Analysis for Prediction 143 7.1.3 Use of Multi-Sided Digital Platforms 144 7.2 Network Effects 145 7.3 Sources of Sustainable Competitive Advantage 147 7.3.1 Economies of Networks 147 7.3.2 Counter Position 148 7.3.3 Branding 148 7.3.4 Cornered Resources 149 7.3.5 Process-Based 149 7.4 Conclusion 150 References 150 8 Effectuation as a Strategic Approach 152 8.1 Managerial Differences with Fintech 152 8.2 Causal Approach for Big Corporations 152 8.3 Realities of Fintech in the Financial Industry 154 8.4 Effectuation for Fintech Entrepreneurship 156 8.5 Entrepreneurial Marketing 161 8.6 An Ambidextrous Framework 164 8.7 Conclusion 167 References 167 9 Measuring Venture Performance 169 9.1 Importance of Marketing Metrics 169 9.2 The Strategic Marketing Process 170 9.3 Systems of Metrics for Marketing Processes 173 9.3.1 Online Metrics 173 9.3.2 Offline Metrics 175 9.3.3 Attribution Problem 176 9.3.4 Product, Brand, and Price Metrics 178 9.4 Building a Metrics System to Track Business Goals 179 9.5 Conclusion 181 References 181 Part III Broad Outcomes of Fintech 182 10 Societal Outcomes of Fintech 183 10.1 Changes in Financial Industry 183 10.2 Societal Outcomes of Fintech 185 10.2.1 Inclusion 185 10.2.2 Development 186 10.2.3 Poverty Reduction 186 10.2.4 Women Empowerment 187 10.2.5 Sustainability 188 10.3 Pending Challenges 189 10.3.1 Access Is Not Enough 189 10.3.2 Digital Divide 190 10.3.3 Financial Divide 191 10.3.4 Money Laundering 191 10.3.5 Another Systemic Financial Crisis? 192 10.4 Ethics in Fintech 193 10.5 Conclusion 195 References 195 11 What’s Next: Assembling Fintech Futures 198 11.1 Looking Back and Forward 198 11.2 Trends Identification for the Fintech Industry 199 11.3 An Assemblage Framework to Prospect Fintech Evolution 201 11.4 A Combined Framework to Assemble Fintech Futures 204 11.5 Conclusion 208 References 209 Index 210 This book explores how new and small ventures with comparatively fewer financial resources have been able to compete with big banks and financial institutions. It discusses entry, competition, and growth strategies based on new business models enacted by current FinTech ventures. An analysis of strategies for Fintech and of cases from banked as well as non-banked and underbanked customer segments produces a framework based on effectuation, resulting in a final discussion of the broad societal outcomes of FinTech related to financial inclusion, the digital divide, and the UN's Sustainable Development Goals. This book offers scholars a comprehensive strategic view on FinTech from effectual, causal, and entrepreneurial innovation standpoints. Pável Reyes-Mercado is professor at Universidad Anáhuac, Mexico, where his research focuses upon the adoption of innovations, technology-enabled marketing, and entrepreneurial marketing. He is the author of Eco-Innovations in Emerging Markets and co-editor of Reverse Entrepreneurship in Latin America This book explores how new and small ventures with comparatively fewer financial resources have been able to compete with big banks and financial institutions. It discusses entry, competition, and growth strategies based on new business models enacted by current FinTech ventures. An analysis of strategies for Fintech and of cases from banked as well as non-banked and underbanked customer segments produces a framework based on effectuation, resulting in a final discussion of the broad societal outcomes of FinTech related to financial inclusion, the digital divide, and the UNs Sustainable Development Goals. This book offers scholars a comprehensive strategic view on FinTech from effectual, causal, and entrepreneurial innovation standpoints. Pavel Reyes-Mercado is professor at Universidad Anahuac, Mexico, where his research focuses upon the adoption of innovations, technology-enabled marketing, and entrepreneurial marketing. He is the author of Eco-Innovations in Emerging Markets and co-editor of Reverse Entrepreneurship in Latin America