IEB publishes global ranking of competitors in the financial sector

Posted by media on July 14, 2016 at 9:00 AM

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Spanish Institute of Stock Market Studies IEB - an affiliate of Complutense University and sponsored by the Madrid Stock Exchange - has recently published its third Annual Ranking of Competitors in the Financial Sector.

The list, compiled by IEB’s Research Department under Rodrigo Garcia de la Cruz, Director of Innovation and Financial Technology, aims to "identify, study and assess the threat of each of the fifteen biggest financial competitors in the sector" worldwide.

In this post we have summarized the report with an overview of the exciting new developments taking place within the finance industry.

This post is also available in Spanish.


Ranking of the top 15 competitors in the financial sector worldwide

The IEB ranking has divided the 15 main competitors in the financial world into three categories:

  1. The first category consists of the top five tech multinationals, Facebook, Apple, Google, Amazon and Paypal, also known as BigTech companies. 

  2. The second encompasses so-called Fintech companies split into five subgroups: equity lending & crowdfunding; payments & transactional; personal financial management (PFM) & staff advisory, investment & wealth management; finally, blockchain and bitcoins.

  3. The third and final group features the new digital banks. The IEB focused its analysis of this category on Atom Bank, Moven, Simple, Number26 and Fidor Bank who have attracted the highest levels of investment since December 2015.

The report analyzes the threat that each company and subgroup poses to the traditional banking sector, as well as, exclusively for this third edition, the level of cooperation they have so far shown with the financial sector.

BigTech companies position relative to traditional banking

In 2015, the BigTech group have shown only subtle variations in the way they interact with traditional banks. Facebook has increased in its threat rating from 7 to 8 points out of a possible 10 for starting to allow money sending through Facebook Messenger. Apple has decreased as a threat, especially since its Apple Pay system uses credit cards from traditional banking entities. The only real remaining threat is Paypal, who continues to score highly with 9 points due to their strong presence in the financial market: they currently have 179 million active accounts in 203 markets and are able to operate using 100 currencies.

Among the BigTech companies that enjoy a more collaborative relationship with banks, Facebook (8/10 points for collaboration) comes out trumps while Amazon and Paypal remain the most reluctant to reach out to traditional banking channels (both scoring a low 6/10).

Comparison Ranking 2015 - 2016

Companies and Sectors 2015
Threat Rating
2016 
Threat Rating

2016
Collaboration Rating

BIGTECH Facebook  7  8  8
Apple  8  7
Google
Amazon
Paypal



The threat and opportunity of Fintech

Meanwhile, financial technology companies (or fintech) have notable variations in their interaction with banks over the previous editions of the IEB’s Annual Ranking Lists.

Those operating in the field of lending and crowd equity have recently reduced their threat ranking from 9 to 7 points as their business models have not been consolidated internationally, meaning that their volumes are not as yet in any sort of substantial competition with banks. Bitcoin however, remains a threat with 8 points although, paradoxically, blockchain enjoys a high collaborative value due to this new technology opening up a nascent but promising opportunity to improve traditional banks’s overall efficiency.

Comparions Ranking 2015 - 2016

Companies and Sectors 2015
Threat Rating
2016 
Threat Rating
2016
Collaboration Rating
FINTECH Lending & Crowd Equity  9 7 6
Payments & Transactional  7 7 7
PFM & Personal Advisory  6
Investment & Wealth Management
Blockchain & Bitcoins 5-8 8-1 
* New entry to 2016 ranking


The big threat of digital banking

IEB’s report attributes a greater threat rating to new digital banks, namely neobanks and challenger banks - no less than 10 points. The reason is simple: these new digital entities are competitors running at much lower costs than traditional banks, with greater user experience and expertise in personalized customer service, not to mention better use of technology having been established in a digital era.


The difference between a neobank and a challenger bank is that the latter has the necessary banking license to operate legally, whereas the former does not and therefore is required to partner with traditional banks.

Moven, Simple and Number 26 are neobanks, whereas Atom and Fidor Bank are challenger banks.


Paradoxically, their high threat rating does not compromise their collaboration rating, which the IEB identifies as being 6 points and places these new banks on par with the lending and crowd equity verticals, Amazon and Paypal.

Comparison Ranking 2015 - 2016

Companies and Sectors 2015
Threat Rating
2016 
Threat Rating
2016
Collaboration Rating
DIGITAL
BANKS
Neo & Challenger banks  * 10 6
 * New entry to 2016 ranking


Predictions and conclusions

The IEB report’s financial forecasts note that large technological companies will continue to work for fully entering the financial services market in 2016. This was substantiated by the recent Financial Innovation Now coalition of Google, Amazon, Apple, Intuit and Paypal - a strategic move that makes the advent of the “Uber Bank” an ever-growing possibility.

The development of APIs has facilitated the integration of fintech entreprises into open bank platforms, allowing them to effectively become functioning financial marketplaces. But it can also be expected that the same fintech companies will eventually stand side-to-side with traditional banks as a new league of fintech bank, such is already the case with Fidor.

The new digital banks will continue their upward trend, confirmed by the fact that the UK has given fourteen banking licenses to such entities. An explosion in the number of new digital banks will depend in any case on their ability to gain scale in a complex regulatory environment.

The 2016 IEB Ranking has incorporated a section on new actors situated at the crossroads between banking and technology, such as telcobanks - the result of the entry of telecom operators in the financial services field - or Asian BATs - acronym for the Chinese giants Baidu, Alibaba and Tencent - whose fingers in the future financial pie are to be expected, as has already been the case with their Western counterparts, GAFA, a group comprising - you guessed it - Google, Apple, Facebook and Amazon.

This post is also available in Spanish.

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