The Innovation Mechanisms of Fintech Start-Ups: Insights from Swift's Innotribe Competition

Abstract

The emergence of nascent forms of financial technology around the globe is driven by efforts to deconstruct and reimagine business models historically embedded within financial services. Entrepreneurial endeavors to this end are diverse. Indeed, the propensity towards complexity across the fintech landscape is considerable. Bridging as it does a diverse range of financial services, markets, innovations, industry participants, infrastructures and technologies. This study aims to improve the comprehension of the global fintech landscape. It is based on the analysis of start-ups who participated in SWIFT's Innotribe competition over a three-year period. We used cluster analysis to group 402 fintech start-up firms, and then selected representative cases to create a foundational understanding of the structure of the fintech landscape. We found that six clusters capture the variety of firms and their activities. The main findings of this work are: (1) the development of fintech clusters to classify core services, business infrastructures and underlying component technologies, which characterize the fintech landscape; (2) an analysis of how fintechs synthesize different technologies to restructure and coordinate flows of financial information through competitive and cooperative mechanisms of disintermediation, extension of access, financialization, hybridization and personalization; (3) an analysis of related strategies for value creation connected with the competitive and cooperative mechanisms that were identified. Collectively, our results offer new insights into the diversity and range of emergent innovations and technologies which are transforming the financial services industry worldwide.

Stochastic hybrid decision‐making based on interval type 2 fuzzy sets for measuring the innovation capacities of financial institutions

“…For instance, Graafland (2019) and Paik, Kang, and Seamans (2019) identified that market factors are highly effective on the decision of the innovative product to be developed. In addition to them, Deng et al (2019), Gozman, Liebenau, and Mangan (2018) and Nuruzzaman, Singh, and Pattnaik (2018) focused on this issue and reached the conclusion that the products and services of competitors are shaped by the company's decision to develop innovative products. On the other side, Akgün and Chioveanu (2019), Marshall and Parra (2019) and Negassi et al (2019) identified that although a company develops an innovative product, if it fails to meet its needs in comparison with its competitors' products, this will have a negative impact on the company.…”

When function meets emotion, change can happen: Societal value propositions and disruptive potential in fintechs

“…Various papers and reports have been dedicated to research on FTs, examining among their evolutionary formation (Arner et al, 2015;Haddad and Hornuf, 2018) their functional classification (Nicoletti, 2017) as well as various other functional as well as nonfunctional dimensions (Gimpel et al, 2017;Gomber et al, 2017). Researchers have already put much effort into identifying related business models (Eickhoff et al, 2017;Schmidt et al, 2018), success factors (Lee and Teo, 2015;Nicoletti, 2017) and innovation potential (Gomber et al, 2018;Gozman et al, 2018;Puschmann, 2017). Nicoletti (2017), for example, expands upon the LASIC components presented by Lee and Teo (2015) and defines customer-centricity, low-profit margin, agility, scalability, security management, innovation and ease of compliance (CLASSIC) as the critical success factors in creating a sustainable fintech business model.…”

“…Nicoletti (2017), for example, expands upon the LASIC components presented by Lee and Teo (2015) and defines customer-centricity, low-profit margin, agility, scalability, security management, innovation and ease of compliance (CLASSIC) as the critical success factors in creating a sustainable fintech business model. Gozman et al (2018) characterize FTs' core services, business infrastructure and underlying component technologies and analyse how FTs synthesize different technologies to restructure flows of financial information through competitive and cooperative mechanisms of disintermediation, extension of access, financialization, hybridization and personalization. These mechanisms are also especially relevant when it comes to the promise of fintechs in a business-to-business context such as entrepreneurial finance, as it means cheaper and quicker access to finance, more efficient payment services, better insights into financial data, less and partly AI-driven intermediaries and, in general, a more direct access to financial suppliers (Block et al, 2018;Cumming and Groh, 2018;Owen et al, 2019).…”

“…The desire for gamification lies in three physiological and intrinsic customer needs: the need for competence, the need for autonomy and the need for social relatedness (Sailer et al, 2017). Gamification elements, for example, can facilitate financial education of customers as well as their active engagement (Gozman et al, 2018), and social relatedness is strongly related to a co-creation mindset that comprises a trend towards open innovation (Catalini and Gans, 2017) and service platforms (Havrylchyk and Verdier, 2018;Leong et al, 2017).…”

“…At the same time, the emergence of fintech companies (FTs) as digital service providers has triggered a flood of articles dedicated to identifying success factors (Nicoletti, 2017) and innovative potential (Puschmann, 2017). Similar to service innovations as a whole, early evidence concerning success factors and innovation mostly follows a purely functional approach based on technological progress (Gomber et al, 2018;Gozman et al, 2018;Nicoletti, 2017), with little insights into their emotional or societal VPs. While their role as innovative providers for entrepreneurial finance, for example, through the clever use of blockchain or AI technologies (Owen et al, 2019), has already been recognized, the importance of their corresponding societal VPs for the sustainable success of fintechs has not been overly addressed thus far, apart from an early discussion surrounding crowdfunding as entrepreneurial financing for innovations (Lehner et al, 2015;Lehner and Harrer, 2017).…”