Who’s Ready for Fintech? Here are Three Charts That Explain

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Fintech is All the Rage

2020 has been a year for fintech innovation. And the big accelerant has been COVID-19. When people shop at home, electronic payments take off. When people stop visiting banks, they manage their finances online. 

Stripe, a payment processing platform, has been a Silicon Valley darling, valued at $36 billion as a startup. The company powers online purchases for clients like Target and Amazon. PayPal and Square have done well too. Their share prices have soared 180% and 89%, respectively.

Then you have the Chinese startups. 

Lufax, an online wealth management and lending operation, has filed for a November IPO in New York. The biggest of them all could have been Ant, although its initial public offering (IPO) was suspended on Nov. 3. 

Still, China is now home to a $29 trillion mobile payment market. The trend of becoming a cashless society is irreversible. It’s little wonder why every traditional bank these days is touting their innovation efforts in the Fintech space. 

Who Has a Fighting Chance? 

Whether you are JP Morgan Chase or AXA or Mastercard, the competitive landscape is fast changing. What matters are capabilities around Robo-advising, artificial intelligence, machine learning, and mobile services. These are capabilities executives have long recognized. Plastic cards,  physical branches, human advisors will soon be relics of the past. 

The traditional players are not sitting still. They won’t accommodate the new players without some fighting back. But here’s the thing: it’s hard to know which banks or insurers or credit card companies are most ready. It’s hard to say decide who has fully embraced the big trend since everyone is talking about the same thing in public. 

At the Center for Future Readiness at IMD business school, where I am director, we have been tracking companies’ readiness. My research team selected a sample of financial institutes. They then downloaded every annual report available, together with all the transcripts of investors’ earning calls. All these were fed to an algorithm. We wanted to see how companies write about themselves, and how CEOs and CFOs defend themselves during tough questioning by Wall Street analysts. We tracked how things looked over the years. 

You may say, don’t CEOs lie, or at least embellish their stories? They may. But they can’t misrepresent the market year after year for decades. And when you compare companies over a long enough time, patterns of difference emerge. 

How Digital Is Each Player?

Over the last decade, smart machines have automated tasks that no longer require programmers to set precise rules. Algorithms are forecasting demands, recommending products, detecting fraud, translating languages and much more. But traditional companies can take advantage of these algorithms only when they are fully immersed in natural language analysis, speech generation, and image analysis. They need to be digitally obsessed.

What you can measure is how often companies mention any ideas or concepts related to digital in their annual reports and investors’ calls. You then total the number of these mentions made over the years. Here’s how it looks. 

Who’s Ready for Fintech? Here are Three Charts That Explain -

You can see a divergence. 

But of course, just because companies are thinking and talking a lot about digital, it doesn’t mean they are meaningfully bringing those innovations into the marketplace. If they spread their investments everywhere, and don’t focus on a few areas, money and resources get wasted. 

The only way to win is to generate tremendous momentum toward accomplishing a few things that are truly vital. Without making tough choices, a team ends up making a millimeter of progress in a million directions. And that includes digital. 

Are They Focused and Committed? 

So we need a second measure. We need to look at how focused and committed companies are. Are they merely open-minded and exploring everywhere? Or are they committed to exploiting a few focused areas to their full potential? 

Here’s how it looks when we combine this exploit-explore spectrum with digital on a two-by-two grid.

Who’s Ready for Fintech? Here are Three Charts That Explain -

This is a combined view of how digitally savvy these companies are, and how committed they are to exploiting an opportunity. 

  • Quadrant 1: 

They are focused and committed to the digital trend. The exploit new opportunities to their fullest. These are Visa and Mastercard of the world. 

  • Quadrant 2: 

Then you have ING. It is digitally savvy, but seems to have difficulties in committing itself to a narrower set of areas. It keeps “exploring.” The danger of this “spray and pray” strategy is that none of the innovation gets scaled very far. 

  • Quadrant 3: 

Here is a transition state. These companies are exploring new areas, but they are not yet digitally aware. They are bumping around in the dark. 

  • Quadrant 4: 

Then you have companies like AIG and AXA, which still focus in exploiting the old market opportunities. They are trapped in their past success. 

How Preparedness Translates Into Resilience

Does any of this matter, you may ask. What stands out is the share price correlation during the COVID-19 pandemic. All three companies in Quadrant 1 are faring far better than the rest. Their share prices have recovered or surpassed the level they were at before the start of the pandemic. These companies rebound faster than others. They are more resilient.

Who’s Ready for Fintech? Here are Three Charts That Explain -

Notice that in our previous analysis, we are only feeding our algorithm with textual description. We only track how companies talk about themselves. It’s a rough gauge of the mindset of these companies. This mindset—a focus on exploiting digital opportunities—has likely translated into sustained investments. And those investments are paying off now. Digital trends are speeding up. Opportunities favor the prepared. The stock market is noticing. 

Stay healthy,

Howard Yu signature

This article is co-authored with Angelo Boutalikakis, a research associate at the LEAP Readiness Project.

Leave a Comment


  1. Impressed by the work and metrics you put out. Very clear. Focus is important. Would be interested if this metric could be applied to the early tech companies; Cisco, Oracle, SAP, comparing them to the newer ones.

  2. Great article, as usual well researched and written in an accessible way. Keep it up Howard. Interesting would be to narrow it down per subsector, banks vs banks, insurance vs insurance, payment provider vs payment provider, as I feel the difference may not be as wide, but nevertheless a compelling story, especially in a East vs West perspective

  3. Excellent article! Going cashless/contactless is essential to stay safe – it’s part of the ‘new norm’. We are living in a fast-moving fintech era, banks and tech companies really need to keep up.

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