Potential of blockchain in a simple way

I noticed a great TED talk about how blockchain could influence industries and wealth distribution. We all know that blockchain is all about trust and how to quickly exchange assets in broader meaning. Don Tapscott managed to simplify view on how future of internet could look like due to blockchain technology and how economy could be influenced.

If key benefit is to merge payments and settlement in one blockchain transaction via smart contracts, practically this would trigger number of opportunities in vertical and horizontal value chains.

Mentioned key potential benefits of blockchain:

  • immutable records
  • sharing economy
  • ending remittance ripoff
  • recapturing our identities
  • ensuring compensation for creators of value

I believe that they are valid options, however there are years to come before such benefits will really solved some of global problems. Before monetising any developed smart contract models, first strategist will have to think how to change current business models and start thinking about future potential of blockchain technology.

Key question is not whether you will be first – as train is already leaving a station – but how we will quickly adopt new technology in our business model. Linking business model to core blockchain smart assets (data, intellectual rights, assets, etc.) will affect current intermediaries. Think about in number of industries who is potentialy endangered and how and who can benefit out of it. It is not only about financial industry, its about all assets registries, intellectual rights benefits, managing digital identities, etc. But key cornerstone will be how to manage all this benefits in an added value bundle for end users either in perspective of costs of living or improved user experience in daily reality.

Currently industry is in developing phase of using technology in potential business models. Private initiative will sooner or later deliver something practical. However, if benefits are those mentioned in TED talk, key question is why governments or supranational institutions are not yet generally thinking how to embrace a technology to improve public services and improve general standings for performing business in individual countries around the globe.




“Fintech” banking business models and importance of risk management

Currently there is a lot of discussions whether banking industry is endangered by fin-tech start-ups. In last weeks we are noticing that P2P financing is losing a momentum and we see opinions that there is no major progress in blockchain industry. On the other hand Moven just published beta version of Android app, Apple Pay is still raising turnover, Venmo transaction numbers are still tremendously growing. Looks like that big tech companies will succeed, as other P2P and crowdfunding models will remain in short-term a niche market.

We believe that business models which are developing in fin-tech industry will gain on a basis of one of four key strategic competitive strengths:

  • user experience driven competitive strength — customer centric model
  • technology or process driven competitive strength — new technology model
  • cloud cost driven competitive strength — banking as a service model
  • risk management competitive strength — underwriting model

We tried to map quite a number of fin-tech companies and other products and services into a venn diagram in order to evaluate if such companies do have potential to surpass early stage of their life cycle. As nobody can doubt in their innovative potential, key problem for them is that clients in usage of banking services are conservative and innovative potential is not their key preference. Trust and stability are still important.

4-Circle Venn Diagram - Fintech business modelsWe are of opinion that development in directions of AI, Blockchain, Biometrics, Alternative scoring, … are just methods to improve processes, quality and service to a customer. It is true being first or not being is an imperative, specially for start-ups, however banks are adapting to developed solutions and are leveraging key strengths they possess: market share and productivity. Some banks for sure will not service changed millennium client’s needs adequately. Due that their perceived quality will decrease and will influence their profitability. But my opinion is that cornerstone of disruption and innovative potential on long-term will be risk management. How banks will be able to integrate statistically “six sigma” proper risk decisions with usage of AI, big data, crowdfunding and crowdsourcing, is a key opportunity, as this will give them an option to manage their margins better than others and will increase trust of those millenniums with higher income. In risk management banks possess competences which I doubt could be surpassed by fin-tech industry.

If we review consumer stand point, we could say that for consumer a trend of decreasing fees from payment and other services will remain, firstly due to big-tech competition and secondly due to changes in regulation. Short-term pressure from start-ups will also be influential, but on long-term will not be a key factor. It will help to segment customers accordingly. Due that banks will need to find other sources of income. Will this source of income be gathered by integrating e-accounting, e-commerce, PFM or other horizontal integrations to support needs of their clients — time will show. Maybe BaaS services will enable additional income for some banks. But as clients will be able to choose among different banking approaches, we can say banking will remain, it will change, and majority of banks will prevail. However consumers will have ability to manage their privacy either in one bank or in distributed products and services across the world. So banks will have to adapt in a way that risk management approach to client will be developed both with building relationship that clients will use main account constantly within the bank to generate amounts of data and on the other hand will have to be able to gather client’s data from numerous products client will use in different regulations and among different digital identities. If trend will be that an average consumer will own number of digital identities (for different purposes), it will enable niche players to co-exists with banks on a long-term. Risk Management Fintech futureAnd again, banks will have to understand consumer digital identities, their usage and misuse, will influence their risk management models in all types of risks. Banks with better insight to consumer privacy trends, consumer digital identities and risks rising from new behaviors will be able to develop better decision models and leverage current technological and social trends, like already mentioned with AI, biometric, big data and crowdsourcing. Such banks will be able to protect or further develop market standing.

If we look from business model approach, either from industry point of view or consumer point of view, we can be sure only of one thing, trust will remain to be the key element of banking. And trust is gained with long-term holistic and accurate risk management.


Future of insurance: breakdown of underwriting and client data connectivity

In the insurance sector changes are de facto emerging in the development of “underwriting”, in rise of changed business models and in arrival of new players in the form of technology giants and start-ups. On the other hand, changes in the financial services industry are enabling insurers to follow vertical and horizontal turnaround in business strategies. Pressure due to regulatory amendments and scrutiny will continue to rise further. Market pressure is going to threaten unprepared insurers sooner or later.

Analyses of development of business models in insurance industry - Analyses of development of business models in insurance industry-3

Business Processes Insuretech Digital Transformation Scenarios

Scattered distribution and price transparency, distributed economy, autonomous vehicles, external sources of capital, cheaper and smarter sensors, internet of things, drones technology, ”blockchain” and the emergence of standardized platforms are changes that will affect the insurance market and business processes.

New players in the market

Lynx BPM analyzed global emerging digital business models in the insurance industry and other financial services. We detected several potential business process development scenarios.

Please evaluate them (see picture Business Processes Insurtech Digital Transformation Scenarios) and give us your opinion. How probable is transition to possible future business processes that will create added value for insurers?

Anyhow do you follow start-ups in the insurtech industry? We believe following are to be watched:

  • Human Condition Safety (HCS) is start-up building an ecosystem that keeps workers safer in the industries in which they face the most physical risk. Human Condition SafetyTechnology creates measurable improvements to reduce the frequency and severity of work-related injuries. Will business model allow insurers to integrate with developed technology and allow improved risk and claim management. AIG is HCS business partner.
  • Brolly is free personal insurance concierge that will be available online and on your mobile phone, powered by artificial intelligence. It will help customers to find policy with over- or under-insurance with best price possible. HeybrollyAs it will increase price transparency the model is to be followed to see how monetization will be delivered in next step. Will be there a room for insurers to participate? Is it possible that next step will be to upgrade model to P2P?
  • Sureify is a platform that bridges the gap between carriers and their current and future policyholders. It shows a potential to bridge a gap to new business models Sureify Labsin whole life insurance industry. Covering omni-channel support, up-sale, risk management and rewards systems. One of potential solutions that will cover all insurers business processes in a segment of life insurance.
  • Knip as digital insurance manager. On the other side shows a potential as on-line broker similar to Brolly however relying on document management and digital on-
    Anzahl der Makler-App-Downloads in Deutschland, Österreich und der Schweiz im vergangenen Jahr. Foto: © Pro.prioridata.com

    Das Investment.com: market data for downloads of brokers apps

    boarding, underwriting and claim management with holistic customer-oriented approach. Which financial intermediary will be interested to put Knip in his portfolio of services?

  • On the other hand we have CoverWallet focusing in SME clients with approach to Coverwalletoffer online brokerage services to cover all risks from general liability to business interruption. Business insurance is managed not only with superior user experiences but is also supported in a way that all other interactions of clients with a broker are reliable and tackled in perceived manner. Similar ones are Simplybusiness with some niche risk coverages and Next Insurance which promise transparency and fast boarding.
  • Finally, additional broker who covers personal and business risks. Worry+Peace it is.
  • Trov as a niche insurer of personal items for risk of damage, loss or theft. They are focusing Trovinto UX perfection and covering already almost 1 million of items. Is such a insurer able to materially undermine Point-of-Sale insurance market. How intermediary fee structure will be influenced in long-term?
  • Ladder is focusing in simplicity: smart and simple way to insure your life. Tech start-up with goal to offer straightforward not-complex life insurance in a streamlined fashion. First customer are able to enroll for beta testing.
  • Force Diagnostics is trying to grab market of life insurance underwriting. According to them they bundled all necessary and relevant life insurance underwriting tests into one, easy-to-use, AaHa! Rapid Health Index Exam kit. Their focus is to add value to core carriers business processes.
  • Insure Social Media try to leverage their ability to be outsourced to handle all social media marketing. A model to improve “moments of truth”?Insquik
  • Insquik lets you use their white label solution and customize it with your own colors and logo. It enables SaaS and support agents to enrich usage of quick 10-minutes online underwriting process. Will independent SaaS solutions find market among insure carriers?
  • Atidot develops a cloud predictive analytics platform for actuarial and risk management purposes. Similar focus is also having QuanTemplate and Analyzere, however each of them focusing in different spectrums of data management and analytics.
  • PolicyGenius key strength compared to other on-line brokers is to support on-line advice and client risk evaluation in first step of value added stream. policygeniusIs this a difference to other on-line brokers sufficient to boost growth?
  • On the other hand RiskGenius is supporting insight for brokers with automatic review of clauses in individual policies and enables them quicker gap analyses and improved reliability. Main clients are brokers and not end customers. Is this delivering less competition to a platform?
  • Silverfinch is a little bit different start-up. It is supporting Solvency II reporting requirements with linking asset managers and insurers. Similar company offering similar service is Fundsquare, however with broader range of services for fund managers supporting regulatory and other needs.
  • In health coverage there is a data analytics platform FitSense which works with insurance companies to personalize life and health insurance. Its enables PaaS approach, wearables usage and data analytics to add value to insurers.
  • Broker who’s speciality is weather risk is Meteo Protect.

In todays blog we did not mentioned P2P start-ups or auto product range start-ups. We will leave them for next time in order to be able to review Lemonade solutions as first P2P carrier. We will also focus on other P2P providers like, blockchain P2P solution Dynamis and conceptually different approach of P2P Friendsurance.

As number of start-ups is still rising in insurtech, this will make it possible to incumbent industry that they will be able to monitor and follow business models in future. Different strategies will be available to them.

Personally I doubt that big number of these start-ups will succeed in long term, however many of them will be in not so far future brought under an umbrella of big guys in financial industry or tech-giants.

Energy, peer-to-peer and blockchain

Few days ago joint venture TransActive Grid published a notice that they had succesfully performed paid transaction via their innovative new peer-to-peer energy transaction platform based on blockchain. As so people are able to manage electric surpluses to the microgrid and sell them in the neighbourhood. TransActive Grid is a joint venture of LO3 Energy, a hardware company who builds tools and develop projects to support and accelerate proliferation of the distributed energy, utilities and computation sharing economy of the future, and Consensus Systems, a software company who enables new services and business models to be built on the blockchain.

Their success can in longterm strongly influence not only distibution of energy, but also have additional impacts on business models and social systems.

Connecting blockchain and energy distribution and in next step also self-managed devices with combination of AI, blockchain and sensors will lead to so called device democracy. How this will influence systems like:

  • distribution of energy,
  • scattered distribution and price transparency,
  • sustainability behaviour of social systems,
  • energy optimizations in production plants and manufacturing,
  • energy optimizations in consumer behavior,
  • consumer sustainability awarness,
  • pricing models,
  • energy price oscillation, and
  • vertical and horizontal changes in business strategies of incumbent energy industry.

More on influence of blockchain to energy distribution you can also find in this article. I am sure that future will bring new distrubution models and optmized energy consumption business models. Digital transformation in energy production and distribution will start in near future and open mind, out-of-box, approaches will be necessary for incumbent energy industry.



Future of banking: fintech

Banking sector changes in business models and the arrival of new players in the form of technology giants and start-up businesses are in full swing. This changes allows banks both vertical and horizontal changes in business strategies. Pressure by regulatory changes (PSD2, Consumer Protection, Data Protection, Alternative Funds Regulation, etc.) and changing business models is threatening unprepared banks. Regulatory pressure in the future will increase even further. Together with increased market pressure banks should already free their resources and cash flows for the journey to the digital business. Scattered distribution and price transparency, P2P platforms, crowd financing, new payment models, rails and ways of settlement, cheaper and smarter sensors, internet of things, “blockchain” and the emergence of API platforms and BaaS technologies are affecting the banking market. All represent an opportunity even for small banks at the global market, but it also raises new risks that the banking  environment may be difficult to accept.

The transformation of business models and adaption of business processes will require enormous consumption of resources, which are already limited. Banks resources are mainly focused into adjusting the branch network range and into segmentation of products and sales channels. Focus is also into ensuring compliance with regulation and into achieving cost-effective operations. Changes in customer behavior and expectations, new entrants and new technologies represent a  significant threat. Wealthier customers will be the first to adopt a new offering in the market. Are we reaching to them? Robo-advisors, price transparency and the possibility of integration of payment systems with digital giants may heavily impact bank margins. Are you ready to change?

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