As robo-advisor offerings from both startups and incumbents continue to proliferate, different models for such products are emerging — some offer only automated advice, while others actually manage investments on a customer's behalf, for example.
A new global consumer survey by ING sheds some light on how consumers feel about using robo-advisors, and how various models impact their perception. The study found that some two thirds of European consumers would use a robo-advisor, but only under specific circumstances.
Here are some of the study's key findings on Europe:
- Control matters. Twenty-six percent of Europeans would only delegate investment management to a robo-advisor if their final approval for its decisions was required. The report also found that consumers would prefer to retain control of their investments instead of delegating to a computer even if it meant lower expected returns. This could spell trouble for fully automated robo-advisor offerings, but may offer hope for hybrid models.
- Automated advice trumps investment. The study found that 29% of Europeans want financial advice from robo-advisors, but not automated financial decisions. This indicates that while consumers might be unsure about robo-advisors' judgment to manage investments, they still think they can generate useful insights into their finances. That could suggest consumers are more actively seeking financial advice and education than access to investment.
These results could spell good news for European retail banks. The findings illustrate that European consumers still highly value a human element in their financial advice and investment management. This is further reflected by the fact that European consumers use self-directed investment much less than their US counterparts, and could present an opportunity for European retail banks, to which consumers have historically gone to for financial advice and investment planning. If these trusted players were to launch their own robo-advisor offerings, they could stand a better chance at onboarding customers than startups, many of which are still struggling to win consumer trust.
Most fintechs, even the unicorns, aren't profitable.
Despite having innovative ideas and live products that are successfully disrupting the financial services industry, these fintechs' business models are increasingly proving to be fundamentally flawed.
Sarah Kocianski, senior research analyst for BI Intelligence, Business Insider's premium research service, has compiled a detailed report on fintech profitability that explores the reasons why fintechs are struggling to turn a profit by providing examples of the unique problems each segment of fintech faces. It also outlines what some firms are doing to overcome these challenges, and highlights the key factors to be considered by fintechs and their investors if they want to reach profitability.
Here are some of the key takeaways from the report:
- Even the largest fintechs have failed to achieve meaningful profits. For example, British unicorns Transferwise and Funding Circle have seen ever-increasing losses since launch — in the latter's case to the tune of £37 million ($48 million) in its most recent filing.
- The profitability question is becoming increasingly important. That's due to a combination of factors including declining VC investment in the sector and increasing pressure from existing investors to see returns.
- Not all fintechs want to turn a profit, but those that do are facing significant challenges. Obstacles to profitability affect all fintech segments including neobanking, robo-advising, money transfer, and marketplace lending.
- Forced to adapt their models, fintechs are employing multiple tactics to reach profitability. These include partnerships, diversification of funding sources, acting as third-party suppliers to other firms, adding new products, and seeking global expansion.
- There a number of considerations that fintechs and their investors must make, and several actions they must take, to get on the path to profitability. These include deciding whether to focus on scale, establishing a stable business plan, and assessing the benefits of varied funding sources.
In full, the report:
- Explains why the profitability question is increasingly being raised.
- Outlines why fintechs in different segments are failing to turn a profit.
- Gives examples of just how large some fintechs' losses are.
- Explores how fintechs are striving to solve the profitability problem.
- Outlines vital considerations for fintechs and their investors.
Interested in getting the full report? Here are two ways to access it:
- Subscribe to an All-Access pass to BI Intelligence and gain immediate access to this report and more than 250 other expertly researched reports. As an added bonus, you'll also gain access to all future reports and daily newsletters to ensure you stay ahead of the curve and benefit personally and professionally. >> Learn More Now
- Purchase & download the full report from our research store. >> Purchase & Download Now
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