Fintech entrants have disrupted the incumbents’ traditional models but struggle to attract profitable customers and manage the regulatory complexity effectively. Both sides need to work together to make the change and growth agenda a reality, Joerg Ruetschi writes in an essay for finews.first.


This article has been published on finews.first, a forum for authors specializing in economic and financial topics.


Digital innovation has rapidly accelerated over the last 25 years. Technology has fundamentally transformed commercial models, operating platforms, and broader customer engagement. It has now become a critical success factor for the financial industry. This has not always been the case as financial institutions (FIs) have been slow in adapting to technological innovation.

FIs are global, large-scale organizations with complex business and operational requirements. Their systems, in many cases developed over 30 years ago, require stability and remain resistant to change. Only during the last few years, the wider industry initiated in response to tumbling revenues and dramatically increased cost-income ratios multi-year transformation programs with billions of investments spend.

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Fintech became a synonym for the initiatives of a dedicated start-up community that developed new technology and services solutions outside of incumbent financial institutions (FI). These emerging players have become the innovative force across three key technologies that constitute the building blocks of the industry’s digital transformation agenda.

The first one is artificial intelligence (AI) which transforms with its components of big data, machine learning and data visualization decision-making. The second one, defined by software solutions such as application program interface (API), cloud computing and smart desktops integration, improves operational efficiency through automation, open architecture, and interoperability. The third one, distributed ledger technologies with blockchain as its main industry application, is reshaping today’s financial and legal infrastructure.

«The new operating framework is based on the design principles of open collaboration»

Value creation is a management methodology that focuses on institutional growth and performance. It is defined by the concept of intrinsic value that measures the financial impact of dedicated strategic and operational initiatives. The changed regulatory and competitive landscape challenges established commercial models with their profitability thresholds.

From a value-creation perspective, a new target operating model stays at the core of the financial industry’s transformation agenda. It replaces old with new systems while integrating emerging technologies in a broader operating framework. The objective of the incumbent is to preserve and defend its positioning while looking to start-ups to innovate and transform their commercial and operational models. Innovative fintech entrants have disrupted the incumbents’ traditional models but struggle to attract profitable customers and manage the regulatory complexity effectively. Both sides need to work together to make the change and growth agenda a reality.

The new operating framework is based on the design principles of open collaboration, integration and interoperability, delivered through an ecosystem of incumbents and innovators. Open collaborative architecture allows incumbent FIs to specialize in their core competence and embeds best-in-class services by building universal platform offerings for their clients.

«Originally, the focus was on payments»

Through a core platform, utility-like services can operationally be delivered at scale and efficiency by the established players while making sure that the regulatory requirements are fulfilled. There is inherent value in specialized technology, risk-transfer and distribution capabilities that are provided by fintech challengers. Their services are defined by differentiating sets of capabilities and getting deployed by specialized value propositions.

The combination of operational restructuring and technology innovation drives the industry’s strategic design. Open finance is the commercial and regulatory concept that defines the operational roadmap by integrating different service layers on one customer experience. This framework was initially established by the open banking standards to use APIs and enable third-party developers to build applications and services around the incumbents.

Originally, the focus was on payments but there is a much wider role for open-source technologies in building out a commercial offering across lending, investing and other financial services. Open finance integrates all the required capabilities in a broader operational framework by setting standards and best practices. They are the key pillar that transforms the financial-services business models.


Joerg Ruetschi is a value creation specialist with a passion for building, growing, and transforming businesses through new technologies. His international career spans investment banking, consulting and technology across Europe, the US, the Middle East, Africa, and Asia. As an investment banker at Goldman Sachs, he led several transformation mandates with financial institutions at Booz & Company as well as Strategy& as part of the PwC network. He is the founder of Evolve Enterprise Solutions (EES), an independent platform for operational venture capital and private equity that specializes in innovative value creation. As Chief Operating Officer, he currently led the scale-up of Cosaic, a US software firm, across two products ChartIQ, with data visualization and Finsemble, interoperability arms. He holds a Ph.D. in Finance from the University of Zurich, as well as being a Certified Turnaround Professional (CTP), Chartered Financial Analyst (CFA) and Financial Risk Manager (FRM). His book «Transforming Financial Institutions» was published by Wiley in 2022.


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