Report Maps FinTech Revenue Models That Are Getting Traction With US Consumers

FinTechs offering financial health-oriented solutions are making inroads into consumers' trust and showing the industry that companies can do well by doing good

REDWOOD CITY, California, Oct. 23, 2018 /PRNewswire/ -- Omidyar Network, the impact investing firm established by Pierre Omidyar, the founder of eBay, and Oliver Wyman, the global management consultancy, today released "Breaking New Ground in FinTech: A Primer on Revenue Models that Create Value and Build Trust." The research report maps out a new set of practices by consumer FinTech firms, who are aligning their revenue strategies with real value creation for consumers as a competitive advantage to increase customer traction and future-proof their business.

Today, nearly 140 million adult Americans struggle with some aspect of their financial lives, such as paying bills on time or saving for emergencies. At the same time, these same households pay roughly $175 billion annually in fees and interest for financial products and services, which too often fail to improve their situations. The study has found, however, that using the right combination of financial health-focused FinTech products can yield the average household with a median of $45,000 in post-tax income at least $2,000 in savings annually. In order to provide this benefit at scale, mass-market FinTechs must design revenue models that are both economically sustainable and that reinforce consumers' trust rather than threaten it, a tricky task in an industry that is ranked by consumers as the least trusted.

"Being the newcomer in an industry that is often plagued by 'gotcha' fees and with the lowest levels of trust among consumers is not an easy task for FinTechs, and is a reason why aligning incentives with consumers' real needs is crucial for success," said Tilman Ehrbeck, partner at Omidyar Network. "Embedding this principle early in the business culture is key to building and retaining consumer trust over time, a lesson that, if put in practice from the get-go, will avoid fixing fundamentals later."

"Breaking New Ground in FinTech" offers a simple framework for thinking of revenue models, defined by what value is created, who will pay for it, and how they will do so. It outlines the three basic payer options—consumers themselves, third-party sellers who want access to consumers, or third-party beneficiaries who derive value from better-served consumers (for example, employers who see productivity gains from financial wellness programs). It also evaluates eight payment models that have reached traction, identifying keys to success relevant across all of them.