running businessmanThe Internet continues to destroy old and create new business models.  Disintermediation runs rampant.  How does a financial services business survive and thrive in the Financial Technology “FinTech” space and create a profitable business model in today’s Internet world?

Old Business ModelInternet ModelPrinciple
BanksMarketplaces and Crowdfunding1
BlockbusterNetflix2
Credit CardsPaypal/Venmo4
Regional Shopping MallsAmazon3
Newspaper/ClassifiedseBay/CraigsList5
Job BoardsLinkedIn5
Yellow CabUber2

 

The Table illustrates old business models on the left and new Internet Models on the right.  The idea is to not be caught on the left column and to figure out how to transform your business to the right column.  This Blog discusses 5 Ways that business owners can leverage FinTech and the Internet to survive and prosper:

  1. Pick a Complex, Interactive or Manually Intensive Product: Hard Money Loans are, so far, are still predominantly a manual underwriting process for short term loans.  The “Every Loan has a Story” environment precludes many advanced automated underwriting techniques and tools.  Rules engines are tough to deploy when unique credit situations, physical inspections and due diligence interpretations are required.  Similarly, many financial advisors and real estate agents continue to thrive due to the complex nature of managing money and buying and selling real estate. In the Retail business, a friend of mine who owns a successful Strip Retail Center has had to shift his tenant mix towards Internet Proof business’ like Dry Cleaners, Restaurants, Clothing, and Nail Salons.  When a customer can more easily and cheaply purchase a product online, they will.   For Hard Money Lender’s to avoid disintermediation and profit in the new FinTech world, they must capitalize on this principle #1 and those below.
  2. Deploy an Online Direct Model: An online direct model for transactional and customer service workflows allows for reduced costs, faster response times and a superior customer experience. Gatekeepers are not needed anymore as consumers and customers demand 24/7 access to transaction status, account data and self-service.
  3. Vertically Integrate with Intermediaries that Add Value: Hard Money Lending and Trust Deed Investment sales are related but different business’. By vertically integrating the two, a slight barrier to entry is created when coupled with licensing, compliance, documentation, underwriting, servicing and default management.
  4. Use Ecosystem Marketing: Email marketing, Google Adwords, Search Engine Optimization (SEO) and Social Media marketing are all quantifiable and measurable.  The feedback from these marketing techniques and resulting tweaks and iterations sets apart successful FinTech and Internet companies.
  5. Leverage the “Network Effect”: The saying the “Power is in the Network” is more and more true.   What fun would Facebook be if your friends were not connected?  Facebook, Twitter and LinkedIn work and provide value because so many people use these tools and their use creates a “Network Effect” that increases efficiency and value.  For example, in Crowdfunding, the Network provides communication of Trust Deed Investments to a wider audience.  This wider audience of lenders creates opportunities for lower rates to the borrower, collaborative underwriting while providing faster and more surety of funding.

Do you have any thoughts or examples of how to transform your business into the new Internet Age?  We would like to know.  Please submit a post on our Mortgage Vintage, Inc. Facebook Page or our LinkedIn Company page.  If you enjoy discussions like this, please sign up for our Linked in Group called Southern California Trust Deed Investment Group or the CrowdTrustDeed Group.