Fintech - A Study on the Need for Drivers of Change

This report investigated after analysis about the need for drivers of change to understand the external environment of technology within dynamic, global and fast-changing world of financial sector. Contents Introduction 3 Drivers of Change 3 Competitive Environment 4 Porter’s Five Forces Model 4 Internal Analysis 6 VRIO Framework 7 Recommendations 8 Conclusion 9 References 10 Introduction In the modern economy, financial sector is developing while reducing poverty and stimulating economic growth.

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Executive Summary
The aim of this report is to analyse the evolution of financial sector with the emergence of
fintech in the companies across the globe. There is a huge disruption caused in the financial
companies broadly such as AXP. This report investigated after analysis about the need for
drivers of change to understand the external environment of technology within dynamic,
global and fast-changing world of financial sector. Every company requires developing
strategies when competing for the high-end consumer base creation and building connections
with online payment solutions and use of AI. It is essential for every organisation both
internally and external to know its resources and capabilities to use at the right time while
making decisions for attracting consumers and maintaining position in the credit card
services.

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Contents
Introduction................................................................................................................................3
Drivers of Change......................................................................................................................3
Competitive Environment..........................................................................................................4
Porter’s Five Forces Model....................................................................................................4
Internal Analysis........................................................................................................................6
VRIO Framework...................................................................................................................7
Recommendations......................................................................................................................8
Conclusion..................................................................................................................................9
References................................................................................................................................10

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Introduction
In the modern economy, financial sector is developing while reducing poverty and
stimulating economic growth. This sector consists of instruments, institutions, and markets
consisting regulatory and legal framework. There is transactions permit working through the
credit extension where the development is concerned about overcoming costs involved within
the financial system. Furthermore, there is a huge disruption caused by Financial Technology
(Fintech) within the broader financial sector nowadays (Camarda, 2018). It is a sort of driving
engine helping in amalgamation of technology and finance for moving towards future with a
new way across the globe. Companies under Fintech involve insurance, credit and lending,
payments, investing, and block-chain. In the world, Fintech helps in enabling to make
business decisions easier through valuable insights, comprehensive data, and powerful
analytical tools superiorly (Braue, 2018). This report will focus on the chosen company that
is “American Express Company” within the financial sector providing services related to
travel and payment globally. It will include the discussion based on drivers of change while
analysing technology area across the globe and its impact on the company and financial
sector. This discussion will also focus on the competitive environment to analyse the level of
business within the industry market. After this, it is essential to address the resources and
capabilities of the company by conducting VRIO analysis to know the state of company
internally.
Drivers of Change
Across the globe, it is essential in the business to explore and identify leading factors
affecting the future. In the company, the change is important for modifying and reviewing
business processes and structures of management. It is crucial to choose the way that is cost
effective and efficient by driving change in the company through external factors. Fintech or
financial technology advancements have a high impact on the financial services industry.
Also, Fintech affects some of the external factors for driving change which include fast-
evolution, strategy of real estate that is automation increment, digitized services and mobile
workforce, and innovation (Hoopes, 2019). Thus, the external drivers sum up cyber threats,
dealing with regulations and customer centricity in technology within the financial sector
which requires change and transformation.

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American Express Company (AXP) issues processes payments, credit cards, and provide
services related to travel primarily across the globe. In the economy, the governments are
encouraging Fintech innovation to drive change while making advisory and regulatory
initiatives for availing and accelerating online payment solutions and other services to have
an impact in financial sector businesses. AXP aims at attracting innovative fintech along with
operating in the financial sector as regulated to make sure about providing the customers’
adequate financial protection (Faden, 2017). The change is driven for providing better
services to customers by taking initiatives through fast Fintech growth. AXP made changes
due to external drivers by implementing regulations and licensing for enabling technology to
offer customers the wider banking services. In the US, regulation of national banks is done by
“OCC (Office of the Comptroller of the Currency)” planned for the fintech availability to
provide services to customers consisting B2B payments and other solutions of online
payment regulating such as paying checks, receiving deposits, or lending money as its
banking activities (Faden, 2017). Thus, it is essential for the company to know the external
drivers of change while competing in the dynamic, global and fast-changing world which
impacts both AXP and the financial sector.
Competitive Environment
In the US, the main competitors of AXP in the credit card services are Visa Inc., DFS
(Discover Financial Services) and MA (MasterCard Incorporated). Here, it is essential for the
company to analyse the competitive environment by using Porter’s Fiver force of competition
within the business’s card services unit to know the impact on sector’s profitability (Webster,
2014). By using this framework for taking strategic decision required AXP to build
sustainable competitive advantage and strategic position development while exploring for
profitable opportunities.
Porter’s Five Forces Model
1. New Entrants Threats
With the increase of fintech, the company’s requires innovation where AXP has a pressure of
new entrants and need to search for new ways of doing things. AXP use the source of
reducing costs, lower pricing strategy, and providing customers with new value propositions.
It is essential for the company to build effective barriers and manage such challenges to

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safeguard its “competitive edge” (Colangelo & Maggiolino, 2018). Here, the threat to AXP is
medium as there is a less chance of companies to enter a dynamic industry.
2. Suppliers Bargaining Power
In credit card services sector, raw materials are purchased from numerous suppliers who are
in a dominant position. There are chances of AXP to face the position of decreasing margins
due to suppliers where the company can earn within the market. In financial sectors, suppliers
who are powerful use their negotiating power for higher prices extraction within the field of
credit card services (Christian, 2018). The presence of suppliers bargaining power is high
impacting overall which lowers the credit services profitability overall. Thus, suppliers
bargaining power in case of AXP is high.
3. Buyers Bargaining Power
In the market, the demand of the buyers is always high when there is an availability of best
offerings by price payment at minimum as possible. AXP faces the pressure of maintaining
profitability in the long-run (Evans & Schmalensee, 2017). Thus, it defines the buyers
bargaining power higher based on powerful and smaller customer based where the ability is
also higher while seeking towards the increasing offers and discounts.
4. Substitute Products or Services Threats
While meeting the needs of the customers with new product or services in distinct ways,
profitability of the sector suffers. In AXP, the threat of this force is high due to offering value
proposition that is distinct in a unique way from the sector’s present offerings (Donovan-
Stevens, 2019).
5. Rivalry among the Existing Competitors
In this industry, this force is intense which drives down the prices and reduce the profitability
overall (Wrobel, 2016). The operations of AXP face high competition in credit card services
industry which takes the overall toll on profitability for long-term of the company.
These forces in case of AXP analysed for gaining a complete image of reasons impacting the
company’s profitability within the industry. There is an identification of changing trends
along with responding to exploitation of emerging opportunity which helps AXP to shape
these forces while gaining competitive advantage (Azzara, 2019). After conducting the

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competitive analysis, it is essential to conduct the internal analysis of the company by
distinguishing its resources and capabilities with the help of VRIO Framework.
Internal Analysis
The CEO of AXP Ken Chenault decided to create new brands for distinct consumers where
the company’s capabilities and infrastructure creates high-end customers being the biggest
credit care company across the globe where they provide leverage to other customer
segments for achieving financial inclusion. The company provides its customers the high-
level of services to serve while naming brands its capabilities and resources (ET Bureau,
2010). The focus of AXP is on high-end customer comfort which is the company’s key
resource and this shows the capability of the company’s strong diversified model of payments
across the globe. The resources and capabilities of AXP define creation of high-end customer
base and infrastructure while leveraging other customer segments as well.
Another resource and capability of AXP is defined as financial inclusion used while making
efforts to improve people’s lives. Other than this, AXP uses its brand as one of the resources
and capabilities along with some not branded products and services while working with third-
parties. The major aspect within the company of using resources and capabilities is to focus
on business model’s diversity. AXP’s creation of capabilities provides the business choice for
meeting the needs of customer segments range (Taylor, 2011). The company’s end-to-end
capability defines brand development through working with partners and their support.
Furthermore, the focus on emerging payments while making partnerships plays an important
role which creates a pre-paid space for the company along with rewards and royalty. The
company take steps to engage and pursue targeted acquisition supplementing the AXP’s
capabilities and resources along with focusing on performance and results while achieving
success across the globe and overcoming challenges (AXP, 2019).
The access to AXP capabilities in terms of partnerships includes virtual payments, AP
(Accounts Payable) automation and lifestyle tools which requires expansion for facilitating
supplier payments and providing new benefits. Another capability of the company is to
embed digital ecosystem as well with enhancement to make better experience of customers.
These capabilities drives both distribution and growth efficiencies, and lastly, the company’s
capability is customer engagement and digital acquisitions while building and developing
connections and AI (artificial intelligence) along with collaboration (AE, 2019). In AXP,

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under B2B collaborations, the capability of AP automation is required to get strengthened as
well. AXP provides the resources such as fingerprint scanner along with storing passwords
consisting financial and digital resources considering Fintech where capabilities focus on
actions to achieve success through these resources.
VRIO Framework
In internal conduct of AXP, these basic and distinctive resources and capabilities are analysed
through this framework consisting value, rarity, inimitability and organisation.
1. High-end customer base
 Valuable: It is a valuable resource for the company because it enables it to generate
higher revenue than compared to its competitors.
 Rare: This is not a rare resource because other competitors such as Visa Inc., DFS and
MA also have high-end customer base (Kenwell, 2018).
 Inimitable: This resource can be imitated by other competitors as they offer them
better services.
 Organised: Although, this resource is properly organised by AXP; however, other
competitors have also organised this resource for their advantage.
2. Financial resources
 Valuable: The financial resources of the company are stable and they are expected to
grow by $43.2 billion in future (Trefis, 2020).
 Rare: These resources are rare because other competitors not reported similar growth
in their profits.
 Inimitable: These resources are imitated because other competitors did not have
similar profitability and market share compared to AXP.
 Organised: AXP has organised its resources by diversifying its investment and
generating multiple revenue schemes.
3. B2B Collaborations
 Valuable: This resource is valuable since it enables the company to work along with
small as well as large businesses to offer better services to its customers.
 Rare: This resource is not rare since other competitors apply similar strategy as well.
 Inimitable: This resource can be imitated by other competitors by investing in B2B
collaborations (Duggan, 2019).

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 Organised: This resource is properly organised by the company through the
integration of mobile applications, websites and other online platforms using Fintech.
4. Digital Acquisitions
 Valuable: AXP relies on a number of digital acquisitions to improve its customer
services which includes implementation of AI in the operations and building
connections.
 Rare: These resources are rare because other competitors did not invest in similar
digital acquisitions.
 Inimitable: Competitors can imitate this by improving their research and development
(R&D) operations (Haeberlin, 2018).
 Organised: AXP has properly organised this resource however its implementation can
be improved in different areas of the company.
5. Brand development
 Valuable: This is a valuable resource since it assists the company in spreading
awareness regarding its services and creates a loyal customer base (Newmeyer, et al.,
2018).
 Rare: This is a rare resource since the investment by AXP in marketing and brand
development operations is higher than compared to its competitors.
 Inimitable: This resource is difficult to imitate by competitors since AXP has already
built its customer base.
 Organised: AXP has effectively organised this resource by ensuring that customers
are aware regarding its brand and they are able to access its services on a global scale.
Recommendations
Based on knowing the competitive environment and internal analysis along with the need for
drivers of change, it is recommended that AXP requires pursuing and improvising block-
chain strategies while making investments in fintech across the globe. It is also recommended
that the company should provide better online payment solutions through fintech considering
cost effectiveness and efficiency to maintain the high-end customer base along with financial
resources and brand development (West, et al., 2018). There can also be the possibility for
the company to increase the embracement of innovation and AP automation along with AI for
making availability of credit card services easier to customers in the financial sector mainly.

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It is essential to make evolution by taking step in the AXP with the involvement of Brexit
impacting the business operations (Detrixhe, 2019).
Conclusion
Conclusively, Fintech is has caused disruption in the financial sector that is impacting
companies such as AXP where innovation has taken place based on the preferences of the
consumers, exponential growth experiences and high-end consumer base across the global.
The analysis showed the market competition of financial sector along with the development
of AI and building connections for online payment solutions while providing an ease to
consumers. In this changing environment, external drivers impact the company along with
analysing the competition in the financial sector (credit card services). The analysis also
considered resources and capabilities that are based on the operations and performance of the
company to know its position and long-term positive effect. It is suggested to implement
strategies and brand development while increasing availability and making investments in
credit card services sectors for customers.

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