When the user gives up: anatomy of a silent failure between giants and startups

The Hook · The Minute Everyone Loses

Tuesday, 10:07 a.m.

A sole trader is trying to open an account for their business. In the browser tab on the left, their usual bank: endless form, requests for physical documents, in-branch appointment. In the tab on the right, a fintech: three screens, video ID verification, almost instant approval.

At 10:19, the user gives up. Not on the branch. On both.

The bank demands time they don’t have. The fintech asks them to accept terms they don’t understand, and to grant access to their tax and banking data in a couple of clicks. Too intrusive. Too opaque. They close the laptop, postpone the decision and keep using a poorly adapted personal account.

Neither side wins here. The bank loses a profitable client. The startup loses an expensively acquired user. The regulator doesn’t improve real competition. The user learns a clear message: switching is costly, maybe too costly.

This report starts from that uncomfortable place: shared failure. Not the myth of “disruption” or of corporate “resilience”, but the space where business models, technology and user experience, in six sectors, are producing an outcome that almost nobody wants to admit: a system where friction changes shape but rarely disappears.

The question is not who innovates faster. The question is another: when friction persists, who wins, who loses, and who is paying a bill they can’t see?

The Genesis · How We Got to a Market Where Everyone Says They’re Winning

Over the last decade, the dominant story has been simple to the point of caricature: agile startups versus slow giants; beautifully designed apps versus marble-floored branches and paper files.

The operational reality, backed by evidence from industry consultancies and international bodies, is less epic and more structural:

• Digitalization cuts across all sectors: AI, IoT, automation in manufacturing, logistics and financial services are not experiments, they’re core infrastructure under construction.
• Sustainability is no longer just marketing; it’s becoming an implicit business-model requirement, with examples of companies that put social and environmental impact at the heart of their finances.
• Sector collaboration is no longer just a PR tactic; it’s a necessity in the face of huge capital requirements, as in batteries, software and autonomous vehicles.
• The geography of startups is dispersing: innovation is no longer the monopoly of three global hubs. That means more competition and also more noise.
• The regulatory environment swings between protecting consumers and raising barriers to entry. An unstable balance where incumbents and startups try to tilt it in their favor.

In parallel, traditional industries have not stood still. They invest in digital capabilities, copy agile methodologies, launch corporate venture arms and call themselves “platforms”. The startup ecosystem, for its part, adopts classic elements: chasing profitability, building assets, learning to manage regulation.

This is where the narrative gap appears: if everyone says they’re winning, who is losing?

The Invisible Conflict · The User as Hostage Between Two Frictions

The dispute is not just “offline” versus “online”. It’s something more subtle: what kind of friction we accept, and who benefits from it.

In almost every sector analyzed—finance, healthcare, retail, mobility, education, industry—the same pattern repeats:

• Traditional industry maintains visible friction: queues, paperwork, in-person visits, waiting times, tech silos.
• Startups impose invisible friction: massive data surrender, platform dependency, shifting conditions, opaque algorithms.

While consulting reports highlight digitalization and open innovation, another conflict advances offstage: are we simply swapping time and paper for privacy risks, technological dependence and operational precarity?

The answer varies by sector, but a constant seeps through: wherever friction moves from the physical counter to the digital clause, someone ends up with more bargaining power. It is rarely the user.

Evidence & Insights · Six Sectors Under the Lens of Shared Failure

1. Finance: When Solvency Is No Longer Enough

a) Business models

• Traditional banking: lives off interest, fees and transaction charges. High fixed costs (staff, branches, legacy systems) and strong vertical integration. High entry barriers due to capital and regulation. Margins protected, but under pressure from interest rates and regulatory requirements.
• Fintech: operate as SaaS (payments infrastructure, cloud core banking), marketplaces (P2P lending), B2C and B2B2C platforms (wallets, account aggregators). Scale is driven by software and data. They can pivot quickly, but their Achilles heel is dependence on funding rounds and deals with banks.

Impact:

• Value capture: fintechs can show better LTV/CAC in specific niches (cross-border payments, segmented lending), but tend to give up part of the margin to banking and infrastructure providers.
• Innovation: fast pace in features (onboarding, virtual cards, alternative scoring), but with risk of feature fatigue and little focus on profitability.
• Internationalization: apps and APIs ease expansion, but every regulatory border adds fixed costs.

b) Technology

• Banks: on‑premise monoliths, costly integrations, traditional BI. Cloud and AI adoption exists but is dragged down by legacy. Security and compliance are solid at the expense of agility.
• Fintech: microservices, cloud, API‑first and mobile‑first. Heavy use of analytics and machine learning for scoring, fraud prevention and personalization.

Trade‑off: fintechs compete on speed to launch and experience; banks on resilience and compliance.

c) User experience

• Traditional: high visible friction—paperwork, in‑person visits, dated interfaces.
• Startups: high convenience, reduced surface friction—short signup, digital cards, chat support. In exchange, invisible friction: changing conditions, product shutdowns when the model doesn’t work, dependence on apps and APIs that can fail.

Winners and losers:

• Banks win when regulation tightens: their capital and compliance protect them.
• Fintechs win among young, digital segments until regulation hardens.
• Users lose when access is conditional on surrendering data without real transparency.

2. Healthcare: From Waiting Room to Algorithm

a) Business models

• Traditional healthcare: hospitals and clinics live off medical services, consultations, procedures. Massive fixed costs in staff and equipment. Vertical integration is common (diagnostics, treatment, in‑house pharmacy). Heavy health regulation.
• Healthtech: telemedicine platforms, monitoring apps, wearables, clinical management software. SaaS B2B models for hospitals, B2C subscriptions or pay‑per‑consultation, and B2B2C hybrids funded by insurers.

Impact:

• Value: healthtechs promise lower costs and better follow‑up, but clash with traditional reimbursement models and health systems that pay per act, not per outcome.
• Innovation: strong in prevention and monitoring; slow in integration with the hospital core.
• Internationalization: technology scales, but every country changes clinical and data‑protection rules.

b) Technology

• Traditional: fragmented electronic health records, poorly interoperable hospital systems, remnants of paper. Gradual adoption of analytics.
• Startups: cloud, IoT, connected devices, AI models for assisted diagnosis and risk prediction.

Here the conflict is brutal: medical data require maximum protection; digital innovation lives off exploiting them.

c) User experience

• Hospital: long waits, complex admin procedures, unclear pathways.
• Healthtech: video consultations, reminders, real‑time data. Reduced friction… for those with connectivity and digital skills.

Winners and losers:

• Platforms that capture health data from millions of people win.
• Large health systems that control physical access and billing retain power.
• Patients without digital skills—and those turned into “risk profiles” for insurers without understanding how—lose.

3. Retail: The Hidden Price of One‑Click Buying

a) Business models

• Traditional retail: income from in‑store sales; costs in rent, staff, inventory. Moderate entry barriers. Variable vertical integration: from independents to big chains with their own logistics.
• E‑commerce and retail tech: marketplaces, subscription models (monthly boxes, memberships), freemium for add‑on services (shipping, content). They use data to optimize prices, assortment and logistics.

Impact:

• Value: e‑commerce margins are thin; profitability comes from scale and side services (ads, third‑party logistics).
• Innovation: fast in catalog, promos and digital experience; slow in labor conditions and logistics sustainability.
• Internationalization: an online store can sell globally, but faces rules, taxes and shipping costs.

b) Technology

• Traditional: legacy POS and inventory systems with poor integration. Limited analytics.
• Startups: cloud platforms, recommendation engines, dynamic pricing, last‑mile optimization.

c) User experience

• Physical store: tangible experience, direct contact, but travel and opening hours are constraints.
• E‑commerce: intuitive browsing, reviews, digital payment, home delivery. Low initial friction; rises with returns, issues and option overload.

Winners and losers:

• Large marketplaces that intermediate the customer relationship win.
• Physical shops that specialize or blend channels survive.
• A specific kind of shopper and merchant loses: the one squeezed between rising platform costs and shrinking margins.

4. Mobility: From the Steering Wheel to the Matching Algorithm

(the contextual text on mobility is truncated, but the analysis is maintained using well‑known, non‑sensitive global patterns)

a) Business models

• Traditional transport: regulated taxis, bus fleets, rail companies. Revenue from regulated fares or public contracts. High fixed costs in vehicles, licenses, maintenance and staff.
• Mobility startups: ride‑hailing platforms, micromobility (shared bikes, scooters), vehicle‑subscription services, route aggregators. Marketplace and B2C/B2B2C platform models.

Impact:

• Value: platforms capture per‑ride commissions, externalizing part of the costs (vehicle, fuel) to drivers or users.
• Innovation: fast in service types (pooling, subscriptions), but struggling to achieve sustained profitability.
• Internationalization: aggressive expansion often followed by retreat where regulation tightens or unit economics fail.

b) Technology

• Traditional: legacy fleet‑management systems, phone bookings, paper tickets or vending machines.
• Startups: mobile apps, dispatch and dynamic pricing algorithms, real‑time maps, IoT in vehicles.

c) User experience

• Old model: waiting in the street, calling by phone, paying cash, limited info on times and routes.
• Platforms: real‑time map, estimated arrival times, cashless payment, two‑way ratings.

Winners and losers:

• Platforms controlling demand win.
• Urban, connected users win in the short term.
• Drivers and operators who shoulder risk without real say in conditions lose; cities lose when congestion and public‑space use are negotiated with private actors holding asymmetric information.

5. Education: When the Campus Competes with the Progress Bar

a) Business models

• Universities and schools: tuition fees, public subsidies, research contracts. Costs in campus, faculty, administration. Strong entry barriers via accreditation.
• Edtech: online course platforms, bootcamps, SaaS for school management and adaptive learning. Subscription, pay‑per‑course, institutional licenses (B2B) and B2B2C schemes with employers training staff.

Impact:

• Value: edtech promises lower cost per student and personalization; traditional education protects the status of its degrees.
• Innovation: fast in formats (microlearning, video, automated assessments); slow in official recognition.
• Internationalization: global platforms, but they clash with national accreditation frameworks.

b) Technology

• Traditional: basic LMS, institutional email, some learning analytics.
• Startups: cloud platforms, engagement analytics, AI for content and automated feedback.

c) User experience

• Classical education: fixed schedules, in‑person attendance, academic bureaucracy.
• Edtech: on‑demand access, intuitive navigation, visible progress bars, forums.

Winners and losers:

• Platforms with millions of users and learning data win.
• Institutions that monopolize recognized credentials retain power.
• Students navigating volatile offerings and credentials that the market doesn’t yet know how to value lose.

6. Industry/Manufacturing: The Analog Factory Under Dashboard Pressure

a) Business models

• Traditional manufacturing: sale of physical products, long‑term contracts with large clients. Costs in plants, machinery, energy, labor. Very high dependence on physical assets.
• Industrial startups: SaaS for predictive maintenance, industrial IoT platforms, B2B supply marketplaces, “product‑as‑a‑service” companies (pay‑per‑use machinery).

Impact:

• Value: startup revenues are recurring and scalable, but depend on integrating into critical operations of very conservative clients.
• Innovation: startups drive AI, IoT and automation; incumbents respond with their own digitalization projects and acquisitions.
• Internationalization: software expands easily; pilots in real plants require local presence and adaptation.

b) Technology

• Traditional plants: SCADA systems, industrial ERPs, bespoke on‑premise solutions. Limited real‑time analytics.
• Startups: cloud architectures, edge computing, connected sensors, data platforms promising efficiency and less downtime.

c) User experience

Here the “user” is the operator, supervisor, plant manager.

• Old models: complex interfaces, long training, fragmented information.
• New solutions: unified dashboards, real‑time alerts, mobility (tablets, smartphones on the shop floor).

Winners and losers:

• Providers that become an indispensable data layer win.
• Plants that turn data into fewer stoppages and defects win.
• Staff who are not reskilled in time and see their work reduced to executing algorithmic orders lose.

The Winners vs. Losers Scorecard (Version 1: By Type of Friction)

The Strategic Shift · Working Backwards from Failure

If we accept that the starting point is not disruption but user abandonment, the analysis reshapes itself.

Instead of asking “how do I compete with this startup or this giant?”, the operational question for both sides should be: “Where in my business model am I funding myself with friction the user can’t see… until it’s too late?”

From that question, strategic moves change:

1. Redefine What Counts as a Legitimate Competitive Advantage

• For incumbents: stop hiding inefficiency behind regulation. Use size and capital not to block, but to experiment with new models for pricing, data and access (e.g. modular services, open APIs, more transparent fees).
• For startups: stop using information asymmetry and opaque conditions as growth engines. Back up the promise of “frictionless experiences” with business models that don’t depend on aggressive lock‑in.

2. Change How Technology Is Used: From Capture Weapon to Explicit Contract

AI, IoT or cloud can reduce real friction or shift it to harder‑to‑see places (data, vendor lock‑in, algorithmic bias).

Concrete actions:

• Human‑readable data policies in fintech, healthtech and retail: clearly explain which data are used, for what, and what limited‑use options exist, even at the cost of lower short‑term revenue.
• Mandatory interoperability in sectors where users get trapped (health, education, banking): switching providers shouldn’t be a months‑long project.
• Algorithmic impact assessments shared with regulators and corporate clients in mobility and industry.

3. User Experience as a Power Metric, Not a Design Metric

UX is measured today with NPS, funnels, churn. One awkward metric is missing: the total cost for the user to switch provider.

• Incumbents: should publish the real “exit cost” (time, steps, penalties) as a public commitment.
• Startups: could compete on “ease of leaving”, betting that the trust gained boosts retention more sustainably than lock‑in.

4. Collaborate Without Hiding Who Controls What

Collaboration between giants and startups already happens: corporate VC, accelerators, distribution deals, white‑label. The risk is that they’re presented as open innovation when they often reinforce existing power.

User‑aligned, honest collaboration would mean:

• Finance: banks using fintechs as experience layers, with clear rules on data ownership and portability.
• Health: hospitals integrating healthtech with guarantees that patients can migrate their data and records without punitive friction.
• Retail: marketplaces that let sellers build and move their own customer base, not just rent it.
• Mobility: cities requiring interoperability between platforms and public transport.
• Education: universities recognizing edtech credits under publicly agreed criteria.
• Industry: deals where manufacturers don’t lose all control over operational data when adopting SaaS solutions.

5. Regulation as Battleground… and Possible Referee

Regulatory frameworks can, based on available evidence, level the playing field or entrench asymmetries.

• When rules become too complex, incumbents survive them; many startups don’t.
• When rules are relaxed without safeguards, data abuse, precarious work and power concentration in platforms appear.

The strategic turn here is that both startups and giants should defend rules that preserve real competition, not just their own perks: data standards, limits on lock‑in practices, minimum algorithmic transparency in critical sectors.

The Big Picture · If Everyone Is Winning, the User Is Not in the Equation

Across six sectors, the pattern that emerges is less glamorous than any keynote about innovation:

• Traditional industry uses visible friction as a defensive wall against competition.
• The startup ecosystem uses invisible friction as an acquisition and retention model.
• Regulators and consultancies celebrate “digital transformation” without asking hard enough who bears the new kind of risk.

The provocative statement is no longer that startups have changed the world. At this point, it’s more provocative to admit that much of the transformation consists of changing who benefits from the same structural friction.

While banks move to the cloud, healthtechs fine‑tune algorithms, retail reorganizes around marketplaces, cities negotiate with mobility platforms, universities play at being digital products and factories bristle with sensors, one scene repeats:

The user in front of two open tabs, weighing which cost they prefer: time and bureaucracy, or data and dependence.

The true winner will be whoever has the courage to build a model where the answer is no longer “pick your poison”, but something more ambitious: a system where reducing friction doesn’t mean creating another, more opaque one in its place.

Until that happens, every technological improvement will carry an unwritten clause:

Here, no one ever really fails… except, at times, the one who pays.

Summary Table · Six Sectors, Three Dimensions

References

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