We are now living in the thick of the Fourth Industrial
Revolution (IR 4.0), and with it has come an explosion of financial technology
(fintech) innovation. Characterized by the avalanche of data produced daily, IR
4.0 brings about the complete disruption of many industries and their business
models.
The banking industry has undeniably experienced many
shake-ups. Technology has brought about the digitization of money, opening up
numerous possibilities for fintech innovation, capturing value-added data
insights while we’re at it. In and around Asia, fintech – the usage of
technology to improve financial services – is booming.
Technology-led financial services are set to bring in US$11
billion in revenue in Southeast Asia (SEA). By 2025, it will account for 11% of
total financial services in SEA, itself considered the fastest-growing region
worldwide.
Asian fintech companies such as China’s Ant Finance and
Indonesia’s OVO are already dominating the fintech landscape and despite
setbacks like Ant’s failed blockbuster IPO, are showing no signs of slowing
down.
As consumers are used to the digital experience offered by
companies such as Google, Amazon, Facebook, and Apple, they expect the same
level of customer experience from their financial services providers. Fintech
provides a very appealing alternative to traditional banks, as they provide
customer-centric solutions that incumbent banks cannot provide.
At the recent Fintech and Blockchain session, Revolut’s COO,
Richard Davies, the COO of global fintech super app Revolut that has been
spreading its wings in APAC, stated that fintech is already poised to bring
major economic benefits globally. According to Davies, there are a few key
reasons why fintech is appealing to consumers.
Price
Davies noted that 27% of consumers opt for fintech services
because it is significantly cheaper compared to incumbent banks. An example is
cross-border payments. Often, fintech offers lower foreign exchange rates, and
does not come with any hidden fees.
Efficiency
For the tech-savvy consumer, fintech services are more
efficient compared to those offered by traditional banks. Fintech apps, for
example, often come with user-friendly interfaces that would seamlessly guide a
consumer through the process that they are undertaking.
20% of consumers opt for fintech services because of the
ease of setting up, with 12% of consumers siding with it because of better user
experience.
Fintech product innovation
Because fintech companies do not need to contend with legacy
staff and systems, they can afford to innovate relevant products quickly and
cheaply.
Also, fintech companies often have a dedicated focus on
fixing specific problems, and can, therefore, come up with tailor-made
solutions for their customers. This is rarely possible for legacy banks as
there is little room for agility –solutions are usually provided in a
one-size-fits-all form.
Davies believes that we have already reached an inflection
point for the mass adoption of fintech. This couldn’t be truer for Asia, whose
fintech landscape is already vibrant and highly competitive. Regulators in the
region are supportive of fintech, as can be seen in countries such as Singapore
and Thailand.
Both countries have agreed to open up regulatory sandboxes
that allow fintechs to test their solutions prior to bringing them into the
market. Further, Singapore and Malaysia are also giving out virtual banking
licenses that can make the operation of neobanks easier.
Ultimately, traditional banks need not fear technology. The
willingness to adapt and collaborate with others will enable technology to
serve all parties – banks, fintechs, and consumers- in the financing sector
well.
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