The bank of tomorrow is shaping up to be much different. But the question is, how do the players plan to respond, says Pat Patel, director of the forthcoming Money20/20 Asia, in an interview with finews.asia.
Are Asian banks embracing fintech because of the growing influence of tech giants in their domain?
In part yes. Today’s tech giants, who already have scale, a strong core business, a large captive audience and superior customer experience, have changed the financial services landscape and increased overall competition.
However, there are a number of other reasons why banks have embraced fintech solutions, three of these include: the likes of Alibaba, Amazon and Tencent have shown that alternative banking solutions do work and customers have taken to them.
«Fintechs can help banks to offer better customer experiences»
Second, financial institutions have also realized that fintechs offer them many opportunities to improve their services and can even provide a much needed competitive edge. In terms of back office processes and infrastructure, these solutions can increase efficiencies and lower costs. On the front end, fintechs can help banks to offer better customer experiences.
Finally, fintechs are also helping financial institutions overcome one of the industry’s biggest hurdles – regulations.
Could you elaborate a bit on that?
Experts estimate that governance, risk and compliance accounts for 15 to 20 percent of the costs to run a major bank. Given that Asia has a complex and fragmented regulatory environment, it is no surprise that banks are now turning to fintechs specializing in regtech solutions to overcome some of these challenges.
Financial technology gets labeled as a disruptor. Right?
Disruption is an overused word and sometimes it gets confused with natural progression. For me, it best describes the evolution in the application of a technology or new solution to improve the status quo.
«Then, there should be no need for fintech»
This is what we see taking place in the financial services industry. It is part of how things have always worked and has been since the industrial revolution.
Do banks that fall behind the fintech curve become obsolete?
In most cases, yes. However in theory, if a bank has a strong business and operating model and is clear on its journey in relation to the market and meeting customer needs, then there should be no need for fintech.
«Traditional banks were not made for the complexity of today’s operations»
Sadly this is not the case for the majority of financial institutions as traditional banking models were not made for the complexity and scale of today’s operations.
Is there any corner of traditional banking that fintech will not change?
Change is a constant. The minute you stand still, you’re moving backwards as the world rotates forward. So every corner of traditional banking, to different degrees, will change.
«The bank of tomorrow is shaping up to be much different»
Whether it's fintechs driving new solutions or the tech giants forcing financial institutions to evolve in order to compete, it is a given that they cannot keep to the status quo.
As technology changes how we interact with businesses, services and even money, the bank of tomorrow is shaping up to be much different to what we are used to and customers expect a lot more. The only question for financial institutions now, is how do they plan to respond?
Pat Patel is the content director of Money20/20 taking place next week in Singapore. Before his current position he worked at VocaLink, acquired by Mastercard. There he was part of the strategy team with a focus on real-time payments systems. In his spare time, he supports the fintech ecosystem across Europe and Asia and speaks frequently about trends and movements in the market.
