A report has noted how banks and other financial organisations, forced to boost digital offerings because of lockdowns and social distancing, are raising the competitive bar for fintech pretenders to their thrones. It suggests that smart co-operation between incumbents and fintechs will be the way forward rather than a fight for market share.
The assertion that big banks and wealth managers live in fear of “robo-platforms” and other fintech challengers might have to be revised because incumbents are adapting amid the COVID-19 crisis.
We have read that Big Techs such as Amazon, Google and Facebook are crashing the bankers’ party (see the Google example here). The sister firm of Chinese e-commerce titan Alibaba, Ant Financial, is by some metrics one of the largest financial firms in the world. (Here is a recent story about its activity.) And there is no doubt that new players are putting existing firms on their toes. That’s a good thing.
However, it is important to beware of the hype. And right on cue, a report yesterday in the South China Morning Post reinforces the point that one shouldn’t underestimate the power of large players to resist threats. The newspaper, for example, notes how HSBC and Citigroup are seeing a surge in demand for digital access to services in areas such as wealth management. HSBC is opening the door to eight new digital-only lenders with backers such as Alibaba. At HSBC, the share of retail transactions in Hong Kong conducted digitally hit 94 per cent in March, the report said.
Citigroup’s digital wealth management transactions, including stock and foreign exchange, rose by 37 per cent in the first two months of the year in Hong Kong, it said, with its digital brokerage and mutual fund transactions rising by more than by 70 per cent in March from January. Bank of China (Hong Kong) has reportedly accelerated its launch of digital services.
And, as WealthBriefingAsia knows, Singapore-based DBS has for some time made digital banking a core strategy; the SCMP report noted that more than 24,000 online equity trading accounts had been opened at DBS since Singapore tightened its lockdown on 7 April.
The same kind of pattern appears to be in place in other parts of the world. At a panel discussion hosted by this news service in Geneva a few months ago, EPAM, the digital platform services firm, said that fintech is disrupting conventional business models, even if some of the fintech players aren’t making huge sums at the moment. But what EPAM also noted is that some of the hype around “robo-advisor” models has worn off from where it was about two years ago. The “bright shiny object” side of fintech is less important than its ability to industrialise parts of the value chain, enable mass customisation and empower advisors and their managers. And that surely is good news for big-brand wealth managers who can use their market scale to take advantage of these tech-driven gains.
There is an important case to be made for wealth managers and other established players to collaborate with fintechs if they can get an edge. A report by Capgemini, issued in April, made precisely this point by noting how firms such as Bank of Montreal and Santander have become “Inventive Banks”, partnering with fintech firms to gain market advantage. It also pointed out how London-based Revolut collaborated with New York-based Currencycloud, a business serving cross-border currency clients; another case was of Commerzbank’s partnership with IDnow, a German firm using machine learning to verify customer ID. BBVA in Mexico partnering with ride-hailing platform Uber to handle real-time debit card payments, and Goldman Sachs adopting technology to extend loans to small- and medium-sized firms over Amazon’s lending platform were other examples given. Collaboration is bursting out everywhere.
Fintech innovators are changing how the industry operates, but perhaps what is even more noticeable is that established organisations are not going away any time soon.