Fintech, banking’s great disruptor. Or is it?

business February 19, 2018 01:00

By Jennifer Doherty
Special to The Nation

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Fintech and banking are often touted as competitors or rivals and there is much speculation about the industry’s future in the same way that music downloads disrupted the record industry and Uber is disrupting established transport industries.

But for all that it aspires to do, technology needs to happen in a safe environment where customers’ data is protected. It all boils down to trust.

HSBC’s 2017 global Trust in Technology report found when it comes to finances, people seek safety and prudence above all else from those who manage their money.

Trust is the cornerstone of all relationships. Banks have had decades to build extensive infrastructure, develop solutions for compliance and regulatory requirements and, most importantly, earn customer trust.

That is why for banks to stay relevant, they cannot lose sight of their core purpose: To safeguard and responsibly look after other people’s money.

But this doesn’t take away the need for banks to start deploying better technology to improve customer experience and journeys.

The real failure is in not harnessing technology to enhance the customer experience.

The financial services industry is going through a period of extraordinary transformation. Digital technology is now bringing a new level of analysis, connectivity and transaction power literally to customers’ fingertips.

These changes have happened in just the last few years – and they serve a new generation of customers who have grown up in the digital world.

Millennials demand convenient services and new ways of accessing them, wherever and whenever they want. They expect agile, rapid services operating in real time that are competitively priced and personalised.

Fintechs are entering the fray to respond to these needs and gaps in the industry.

Relations between these emerging fintech players and the established banking industry are sometimes portrayed as challenging, even combative. But the reality is that banks and fintech companies are entering partnerships of collaboration, giving banks access to new technologies, and giving fintech companies access to funding and scale of market opportunity.

HSBC’s partnership with Tradeshift is one such example. We now have the capability to embed financing solutions on different supplychain platforms that our clients can leverage. This has made it easier for business customers to manage their accounts and their relationships with suppliers online, saving time and cutting down paperwork.

Big banks and fintech startups have a great deal to offer each other. Banks have a large customer base, stable infrastructure, assets and regulatory knowhow. Startups provide out-of-the-box thinking, technical expertise, and agility to adapt quickly to change.

Together, they can be far more successful at improving the financial services and customer experience than if they compete against one another. And we’ll witness far greater collaboration and integration in the coming years.

Over time, banks that can adapt, embracing the innovations and utilising technologies offered by the fintech industry stand to reap new opportunities, and even extend their share of the market.

Current fintech investments are reflecting the shift from disruption to collaboration where, increasingly, investment is moving into new technology that collaborates and complements the existing technology and infrastructure, rather than those that are disruptive or work in silos.

The evolution of financial services is not a zero sum game. It is clear that banking will look quite different in the coming years than it does today – with regulation, technology, demographics and changing customer expectations.

In as much as financial technology is putting pressure on banks, it is a lot further away from a disruption. The established banks are likely to remain key players – it is more a question of how banks can utilise the fintech innovations sprouting up around them.

Contributed by Jennifer Doherty, head of innovation for Asia, global liquidity and cash management, HSBC