SINGAPORE: The financial technology (FinTech) sector is growing rapidly with more start-ups looking to make online financial services more efficient, flexible, accessible and varied for consumers.
And they have the potential to win over a generation of millennials who are jaded with traditional banking, said a guest on Channel NewsAsia’s Perspectives panel discussion on The Future Of Fintech.
“Three quarters of millennials say they would prefer to get financial services and tools from Google or from Apple, and they’re expecting change,” said Ms Alyse Killeen, an early stage venture capital investor.
Ms Killeen was citing a three-year-study on 10,000 US millennials – those born between 1982 and 2004 – by creative consultancy Scratch, a unit under media company Viacom. The study found that one-third of United States millennials are willing to change banking institutions in the next 90 days because there is no brand loyalty.
This leaves room for payment or funding services traditionally provided by banks to be overtaken by non-traditional banking companies, such as Apple Pay, Alipay, PayPal or Amazon Payments.
On Tuesday (Apr 19), Apple Pay launched its e-wallet service in Singapore, to be followed soon by Samsung Pay. Meanwhile Braintree, a division of PayPal, is one example of a global FinTech start-up in Singapore that provides secure online payments for businesses such as Airbnb and Uber.
Ms Killeen pointed to innovative start-ups in the US that address lending markets, student loans and remittances, to name a few areas.
Ms Alyse Killeen, an early stage venture capital investor, says start-ups are looking to capitalise on services banks provide or lack. (Photo: Samantha Yap)
“In every value or product that a bank provides, there are 20 to 30 start-ups attacking that very value and offering new products,” said Ms Killeen during a recording of the show at the Singapore Management University (SMU).
In areas where banks are less equipped to respond to young consumers’ needs, such as crowdfunding, mobile payments, personal loans, innovators in Silicon Valley or Singapore are seeing opportunities to fill the gap.
“The field is quite ripe for disruption,” said Ms Killeen. “Start-ups I suspect will win in some areas and banks will win in others.”
To stay ahead of the curve, a bank would need to “look at how to disrupt itself”, said Professor David Lee Kuo Chuen, who teaches Quantitative Finance (Practice) at the Lee Kong Chian School of Business at SMU.
“Adapt or die,” said Mr Jonathon Allaway, Managing Director of Financial Services at Accenture, quoting the CEO of the Commonwealth Bank.
‘BANKS WILL REMAIN’
But Ms Anju Patwardhan, Group Chief Innovation Officer at Standard Chartered Bank, does not feel that banks will be made irrelevant.
“I think with the new younger generation of consumers, the channels that they use for banking will change but fundamentally, banking is likely to remain very much similar to what it is today,” she said.
To keep up with the FinTech industry, Standard Chartered recently launched eXellerator, an innovation lab located in Singapore. The lab will explore “the use of emerging technologies and data science for sustainable business solutions”.
Ms Patwardhan added: “Customers will decide which channel they want to use, which financial institution or company they want to partner with, and the banks will have to respond to those needs.”
Mr Jonathon Allaway, Managing Director of Financial Services at Accenture. (Photo: Samantha Yap)
And while it may seem like the FinTech industry is picking up the pace, traditional banks are still the most trusted because they are adequately regulated, she said. She cited an Accenture report which found that 86 per cent of people globally still trust their banks more than any other financial institution or technology company to keep their data safe.
Ultimately, Accenture’s Mr Allaway sees FinTech as a double-edged sword for banks.
“For those who adapt it and embrace it, it will be a new way of competing and being relevant to customers.
“For those who don’t, we actually have research that shows that in Europe and in North America, you potentially stand to lose 32 per cent of your revenue and customer base,” he said, noting that this 32 per cent would be the most valuable customers because they are the ones evolving and growing digitally.
The Future Of Fintech airs Apr 20, 8pm (SG/HK), with an encore on Apr 21, 6pm. Catch up on Perspectives episodes online.