'Fintech Gives Banks A Wake-Up Call

The rapid development of financial technology (FinTech) has created rife competition for banking institutions, especially in the payment sector. Banks are fighting to keep up with the digitisation wave, to boost profitability and maintain their competitive edge.

According to Singapore Exchange (SGX), banks could face 5 per cent reduction in operating income from lower payment transaction volume and margin erosion, if they would not be open to the opportunities provided by new technologies.

Platinum Analytics co-founder and CTO Bao Qi Hong said that FinTech’s biggest advantage is the efficiency that it offers to consumers. Adding to the advantage is the direction of investing in efficiency, in contrast to banks pouring investments to capture bigger market share.

Bao’s company seeks to amalgamate China's FinTech talents with access to international financial markets in Singapore, for greater collaboration between both countries.

For decades, consumers have been visiting banks for savings, transactions and investment purposes. “Banks act as a channel, a focal point for masses to aggregate and manage their wealth, as well as getting access to money services.

“Although for the past decades banks have been the most efficient provider of these services, that is no longer the case now.

“Rather than looking at the consumer perspective, tech giants are looking at using technology to solve problems - problems that banks are still relying on people to solve - and it is working," said Bao.

Many banking processes, such as know your-customer (KYC) still involves back-end support manned by employees. In contrast, FinTech companies leverage on automation to speed up processes.