Will banks go after Fintech start-ups?

The hype about tech disruption is over and now, it's all about collaboration. 

Just as industries from retail, to entertainment, to transportation have been shaken up by software-driven disruption, it would be only natural to assume that the banking industry would be the next domino to fall in this world of evolving technology.

The impact of emerging technologies and digitalisation are wide ranging – from the way banks facilitate payments to how they can do better loan underwriting. Instead of getting disrupted, banks are using technology to improve efficiency and the customer experience.

“Some innovations, specifically in Fintech, that we see emerging include blockchain technology that will certainly impact the way banks operate. Artificial intelligence (AI) is also an area that we are exploring – besides setting up our own AI lab, we are also exploring solutions with Fintech companies to drive efficiencies in our processes and derive new revenue streams, such as with our home loans chatbot that has raked in more than $100M in loans just in its first year since launch.” – Mr. Altona Widjaja, Vice President, Fintech and Innovation Group, OCBC Bank

What exactly do banks want?

Collaborate instead of competing

A report by EY. “Unleashing the Potential of FinTech in Banking” highlights that collaborating instead of competing with start-ups can provide fresh tech solutions for banks. An array of rapidly advancing technological innovations, from robotics to artificial intelligence and machine learning, offers banks new ways to transform their businesses without replacing core banking systems.

“Changing the way we work is important, and as other companies are moving rapidly into financial services – for example, Grab Financial and AirAsia Bigpay – we have to continue to deliver great customer experiences and products.” – Mr. Altona Widjaja

At the same time, fintech start-ups increasingly recognise the significant costs of customer acquisition in financial services and barriers to cross-border business that banks are well-equipped to bridge. For banks to rebuild sustainable ROE, they must build better ecosystems. These will be founded on collaboration with fintech start-ups to help reduce structural costs, enable enhanced regulatory compliance and better serve clients.

Are banks taking over Fintech start-ups?

A recent article by CBINSIGHTS highlights that banks are finally “going after” fintech start-ups. The largest US banks have acquired only 18 fintech start-ups since 2013 however, 8 of the acquisitions took place in 2017 – the most seen in any year across the time period.

Will this trend pick up in Singapore?

As customer expectations are changing, banks have to be adaptable to change and create scalable solutions to better serve customers. Financial services will be embedded into customers’ lives and partnerships with other ecosystem players will be the key to be dominant in this space. Some of banks’ key focus areas for Fintech include artificial intelligence, wealth management, credit and financing, insurance, authentication, security, analytics and blockchain technologies.

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