Will Tech Giants and Fintech Startups replace Traditional Banks and Financial Institutions in the era of Fintech?

Will Tech Giants and Fintech Startups replace Traditional Banks and Financial Institutions in the era of Fintech?

(Photo: Carey Kolaja of Citi Fintech and Melissa Guzy of Arbor Ventures talk about “Creating the next great Fintech Concept” in RISE 2017)

RISE Conference 2017: MoneyConf Stage (Jul 11, 2017)

It is foreseen that traditional banks and fintech companies will collaborate for the next couple of years as spoke by Jing Ulrich of J.P. Morgan Chase in one of the sessions of RISE Conference 2017. Jing is not alone as a number of speakers share the same thoughts during the conference.

With the vivid growth in fintech startups and tech giants in the last decade, traditional banking industries and financial institutions encounter tremendous competitions and challenges. By means of new technology products such as social media platforms and communication mobile applications, tech giants can reach out to massive customer base instantly and boundlessly. As a result, tech giants can enter the financial space by launching financial services such as electronic wallet and mobile payment to their customers, who may not necessary have an account with the traditional banks. Melissa Guzy of Arbor Ventures commented during the talk in RISE 2017 that social networks and mobile application companies have transformed traditional services such as banking and wealth management, which also leads to a rise of “non-bank banks”.

To embrace the new era of fintech, Ping An Group advance their technology arm by establishing Ping An Technology that focus on technologies in financial sector. During RISE Conference 2017, Ericson Chan of Ping An Technology presented how fintech and artificial intelligence helps to transform traditional financial business from front to back-end and to analyze customers’ behavioral data, which result in cost reduction and launch of tailor-made products that fit customers’ needs. By utilizing techfin, Ericson believes this enables financial institutions to create a new market place and ecosystem that is beyond traditional markets.

(Photo: Ericson Chan, Ping An Technology presented “Fintech, if it doesn’t kill you, makes you stronger” in RISE 2017)

With the interference of mobile application and services, banking industry has changed drastically in the last decades. Dr. Michael Gorriz of Standard Chartered states that banks are required to fulfil the expectation on customers’ requests to banking services nowadays. Trust built simply based on customer relationship with the sales staff is no longer adequate. “What additional value that we (the bank) can create on top of what is being commoditized?” said Carey Kolaja of Citi Fintech, may be the key concept for traditional financial institutions to transform and survive in the era of fintech.

(Photo: In conversation with Dr. Michael Gorriz of Standard Chartered in RISE 2017)

Although the rise of the tech giants and fintech startups is an unstoppable trend, it will not kill the traditional banks and financial institutions. Dr. Michael Gorriz believes that it is inadequate to simply develop digital platforms for banking and financial services, as human touches and connectively are still essential. Connecting the strengths of both fintech companies and traditional banks is the way forward for future fintech development.

Fintech companies are strong in customer penetrations through their tech products, however, they will encounter regulatory issues when they scale up to a certain size. As a result, fintech companies will need to collaborate with traditional banks, which have more experts with experience in dealing with these regulatory constraints.   Besides, traditional banks and financial institutions have already built their branding and reputations by providing full financial services and supports for decades, hence fintech companies can provide specific financial services and products as part of the financial services that the traditional banks provided. On the other hand, traditional banks can leverage on the technology expertizes of the tech giants to develop their digital financial services platform and extend their services and products to another customer segments.

In the era of fintech, it is not a zero-sum game for tech giants or traditional financial institutions. Fintech companies will continue to grow and expand their services to the financial space while they cannot replace traditional financial institutes. Both types of corporations can co-exist and can create a new win-win ecosystem by leveraging on each other’s’ expertise.

Prudence Leung is a freelance senior reporter and writer in Machine Learning of Artificial Intelligence Hong Kong that mainly covers fintech aspect. She is well experience in regulatory development in fintech, as well as business and process transformation in fund, banking and insurance industry.Prudence conducted legal research related to regulatory reform in fintech, crowdfunding, cross-border corporate conflicts etc in her legal studies. She is also familar with financial modelling, which she has built financial models on "Implied Volitlaty Surface of Hang Seng Index Option".Prudence is fond of playing basketball. She is also interested in photography, hiking and painting.