Asian Financial Companies Turn to Fintech, But Headwinds Remainby Fintech News Singapore June 29, 2016
Financial companies in Asia are looking to catch up with the west in using financial technology, but while adoption of fintech is expected to increase, the distrust for online banking systems and the lack of regulatory support may slow down the process.
As fintech becomes increasingly ubiquitous in western markets, many financial institutions in Asia are beginning to look into the sector. Ernst & Young has even established a fintech adoption index, which revealed in January a higher adoption rate of fintech by digitally active people in Hong Kong and Singapore than those in the U.S. and U.K.
In Thailand, financial companies are expected to increasingly seek partnerships or M&A with startup fintech companies, according to a recent report by PricewaterhouseCoopers Thailand.
Fintech could have a huge impact on Thailand’s changing financial sector, as banks look to scoop up technology companies to keep pace with emerging business models, Vilaiporn Taweelappontong, a lead partner at PwC Consulting (Thailand), said in the release announcing the report. She added that within five years, all players in the finance industry will feel the impact of fintech.
Vilaiporn said that while some financial institutions are transforming their IT departments from support units to active participants in the overall business strategy to prepare for disruption, larger firms will likely find partnerships or M&A with fintech startups to be more conducive to quick adoption.
“The biggest challenge seems to be a financial services company’s scale,” Vilaiporn said. “If it’s too large or taking a long time to modernize, partnering with a fintech startup might be a good option to quickly pick up on fresh ideas, boost innovation and deliver better financial services at lower costs.”
Vilaiporn said blockchain technology will be a prominent part of fintech, calling it a “truly disruptive innovation” for the financial sector. Blockchain is the use of distributed and decentralized ledger technology in which transactions are recorded to improve payments, clearing and settlement, audit or data management of assets.
While blockchain is still at an early stage in Thailand, some companies have backed fintech startups or launched initiatives to increase interaction with them, Vilaiporn said.
Going forward, Vilaiporn believes fintech will be crucial in transforming Thailand’s financial landscape, leading to more electronic payment transactions and heightened competition for banks from nonbanking financial institutions and expansion from foreign players.
But while “fintegration” — the integration of traditional lenders with startups — is underway in North America and Europe, it has been slower to reach Asia, Christian König, founder of the nonprofit Fintech Vietnam Meetup, said.
König said that for banks in Asia, integrating fintech may be especially challenging due to distrust for online banking systems. “Normal people [in Asia] don’t trust online banking systems, so this is one point that is somehow different from the western regions,” said König. He added that fintech services can exploit this gap in the market and help consumers “leapfrog” traditional banking channels.
König explained that in Vietnam, the country’s unbanked population may not trust traditional banks, but do trust big names in the technology industry such as Google and Apple. Using Facebook as an example, König said that since the social media platform is extremely popular in the country and Vietnam is one of Facebook’s fastest-growing markets, he believes that if it were to offer a digital payment tool to users, people from Vietnam would use it.
“This is why I’m pretty optimistic for fintech to come to this region,” König said.
But while Asian financial institutions have become more open to adopting fintech, regulatory issues are often cited as a major factor impeding more widespread adoption.
Kapital Boost, a Singapore-based Islamic crowd funding platform, is interested in collaborating with banks, Erly Witoyo, a partner at the startup, said in an interview. However, collaborations have been slow to materialize due to the lack of laws in place to help businesses navigate this brave new world of fintegration, he added.
“With regulations, you have clarity, and people are more comfortable investing their money in a platform,” Witoyo said.
PwC’s Vilaiporn agrees, noting Thai regulators share the same concerns regarding fintech. She added that fintech has highlighted the imperative for regulators to remain familiar with the changing banking landscape.
This article appeared first on snl.com