Why banks need to be smarter than fintechs

The start-up fintech culture is on the rise providing traditional banks serious competition. According to an Accenture, Asia-Pacific based fintechs as of September 2016 have raised US$10.5 billion from investors. A far cry from the US$103 million the region generated 10 years ago.

“The banks are competing for mindshare and essentially they want to manage the wallet for consumers,” says John Knuff, vice president of global ecosystems at Equinix. “Retailers have the same goal; their objective is that they are the ones that want to interact with you. Consumers are ultimately going to decide who wins.

With that in mind, banks need to have a clear and effective technology strategy when addressing new competition. One way would be via the front-facing route. It’s clear that non-traditional players want to own the customer experience but if banks can rapidly develop simpler yet user-friendly products on top of their existing infrastructure that could be a key factor in retaining clients.

“Get the processes and technology enhanced and transformed in order to give a really solid foundation to build your business on. That’s the problem banks are having today the systems built 20-30 years ago are so imbedded into the institution,” notes Alex Kwiatkowski, senior strategist, banking and digital channels at Misys.  

In the end, banks need to anticipate the outcomes of their technology journey and understand what they hope to accomplish. “There are some banks that know what they want and there are some banks that don’t know what they want, it’s about what you are seeking to achieve. Banks would definitely want an improved customer experience. You definitely want to demonstrate to your regulator that you have risk management under control. You definitely need to demonstrate to your investors that you have return on equity above cost of equity,” highlights Kwiatkowski.

The banking opportunity especially in Asia is too significant to miss out on, McKinsey & Company data reveals that out of industry’s US$1.1 trillion 2015 profits close to half was originated from the Asia-Pacific region compared to only 28% in 2005.