Fintech: friend or foe?

These Fintechs are categorised into four groups according to the type of products and services provided: 1) capital market and banking services such as payment and lending, 2) investment management services, 3) insurance products such as P2P insurance and personal insurance, and 4) property-related services such as housing mortgages. 
Within these groups the number of startups have been rising at varying rates, for instance globally the majority share of startups are within the capital market and banking services; in particular payment services, whilst in the Thai market most startups are concentrated within the lending business. 
Overall Fintechs have achieved tremendous success as reflected by the amount of unicorn startups that have risen to over 40 firms, which is the highest among all industries, including tourism, education and retail.
Aside from startups, many leading technology companies or big tech companies like Alibaba, Tencent and Google have also been entering the Fintech market. These companies have adopted emerging technology like blockchain and artificial intelligence or AI in developing new products. A recent example is Ant Financial, an affiliate company of the Alibaba group and operator of a mobile and online payment application, whereby the company has been promoting a new payment method that uses facial recognition in replacement of QR Codes.
AI, which is the enabling technology, will make payments ever more convenient, especially for elders, as customers will no longer need to access their smartphones for each transaction. 
In terms of competitiveness, these big tech companies will have an edge over traditional firms due to their digital ecosystem, for instance; access to popular social media networks that are large pools of consumer data will allow for greater consumer insights. By combining the data with emerging technologies, big tech companies are more likely to create new products and services that are better aligned with customers' needs than traditional firms.
As such, the emergence of Fintechs can be seen as a challenge to traditional financial businesses that includes banks, securities firms and insurance companies, which may be at risk of losing their market share. Furthermore, competition among financial and banking businesses have intensified with increasing number of competitors and innovative products and services launches that caters to customers' preference. Traditional businesses are also likely to be affected indirectly, such as losing consumer behaviour data to startups and big tech firms when consumers make their transactions via e-wallet.
To overcome the numerous challenges, firms should start by prioritising core strengths. 
For instance, to cope with the fast changing environment firms can enhance efficiency by outsourcing technology-related activities to those with more expertise. 
As for firms that are more focused on building competitive strengths and maintaining comprehensive management control, they should set up a Fintech unit as an affiliated company, which would allow flexibility in handling product and service development. Cooperating with startups and big tech companies in developing new product and services can also be beneficial like in the case of China Everbright Bank and Ant Financial, where the bank was able to leverage on Ant Financial's artificial intelligence-related applications and biometric verification technology to accelerate product and service development and lessen the burden of having to build new technology from scratch.

Contributed by Parichart Jiravachara, Partner, Risk Advisory, Deloitte Thailand and Kanchanok Bunsupaporn, Senior Consultant, Clients & Industries, Deloitte Thailand.

Kanchanok Bunsupaporn

Parichart Jiravachara