Fintech start-ups ‘vital to future health of banks’

 
Deloitte Touche Tohmatsu Ltd is a multinational professional services network, with 25 office locations in Southeast Asia employing up to 7,400 professionals. 
Fintech – companies offering financial technology in financial services – have become increasingly involved in the banking industry in Thailand, says Vijay. 
“Fintechs utilise alternative information sources to evaluate and predict customer credit worthiness,” he says. These include SMS, emails, Facebook, call logs and e-commerce payments.
“The whole idea in the fintech space is to be able to integrate quickly and launch products quickly in a business landscape that is rapidly changing,” he says.
“Therefore, one of the biggest challenges for banks is to look at their IT systems and figure out what kind of technology models they should have to allow for ease of integration with fintech companies and launch a new product within a few weeks,” he continues.
Another challenge surrounds the kind of business models that banks have. Once partnered with fintech companies, banks have to figure out whether they want to share revenue with their partner or charge a flat fee for each product. They also need to figure out the exact specifics of the rights they and their partner share over the product, as well as how their fintech partners share their risks and liabilities, according to Vijay. 
“The commercial model for how banks should integrate with fintechs on the business level is a key question which is going to be a challenge for Thai banks,” he said.
The third area of challenge for banks concerns issues of consumer protection.
Ensuring that customers have given banks their complete consent is going to be a challenge, as fintech companies often draw their information from alternative data points. 
This issue is important for banks because without proper consent from customers, in utilising alternative information banks could be violating certain legislation governing consumer protection, says Vijay. 
Thai companies in the banking sectors have expressed concerns with regards to this issue and have questioned how Indian banks deal with consumer protection legislation that is only getting tougher, he says. 
However, increased regulation does not mean that alternative data sources are going to be entirely restricted from use by companies and negatively affect the growth of fintech. Legislation on data protection only means that use of the alternate data sources must now be more specific to different companies and different purposes, Vijay suggests. 
Governments recognise that ultimately, fintechs will benefit financial services. Although there is more legislation on data protection being passed yearly, they are not intended to limit the growth of fintech, he added.