Fintech businesses in Asia will only survive and thrive if they adopt partnership models with existing traditional banking players, according to leading players in the online finance industry.
Kevin Phillips, Head of Corporate Development for Peer to Peer (P2P) small business loan start-up Kabbage, said it didn’t make sense for such businesses to take on the financial powerhouses.
Speaking at the RISE Conference in Hong Kong, he said: “A smartphone will be the channel for banking in the future. But it has two impediments. Security and the fact our fingers haven’t evolved yet to fit the screen on the tiny keyboard.”
He added that despite the huge growth in the fintech industry, the banks – with their access to capital and scale – would always be in charge.
Where they could score was in working together, adding: “We see ourselves as partners with the banks. The banks have an inherent advantage.
“Banks come at everything from a regulatory standpoint, we come at it from a customer standpoint. If you can partner then there is a huge opportunity.”
His view was echoed by Barry Freeman, co-founder of China based P2P lender Jimubox, who said: “Instead of replacing traditional banking, it’s about providing a faster way to market.
“Where we can operate and be added to the system is by providing innovative products. We see it as additive to the market. The idea of replacing traditional banks – clearly the tech is eroding some of the functions – but in the long term they will evolve.
“Fintech businesses are a catalyst for change in the industry, which the banks are embracing.”
But the disruption experienced by large institutions will have a knock on effect in the jobs market, even if the downfall of the banks is being overstated.
Mr Phillips said the biggest change will come in sectors of the industry that can be replaced by a computer.
“With the use of big data and machine learning the jobs at most risk are credit analysts.
“With all this data we should be able to come up, on the fly, with a product that suits your (customer) needs. We with our tech, data and better understanding of your business we ought to be able to offer you a product that fits you.”
Simon Loong, of China’s leading online lending platform, WeLab added that the digital revolution could also affect other parts of the industry.
“The second job at risk is sales. The feet on the street. One thing we learned is there are cycles. When there are down cycles what do you do with your sales staff? They become a cost. Fintechs are better prepared to adapt to downturns in the cycle.
“The fastest decision we have is around 21 seconds. 74% of our customers will get a loan within 24 hours. That’s something that’s almost impossible in a traditional banking. We focus on speed, efficiency and lower cost.”
With many more fintechs mushrooming in 2016, it does seem that this is the way to go.