Fintech: Friend or foe?

Fintech: Friend or foe?

Startups and big tech firms alike are changing financial business models. By Parichart Jiravachara and Kanchanok Bunsupaporn

Fintech -- businesses providing financial products and services by way of technological applications -- has been rapidly transforming the financial industry in recent years. These firms are categorised into four groups according to the products and services provided: capital market and banking services such as payment and lending; investment management; insurance products such as peer-to-peer (P2P) and personal insurance; and property-related services such as housing mortgages.

Within these groups, the number of startups has been rising at varying rates. Globally, the majority share of startups are within the capital market and banking services, in particular payment services, while in the Thai market most startups are concentrated in the lending business.

Overall, fintech firms have achieved tremendous success, as reflected by the presence of 40 unicorns -- firms with a valuation of US$1 billion or more. This is the highest among all industries, including tourism, education and retail.

Aside from startups, technology titans such as Alibaba, Tencent and Google are also active in the fintech market. These companies have adopted emerging technologies such as blockchain and artificial intelligence (AI) to develop new products.

A recent example is Ant Financial, the mobile and online payment affiliate of Alibaba Group. It has been promoting a new payment method that uses facial recognition in place of QR codes. AI, which is the enabling technology, will make payments more convenient, especially for older people, as customers will no longer need to access their smartphones for each transaction.


In terms of competitiveness, big tech companies will have an edge over traditional firms because of the reach of their digital ecosystems. For instance, access to popular social media networks that are large pools of consumer data will allow for greater consumer insights. By combining this data with emerging technologies, big tech companies are more likely than traditional firms to create new products and services that are better aligned with customers' needs.

As such, the emergence of fintech can be seen as a challenge to traditional financial businesses that include banks, securities firms and insurance companies, which may be at risk of losing their market share.

Furthermore, competition among financial and banking businesses has intensified with an increasing number of competitors and innovative product and service launches to cater to customer preferences. Traditional businesses are also likely to be affected indirectly, through the loss of consumer behaviour data to startups and big tech firms when consumers make their transactions via e-wallets.

To overcome the numerous challenges, firms should start by prioritising core strengths. 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 for flexibility handling product and service development.

Cooperating with startups or big tech companies in developing new products and services can also be beneficial. One example involves China Everbright Bank and Ant Financial, where the bank was able to take advantage of Ant Financial's AI-related applications and biometric verification technology to accelerate product and service development and lessen the burden of having to build new technology from scratch.

(Deloitte will be the main sponsor of The Singapore FinTech Festival 2019 to be held from Nov 11-15. To register, visit

Parichart Jiravachara is a Partner (Risk Advisory) and Kanchanok Bunsupaporn is a Senior Consultant (Clients & Industries) with Deloitte Thailand.

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