Who will win the race between tech giants and banking behemoths? Experts say the current trend points more toward partnership than direct competition, but technology companies are pulling away while traditional players are catching up.
Banks still have better localised knowledge of their customers but tech giants are gaining in terms of data gathering. Therefore, each side sees the value in partnerships, according to Sutapa Amornvivat, CEO of SCB Abacus, the data analytics affiliate of Siam Commercial Bank.
"We will see and we have been seeing lots of partnerships, not just between tech companies and financial companies, but also between very different industries where technology has helped enable that relationship," she said during a panel discussion at the Bloomberg Asean Business Summit in Bangkok last month.
For example, the hugely popular Nintendo augmented reality (AR) game Pokemon-Go has become a marketing tool for small retailers in the United States. Closer to home, artificial intelligence (AI) powered by SCB Abacus enables instant credit approval on the regional shopping platform Lazada.
"We will see many, many others because of the data that has become much more available," said Ms Sutapa. "So the technology with which we can draw information, and the regulations that surround that ability to connect the data, is very important."
As time goes by, she said, traditional players such as banks will have to identify the "real knowledge" they need -- beyond just understanding customers -- by developing their own technology if they want to stay relevant.
Claus Andresen, president of SAP Southeast Asia, believes the tech sector will ultimately win the battle.
"We (tech companies) have certain advantages," said Mr Andersen, who started his career in the financial sector.
What SAP has been observing among its customers worldwide is that the companies that "really win the battlefield" are the ones that know the most about customers, can predict in real time what they want, and have the ability to create products and services that are available to customers "when they need them, where they need them, and at the right price".
"There are many great tech players who are doing that already today," he said. "The fantastic part is that there are a lot of banks, a lot of financial institutions, that are moving rapidly in that direction."
Sharon Toh, head of Asean for Swift (Society for Worldwide Interbank Financial Telecommunication), agreed that banks are "really stepping up their game", while many innovative collaborations are taking place.
Technology companies dominate this year's Fortune 500 list, with Apple, Alphabet (the parent of Google), Microsoft and Amazon the top four by market value. In terms of revenue, Walmart tops the table at US$500 billion, followed by Exxon Mobil ($244 billion), Berkshire Hathaway ($242 billion) and Apple ($229 billion).
In terms of headlines, though, it is fintech companies that are stealing them. A German fintech company that specialises in payments, Wirecard AG, is now worth more than Deutsche Bank. The value of Wirecard shares has climbed 84% this year and the company will join the benchmark DAX index next month.
Wirecard stock has benefited from a payment systems partnership with Visa in June and the successful initial public offering of its Dutch competitor Adyen.
"Wirecard is going deeper into an area that could have been of interest for established banks," Holger Schmidt, an analyst at Bankhaus Metzler in Frankfurt, told Bloomberg. "None of the big European lenders is active in this space and they all failed to recognise this long-term trend. This left the door open for non-financial institutions."
For years, systems for processing payments in stores and online were controlled by banks, credit card issuers and established IT suppliers. Wirecard and Adyen are part of a new breed challenging this hegemony, creating more choices for consumers.
Closer to home, Temasek Holdings last week completed the sell-off of its holdings in US banks, including Goldman Sachs and Morgan Stanley, to focus more on fintech and payment services. The Singapore-based investment company, with a $200-billion portfolio, holds stakes in Global Payments, PayPal, CenturyLink and Visa among others.
Banks have to become more like tech companies because of the rising competition from the likes of Alibaba, which is rapidly growing into financial services, according to Piyush Gupta, the CEO of DBS, Southeast Asia's biggest lender by market capitalisation.
"One, we have to be able to embrace the same technology that these technology firms do," Mr Gupta told CNBC in March. "That's not tough, because technology is freely available.
"But you have to be willing to re-architect your fundamental technology to be like a tech firm. You've got to make a culture change. You've got to be like a fintech or like a startup."
Mr Gupta speaks from experience -- Euromoney magazine has declared DBS the World's Best Digital Bank.
Nevertheless, banks excel in one area where startups need help and that is risk management, whether it is liquidity, market risk or credit risk. "It's not like we come to this challenge unarmed," said Mr Gupta.
In any case, banks need to maintain perspective in the face of "the hype, the hopes and the myths" surrounding AI and the science of data, said Dr Sutapa of SCB Abacus. "Understanding the practicalities of what they can deliver … is much more important."
For Ms Toh, cyber security is the one problem that keeps her up at night as Swift manages critical infrastructure: every two to three days, sums equivalent to the entire gross domestic product of the world go through its network.
"We are now really looking into three areas including the bank, which involves how you protect and secure your local environment; your counterparties in terms of how you prevent and detect any fraud; and lastly, it is really about the community by preventing future attacks through sharing of information," she said.
According to the 2018 Annual Cybersecurity Report by Cisco, malware is becoming "more vicious" and "harder to combat" and companies are now facing everything from network-based ransomware worms to devastating wiper malware.
Cisco says the number of cyberattacks it has to prevent in a day is actually more than the number of searches on Google.
Mr Andresen said that since 77% of the world's transactions run on SAP platforms, it is important to assure clients that technology is an opportunity and not a threat. Part of that challenge is finding the talent that knows how to use technology for optimum results.
"The technology is out there today that you can buy in an affordable manner but you need the right skill set to use it," he said.
SAP has trained around half a million students in Africa in coding, which Mr Andresen called a "simple but very useful" skill for future careers. In Asean it has started a competition involving 5,000 students competing in basic data analytic skills.