Fintech APAC, The Lay of The Land and Onwards

Photo by Micheile Henderson on Unsplash

My take on the evolution of the fintech movement and the disruptiveness of customer-centricity

We all know financial services are being rattled because the historical competitive advantage, the protective “barrier to entry” of the sector, “trust,” is being challenged by new ways of building confidence and reputation, such as online reviews.

In a scenario of transformation (or discontinuity), the new dominant design that emerges is shaped by people’s new habits. So much so that one way of identifying a wave of disruption is to pay attention to broad trends; changes in behaviours of society.

The APAC region is very diverse. The population of the various countries have unique habits driven by their different cultures which also reflects in different regulation. These factors mould the local fintech movements.

In China, for example, the adoption of cashless payment is incentivised through restrictions imposed by the government on the use of paper money for transactions involving large figures.

In Japan, a temporary program from the government awarded cashless purchases with cashback and seemed to have helped to cement a new habit.

Nonetheless, there are commonalities across the APAC — in addition to COVID-19 accelerating the adoption of contactless solutions all around:

• The fintech movement took place primarily at the consumer level, where value is directly based on volume. But now we can see it expanding to include other types of financial services where the value per customer is increased. In this scenario, the number of customers is reduced. Clients are more challenging to be acquired, but they also bring more revenue at the individual level. Services provided by fintech are gradually evolving from retail banking to wealth management and banking for small-medium businesses and on a trajectory to serve mid-tier corporates, global organisations & institutions. In Asia-Pacific, the number of startups providing each one of those different financial services varies per country. The expansion of the menu of services is a trend common to all countries, though.
• The fintech movement is nurturing startups in other areas, outside of direct financial services, such as compliance onboarding, KYC, RPA.
• Also, across the board, maintaining a strong focus on data security is paramount, and it is the ongoing priority. It’s all about permission-based interactions, and they need to be secure. The expectation of some Asian countries for data to be locally stored also helps to elevate the importance of data security.
• Collaboration is increasing between fintech (amongst themselves as well), traditional banks and even the government. In Australia, for example, the regulatory sandbox for fintech products launched in 2016 has now been enhanced, enabling more businesses to test a wider range of financial products and services, and for a longer period of time. No government wants not to benefit from the growth of the fintech market over the next five years; involving billions of dollars. This is interesting because, as we know, regulation can serve to protect incumbents and the status quo; however, when regulation changes, it can turn into a factor of disruption.

Fintech has come a long way already; developing very rapidly indeed, but still with plenty of room to evolve even further—very exciting.

Undoubtedly, the tremendous advancement it brings—and possibly the central pillar of the fintech movement—is the customer-centric approach fueling the transformation from monolithic, one-stop-shop banking services offerings to a best of breed model. Customers, consisting of not only individuals but also businesses and players in the financial ecosystem itself, can now select the best products and services from different (and various) providers to address their needs.

Even with start-ups being absorbed by deep pocket high-street banks and other traditional organisations in the financial sector, winners will be the ones capable of reinventing themselves to prevent the old habits and culture to gradually and forcefully alter the agile & nimble operating model of the acquired fintech.

Customer centricity is the new norm. Let the consumer pick and choose, and may the best service provider win.