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FinTech Challenges Traditional Financial Sector

By Ada Choi & Cynthia Chan
By Ada Choi & Cynthia Chan
        

This report discusses the challenges FinTech is posing to traditional banks and the ways in which they are responding.

Tighter regulations have restricted the banking and financial services industry’s ability to expand and drive new revenue growth in recent years. At the same time, the evolution of consumer preferences and significant advances in technology are supporting the rapid expansion of financial technology (FinTech).

FinTech is driving the transformation of the financial sector in terms of the delivery of financial services, the medium of transactions and the approach to business analysis. It is providing alternative solutions to customers and redefining standards and expectations within the financial services industry.

EXAMPLES INCLUDE:

  • Mobile payment and digital currencies are enabling faster and more transparent payment and settlement.
  • Online loan applications and more powerful loan analysis are speeding up the lending process.
  • Robo-advisors are utilising machine learning algorithms and data analytics to recommend suitable portfolios to investors at lower management fees. They also have the capability to extend these services to unserved or underserved clients of traditional financial institutions.
  • Crowdfunding is providing new sources of finance for start-ups and riskier businesses unsuitable for public listings.

FinTech Challenges Traditional Financial Sector Figure 1.

Many FinTech services and solutions are being provided by start-ups and tech companies and pose a serious threat to traditional financial institutions in terms of market share, revenue and strategic and operational models.

PwC’s 2017 Global FinTech report found that 88% of large financial firms in Asia believe part of their business is at risk of being lost to standalone FinTech companies. Traditional consumer banks’ personal loans and financing businesses were identified as being most at risk.

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Contacts

Henry Chin
Henry Chin, Ph.D.
Head of Research, Asia Pacific
Asia Pacific
Research
+852 2820 8160
+852 2810 0830
Ada Choi
Ada Choi
Executive Director, Asia Pacific Research
Asia Pacific
Research
+852 2820 2871
+852 2810 0830

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