2020 opened with major fintech companies vying for digital banking licenses, especially in Singapore. After Grab and Razer, Ant Financial followed suit.
Digital banking is at a tipping point in the Asia Pacific region and the financial services industry needs to be prepared for a transformative year ahead.
Here are the five trends, I think, will dominate the scene.
Fintech companies partnerships will become the norm
Banks face a choice as we enter the 2020s: they can either innovate and restructure business models, providing new services and products to improve their value chain or become commodity players, specialising in a particular area.
Partnering with fintech companies will be key going forward.
Also Read: Think like a fintech company: How banks can capitalise on the digital banking revolution
The industry experience and trustworthiness of traditional banks combined with the agility and innovation of fintech companies will allow banks to create more compelling customer experiences and remain relevant in the coming years.
Data intelligence will drive competitive advantage
Data intelligence will be a key competitive differentiator. This is evident not just in banking, but across other industries.
For example, the recent acquisition of Fitbit by Google has given the tech-giant access to a huge source of anonymised health data.
Similarly, banks hold a wealth of customer financial data. The challenge is how best to use it effectively. While agile challenger banks and fintech companies are already experimenting here, traditional banks remain behind the curve.
Data intelligence will be a key focus as they aim to personalise their services and become more embedded in customers’ lives.
Regtech will take centre stage
The way large banks handle regulatory compliance is overly complex and costly. Many are hamstrung by legacy systems.
In 2020 I expect to see a drive to deliver efficiencies in this area. Challenger banks are already partnering with cloud-based technology providers to handle KYC, customer verification and other regulatory requirements.
This approach is critical in keeping costs low. Incumbents need to transform and simplify the myriad of systems they have in place to perform tasks like customer verification, and to agree on common standards.
Only then can they can embrace regtech and benefit from the associated efficiency savings.
Consolidation among challenger banks
It’s not sustainable for challenger banks to continue losing money in the pursuit of customer acquisition. The race is on.
Incumbent banks are playing catch-up as they launch new digital services, while challenger banks will be looking to sell the higher-margin loans or insurance products. Not all challenger banks will survive a downturn.
I expect consolidation in the form of mergers and acquisitions over the coming year.
Use of hyper-connected devices will continue to grow
The uptake of smartphones, voice-activated assistants, the Internet of Things and edge computing will continue to grow.
Also Read: AI and data will be the future of the M&A banking industry (Why I decided to merge with Finquest)
“BigTechs” such as Amazon and Google are working to roll out voice-activated devices across households as possible, making them a potential interface for all kinds of things in the future, including conversational banking.
This may not yet happen in 2020, but phase one is just about getting users familiar with the technology and its capabilities.
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