Merging the strengths of 'fin' and 'tech' to launch a renaissance

THERE has been an ongoing narrative around the concern that banks are facing heightened competition from financial technology (fintech) firms. This year alone saw a number of headlines warning that the banking system is ripe for disruption amid the advance of their fintech rivals.

Examples of this trend abound across both the financial industry and regulatory landscape. For example, the Monetary Authority of Singapore (MAS) has rolled out initiatives to boost Singapore's status as a fintech hub. In June, the MAS introduced a regulatory sandbox to enable financial and non-financial institutions to experiment with fintech solutions. At the same time, a February 2016 survey by recruitment firm Robert Half - which polled 400 financial services companies in Singapore, Hong Kong, Japan and the United Kingdom - showed that 40 per cent of respondents in Singapore identified online investment firms as the biggest challenge confronting their business. In late September, DBS Bank CEO Piyush Gupta warned that banks were on "a burning platform" unless they transform themselves digitally to meet the challenges posed by fintech firms.

In this environment, it is easy to see why banks would perceive fintech as a threat. However, this does not need to be the case. Rather, banks should see fintech firms as potential partners with which to collaborate, rather than compete. Banks can collaborate with fintech firms to deliver intuitive, user-friendly experiences for clients, instead of building their own fintech capabilities from scratch. In many cases, this is what banks have started doing, with traditional lenders in Singapore establishing fintech accelerator labs and other programmes for local startups. A key method to enable this cooperation is for financial institutions to adopt open-platform strategies which enable emerging fintech solutions to be integrated into existing systems in a "plug and play" manner.