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Disruptive Fintech Is Dead — Long Live Collaborative Fintech!

Zhi Ying Ng
Analyst
January 24, 2017

As we move closer to the end of January 2017, one thing’s for sure: digital financial innovation shows no signs of abating in Asia Pacific, and a series of financial technology (fintech) startups continue to put Singapore and Hong Kong firmly on the innovation map. Just last week Next Money held its Fintech Finals 2017 (FF17) in Hong Kong, and the Monetary Authority of Singapore (MAS) also announced that it will hold the Singapore Fintech Festival 2017 in November, the second year in a row that the regulator will be hosting the event.

FinovateAsia 2016 in Hong Kong and the Global Fintech Hackcelerator in Singapore last year gave us a glimpse into how fintech in the region will develop in 2017:

  • Asia’s governments are playing a pivotal role in driving fintech investment. MAS has committed nearly $160 million through 2020 to the Financial Sector Technology & Innovation (FSTI) scheme to fund infrastructure and deliver fintech services aimed at establishing Singapore as a smart financial center, as part of the Singapore government’s Smart Nation initiative. The Hong Kong government has announced a $370 million Innovation and Technology Venture Fund aimed at encouraging private venture funds to increase their investments in technology startups through a matching process. Both MAS and InvestHK have established dedicated fintech teams.
  • Fintech companies want to collaborate, not disrupt. Fintech companies in the region are gradually moving away from a provocative posture as a challenger to banks to favoring collaboration and helping incumbents improve their customer experience and operational excellence. Many startups were initially contemptuous of incumbents’ perceived intertia and poor customer service and saw themselves as alternatives. But complex regulatory environments, prohibitive customer acquisition costs, and difficulties monetizing “freemium” models have opened their eyes to the capital, mentorship, and scale that incumbent firms can offer.
  • Government bodies set a collaborative, not disruptive, tone for fintech. The Singapore and Hong Kong governments have taken a very supportive yet cautious approach to fintech in the region. This approach is encapsulated in the words of Sopnendu Mohanty, chief fintech officer at MAS: “I see ‘fintech’ and ‘banks’ as synonymous. I don’t see them in conflict with each other.”

Security and risk, mobile banking, and payments fintech companies took center stage at the two events; click here to read the report.

While regulators encourage a vibrant ecosystem for collaborative fintech, collaborative fintech poses unique challenges to the financial services sector. Innovation through collaborative fintech is harder than it seems.
 
When fintech companies take an approach that is more collaborative than disruptive, it risks giving financial institutions a false sense of security. This is because digital financial services executives don't feel threatened by startups that are not out to disrupt but to collaborate, seemingly cementing the financial institution's position as the undefeated incumbent. Keep in mind that the truly disruptive fintech companies such as Ant Financial and JD Finance have yet to fully spread their wings anywhere in Asia Pacific other than China. Financial institutions still have time to accelerate innovation with startups, but to reap the benefits of collaborative fintech, digitial business strategy executives at financial services firms must establish explicit business objectives, tweak processes to support innovation, and link outcomes back to the business. 
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