KUALA LUMPUR: Financial market innovations by financial technology (fintech) companies are the greatest new opportunity coming to the banking industry today, says Ernst & Young (E&Y).
Banks have the opportunity to partner with fintech players and, in so doing, gain access to more sophisticated and detailed customer data, said E&Y director-global lead analyst for banking and capital markets, Steven Lewis.
"Fintech could help enhance the customer experience, provide customers (whether businesses or individuals) with new or better products and services, and enable banks to streamline their infrastructure to reduce the complexity of processes of the systems," he told Bernama.
Digital developments brought by fintech firms could accelerate banks' growth through increased banking penetration levels and improve profitability by lowering costs.
The growth of robo platforms and robo advisers from fintech enables risk profiles to be analysed automatically through technology and in a way that is cost effective, he said.
Banks that embrace technology innovation and respond to the increased sophistication of clients will be in a prime position to reap the benefits from regional growth, he said.
"If we look globally, we have something like 4,000 fintech companies.
"At end-2014, investments into fintech firms were in excess of US$12 billion. That wave of growth is coming through to all the banking markets, including Malaysia," he said.
"In Malaysia, following British Prime Minister David Cameron's visit to Malaysia recently (July 30), the expectation is there could be peer-to-peer (P2P) licences granted (by Malaysias banking regulator).
"Im sure there will be others," Lewis, who based in the UK, said.
P2P could provide funding for alternative business finance providers or referral arrangements, with small business customers who don't qualify for a loan referred to the banks associated P2P lender, he said.
"On the challenge for the small and medium-sized enterprises (SMEs) to access funding, P2P is another source of funding for those businesses.
"Some fintech technologies may also enable more individuals to invest their wealth onshore, providing opportunities to new businesses operating in that space and a greater source of funding for investments, while more of the wealth stays onshore rather than go offshore, he added.
E&Y in its recent report titled "Banking in Asia-Pacific" said the new entrants from the fintech sector are using technology and data analytics to provide personalised, proactive services, which could provide faster and cheaper solutions for customers.
"The Asia-Pacific region is already seeing new types of banking competitors offering digital banking, mobile banking - to address financial inclusion issues and peer-to-peer lending and crowd funding - for customers who may not be able to access finance from banks," it said.
Fintech payment players are looking to capture part of the value chain by providing alternative ways of enabling payments but they are not seeking to bypass banks, it added. - Bernama
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