Fintech: Disruption or synergy?

  • Business
  • Monday, 15 Jun 2020

Yen Teik Lee, assistant professor of finance at Asia School of Business & International Faculty Fellow at MIT

PETALING JAYA: To turn financial technology (fintech) into a competitive advantage, companies should go beyond digitalisation, that is, the implementation of digital technologies, and embrace digital transformation, that is, digitalisation and organisational changes, says Yen Teik Lee, assistant professor of finance at Asia School of Business & International Faculty Fellow at MIT.

“To digitalise processes and products, they can develop fintech capabilities in-house, acquire fintech players with complementary digital assets, or partner with fintech enablers such as platform-as-a-service and banking-as-a-service,” he said in an email to StarBiz.

“However, the commoditisation of digital technologies means that digitalisation in itself will not generate a sustainable competitive advantage. The game-changer comes from corresponding changes in organisational processes that promote agility, adaptability, and experimentation,” he added.

Yen pointed out that digital transformation is not just about technology, but a fundamental rethinking of a digital-first business model (such as fintech platform, fintech ecosystem, and API marketplace) and continuous enhancement of customer experience and engagement.

“Digitally transformed players are customer-centric end-to-end, which is a true source of a sustainable competitive advantage,” he explained. Lee will be speaking at a virtual workshop, titled, “Fintech Innovation: Disrupt Or Be Disrupted”.

The two-day virtual workshop would be held on June 24-25. It is organised by Star Media Group, in partnership with Asia School of Business. Lee noted financial institutions were facing headwinds in revenue growth and profit margin, as well as market share grab from fintech verticals and the forthcoming digital banks.

“In 2016, a survey by PricewaterhouseCoopers Malaysia revealed that 82% of financial institutions were concerned about the threats posed by fintech. The digitalisation of financial transactions has gained traction since then, and the pace has accelerated during Covid-19,” Lee said.

“There has probably been more digitalisation in the last four months than what the industry had expected in the next four years. The pace of digitalisation is going to stay as we adjust to the new normal (such as remote working and e-commerce). Strategically, the conventional industry players are also collaborating with fintech players, leveraging on each other’s strengths (such as the partnership between Maybank and Grab),” he noted.

However, Lee pointed out, the legacy organisational processes are holding back the conventional industry players.

“Success with digital technologies requires organising for new business logic. For example, CIMB Bank Philippine reconfigured its organisational processes around the digital banking model and successfully acquired over a million Filipinos to its all-digital and mobile-first fintech platform in 10 months.

“Just like CIMB Bank, other conventional industry players must embrace end-to-end digital transformation, engage their customers obsessively, and explore new business models to stay relevant and survive. Otherwise, they will fall behind slowly and vanish suddenly,” he explained.

On the regulatory landscape, Lee noted fintech regulations in Malaysia were prudent, but open to innovations.

In general, Malaysia has three broad regulatory frameworks that govern fintech innovations.

The first is Bank Negara’s regulatory sandbox framework that offers fintech players a live but controlled environment for experimentations under the supervision of the Financial Technology Enabler Group (FTEG). The very first to graduate from the sandbox is Moneymatch, which is an award-winning fintech start-up focusing on cross-border payments.

The second is Labuan International Business and Financial Centre (IBFC), which is a mid-shore jurisdiction that offers fintech players a market-liberal environment for experimentations and serves as a gateway to the Asia Pacific. Prominent players in Labuan IBFC include China Construction Bank Labuan that collaborated recently with Tencent to support end-to-end digitalisation initiatives of enterprises in Malaysia.

The third is the Securities Commission’s (SC) regulatory frameworks governing specific fintech solutions (such as equity crowdfunding, peer-to-peer lending, and fund management). These solution-specific regulatory frameworks reduce regulatory uncertainty around fintech innovations. Furthermore, the SC has also been proactively developing market-based fintech innovation.

On major trends that are reshaping the financial landscape, Lee noted the commoditisation of digital technologies such as artificial intelligence, blockchain technology, cloud computing, and big data and evolving customer sophistication are driving drivers.

He said the first is accelerated end-to-end digital transformation; the second is obsessive customer engagement; and the third is the emergence of new business models (such as fintech platform, fintech ecosystem, and API marketplace).

“The use of digital technologies through digitalisation initiatives (such as robotic process automation, e-KYC, and chatbot) across all touchpoints of value creation in the financial industry has escalated during Covid-19, which ushers in the touchless, paperless and cashless era. Facilitating the escalation are the technology platform providers that offer out-of-the-box banking software solutions (such as platform-as-a-service) optimised for specific use cases,” Lee said.

On the second point, he noted, a digital-first end-to-end solution is a catalyst for frictionless and unique customer experience.

“Frictionless customer experience is crucial to keep customers engaged. Amazon spent millions to defend its 1-Click ordering technology, which is the bedrock for its dominance in the e-commerce market. Furthermore, digital technologies can build upon situational awareness (e.g., mobile phone sensors) and cognitive intelligence to enable mass customisation at scale, crafting a unique and context-specific customer experience. Imagine a virtual assistant that offers you real-time advice and service within the context of what you are doing or plan to do,” he explained.

Traditionally, financial services firms create value through an exchange of capital or information.

However, Lee said, a fintech platform or ecosystem creates value by facilitating interactions between the best-of-class digital-first financial service providers (such as cross-border transactions, wealth management, and insurance) and customers at scale.

To register for the virtual workshop, visit or email

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fintech , financial technology , banking


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