If you answer:
Investment – you are a seasoned financial professional who knows too much about finance’s past and present (i.e. regulators) to feel alarm at technology’s implications for its future.
Information – life in the back office or at Accenture means that you can readily rattle off half a dozen banking pain points for which tech could be a salve and cost-saver if only ‘the business’ would listen.
Innovation – you are a lumbersexual (sleeve tattoos, beard, and your dad’s flannel shirt) fintech founder out to replace a broken banking system.
That all three answers are correct reveals a problem of perspective and cross-purpose that a buzzword like fintech glosses over. Of one thing we can be certain: technology is not a new factor in finance. The stack that facilitates high-frequency trading (HFT) is a ready example of cutting-edge tech at work.
For ships that are slow to steer, like Asia’s financial institutions, fintech’s broad allure is if it can yield a product or technology that will grow revenues or reduce costs. DBS is leading the pack in this regard, setting up accelerator programmes in Hong Kong and Singapore and appointing a chief innovation officer.
This is a symbiotic relationship, where startups take the place of operations or management consultants in applying technology to business development and problem solving. Anathema to hard-core techs, accelerators’ middle-of-the-road appeal is seeing them flourish across the region.
As ever a tale of two cities, Hong Kong and Singapore are taking different approaches to fintech. For Singapore it is another answer to the existential question of why should anyone want or need to do business on Fantasy Island? It is this nagging concern that keeps local regulators on the front foot.
Hong Kong faces a different existential question, stemming from the (in theory) gradual reintegration into the mainland. A return of the yellow umbrellas is the greatest fear of an establishment attempting to keep Beijing placid. The growth of a broader innovation economy in Hong Kong is a slow and steady answer to the problem of a restive youth’s underemployment.
Enough of the incumbents, what about the aspirants? A region dominated by state-owned companies and family-owned conglomerates seems an unlikely place to be chasing unicorns. (Ah, dear reader, are you unfamiliar with the startup ecosystem’s jargon? A unicorn is a startup that reaches a $1 billion valuation.)
Here bankers that pooh-pooh startups are partly right. Startups, by their nature, are monoline businesses. Fixing an individual problem in finance incredibly well makes you a good candidate for acquisition rather than ascension to the pantheon. Conversely Alibaba and Tencent are on their way to becoming all things to all people with a cradle-to-grave relationship with clients that banks once enjoyed. Bankers rationalize the threat by stating that regulatory burdens will level the playing field and it is not an easy shift from e-commerce to financial services. Oh really?
Capital? We have enough retained earnings to manufacture it when we need it.
Risk management data? Aplenty, and can produce more with ease.
Scale? Oh yeah, check out Singles Day.
Cost control? State of the art back office, mate, premised on a lot of cool tech.
Customers that like you? Absolutely! They carry us everywhere in their pockets.
Ah yes, the customers – they bring a few points to mind. First, however fintech plays out, improved customer service is likely to be a tangible benefit. Second, the rise of mobile handset banking in east Africa provides a commercial precedent for Asia. M-Pesa shows that it is possible to skip over bricks and mortar and go straight to a handset-based financial platform not administered by a bank. Ironically it is the intangible nature of handset banking that could finally provide a tangible opportunity from Myanmar to Vietnam, reaching the unbanked and under-banked. Across Asia this portends either incredible promise or a new way for international creditors to lose a spectacular amount of money in Indonesia.
In the meantime, expect fintech founders to feature increasingly upon the Asian financial scene. Is the Mandarin Grill ready for its first vegan TaiPan?
Panda Breath: (noun) a state of being where, regardless of origin, one expresses views on the world through an Asian perspective. ‘Saigon. Shit. I’m still only in Saigon. Every time I think I’m going to wake up in the jungle I find myself on the floor with strong opinions and panda breath.’