Last week, I was approached by a phone call right before I hopped on my flight to Jakarta. On the other side of the phone line was an aspiring young man with full anxiety to choose either banking or technology as per his career path. He was curious about my time at a certain Singaporean bank.
“I will bet more on FinTech to be the future,” I suggested. That particular bank is indeed one of the most innovative banks in the world, but there are players other than banks that can do the same thing and better, these days. There are several cases that technology companies are disrupting the banking business, and they are:
In addition to China’s AliPay, which was originally meant to provide a payment system for their ecommerce platform Taobao, Amazon also launched it’s first-ever debit card in Mexico last month to provide accessibility to shoppers without a traditional bank account.
Ecommerces in markets like Mexico (which less than 30% of its population has access to credit and debit cards) have found it difficult expand their online shopping business. Now with the Amazon’s debit card “Amazon Rechargeable”, it is providing the deposit and transactions function to users.
Social messaging apps
As WhatsApp launched its payment feature to its 200 million users in India; LINE also established the “LINE Financial Corporation” and LINE Pay, which allows payment made by registered credit cards. By creating a financial institution of its own, it is able to facilitate online transactions and payments, through its messenger app.
LINE Pay is currently one of the most aggressive payment app (other than WechatPay and Alipay in this region), having introduced its own marketplace (in addition to its sticker marketplace), taxi-hailing and food delivery businesses. It hopes to unify all activities using LINE Pay – serving needs such as payments, and merchant or supply chain financing.
One of Indonesia’s largest technology unicorns – Go-Jek, created GO-PAY last year following the outright purchase of 3 FinTech companies in Indonesia. Knitted closely with almost every urban Indonesian’s life, ride-hailing service is not the only thing they offer. In one FinTech conference, Go-Jek CEO, Nadiem Makarim, explained how GO-PAY empowers each Go-Jek drivers to become mobile ATMs for the unbanked people, and potentially to offer loans, insurance, and transactions that enhance financial inclusion to all people.
Similarly, the Grab also rolled out GrabPay following the formation of Grab Financial Service Asia.
Less exclusivity and more touch points as advantages
Technology companies are stepping into the financial services for two possible reasons: the liberation of the banking license and the frequent touch points with the users.
Banking licenses are no longer exclusive to financial institutions. This trend is not only exclusive to a handful of countries, but is currently sweeping the globe. Taking China as an example, starting from 2010, the Chinese government made an announcement to open up licensing to private banks as an approach to encourage private investment. Many technology companies with capital and resources are allowed to establish their banking arms.
Unlike banks, technology companies usually control more channels that interact with the users. This creates tonnes of “data” that allows the company to identify their customer much more easily.
Traditional business are also turning the tables on these traditional financial institutions. As frequent travelers, we all know how painful it is to open a bank account in foreign countries. This all changed when remittance agency – TransferWise, issued its debit card this year enabling multi-currency transactions at low fees.
Globe, at telecommunication operator in the Philippines founded Mynt to offer transaction and loan services to their users as an alternative to a bank account. For those unaware, even automobile car makers such as BMW are offering car loans through its BMW Financial Services entity.
What is the lesson?
I can still recall on my first day of training at the bank some years ago. The country’s managing director told us the first thing about banking was the exclusivity of authorization to provide safe and trustful financial services to the population.
Fast forward to today, unfortunately the exclusivity no longer applies. Banks must find their sweet spot to secure their business while remaining open to collaboration with new players. Fortunately, banks are learning. As learning from your enemy will make you more competent, it may also make friends during the process.
Or maybe that is the only way they can save their ass.
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