By Laurence Thiery, Head of Financial Services Market & Business Development, Asia Pacific, AWS
FinTech has quickly become a significant, fast-growing industry segment across many parts of Asia. According to KPMG, the Asia Pacific region saw USD 11.6 billion in total FinTech investment in 2020, and in ASEAN, FinTech investments hit $8.9B from 2015-2019. With the growing number of FinTechs in the region, the scope of both the challenge and opportunity that FinTechs represent becomes apparent quickly.
FinTechs Adopt Unique Approach
Even more remarkable is how these FinTech businesses are being built. Firstly, most are born in the cloud, in stark contrast to traditional financial services firms. Companies like PearlPay in the Philippines provide end-to-end digital banking services to rural banks. Due to the COVID-19 pandemic, rural banks are accelerating their digital transformation journey and look to PearlPay to digitize their services, enabling them to reach and serve even those with limited or no access to the internet.
At Amazon Web Services (AWS), we support FinTech companies across Asia, many of which have chosen to build on our services in order to quickly implement new business models and re-invent entire areas of the financial services industry.
Secondly, while a traditional bank might feel obligated to provide a full range of services with varying margins, FinTechs such as Karza Technologies, a lending FinTech in India, Warung Pintar, a payment FinTech in Indonesia, and Hong Kong’s Neat. HK, which lends to small and medium enterprises, win customers by providing differentiated, targeted offerings in a high-margin or high-volume field, such as in lending or payments.
How FinTechs Deliver Innovation and Transform
Asia’s regulators have taken note of the promise of FinTechs and are moving to responsibly nurture this nascent industry within financial services. Many have taken the stance that these companies exist to service consumers, not the providers, and have begun creating structures that openly benefit any competitor that is working to improve products and services.
This can be clearly seen in Singapore and Malaysia with their Open Banking and Digital Banking licenses and frameworks, which will make internal bank data accessible to external parties digitally, and enable firms to deliver banking services over the internet respectively.
In every corner of the region, we can find FinTech companies creating innovative new ways to meet the needs of their customers.
In some cases, FinTechs have used the latest technology to improve their customer experience to draw in new customer segments. In other cases, we see FinTechs that have applied technology to improve efficiencies and enter a line of business which was previously underserved. And some FinTechs seek to create an entire virtual bank that offers new and differentiated experiences for its customers.
FinTechs are first movers in building a cloud-based future, having understood this approach enables a great pace of innovation which ultimately benefits their customers.
Traditional Banks Moving to Capitalize on More Opportunities
Of course, from the outset FinTech companies may lack many things that established banks and insurers may take for granted, such as a strong brand, legacy customer relationships, and a highly talented population of employees. These factors can’t be underestimated, as they provide the foundations upon which traditional banks and insurers can meet the challenge FinTechs have brought to the financial services industry – and possibly even benefit from them.
Traditional financial companies need one more key ingredient—leadership conviction and aggressive top-down goals to drive change. At AWS, we help many traditional finance organizations across Asia to thrive in the FinTech era.
A few companies have leveraged their greatest assets—their staff, customers, and reputations—to transform their operations. In doing so, they challenged entrenched practices and drove cultural change across the organization.
One of Philippines' leading banks, UnionBank has allowed 85% of its workforce to work from home during the COVID-19 pandemic. With AWS, the bank is also UnionBank is also able to ensure the security of its customers’ data, reduce backup time from eight to two hours, offer annual cost savings of US $380,500 for storage, save 75% of data retrieval time, and facilitate more strategic work roles for its IT team. UnionBank was also able to garner 250,000 new accounts, 90% of which were accessed from digital channels, thanks to AWS.
The Future of Fintech in Asia
For those financial services organizations that have yet to embrace the transformation challenge, the question now is how long they can resist before their options become limited. By failing to transform, they may find themselves disengaged from their customers and providing less and less value over time.
The long-term benefit of transformation however is to build a more meaningful place in the lives of their customers with personalized service offerings that touch every stage of their life and gives them a reason to remain loyal.
In a traditionally risk-averse industry such as financial services, it turns out that the greatest risk of all comes not from doing anything.
