Fintech developments – new tech, old banana?

Charles d'Haussy, Head of Fintech, Invest Hong Kong

As a force for innovation, financial technology (Fintech) is something the financial institution has long taken for granted. It is technology used in the delivery of a broad range of financial services. Like your watch, TV, computer, car and coffee – it is something that has existed for so long that you can’t really expect to be able to do business without it.

And yet, the term Fintech has become synonymous with the innovations – the kind consumers equate with paying their Uber ride, trading via WeChat or banking via their smartphone.

The reality is that the Fintechs people think of today are the same set of service financial institutions have been providing – only delivered much faster and possibly cheaper, in a more consumer friendly experience, and in some cases by someone other than your traditional bank.

And this is what scares the incumbents – that their future lies in the experience of a customer using his or her smart device – out of the absolute control of a colluding banks and regulators (that’s for another story). This is the new normal.

Less than a decade after this banking new normal, we are seeing the rise of non-finance companies that, in many ways, challenge the old ways of doing things – and there is nothing wrong with that, especially if it benefits consumers. What is different about this new breed of “innovators” is that they are no longer coming a small part of the world, hint: Silicon Valley. Instead they are proliferating from different parts of the world, from people with different backgrounds and experiences. The only commonality is the use of technology to deliver a better of serving the financial services customers want from their incumbents – new tech for old banana!

Figure 1: Customers using at least one non-traditional firm for financial services, 2016

Customers using at least one non-traditional firm for financial services, 2016

Source: World Fintech Report 2017, Capgemini

Another new set of players that have come into the foray are governments. No they are not trying to innovate the industry with new apps – instead they are revamping regulations to facilitate the redevelopment of financial services more aligned to what customers want. The strategy is to draw talent locally and from anywhere in the world, nurture these new tech-driven financial services offerings, and market these as “made in country”. The ulterior motives include bragging rights, inbound investments, and potentially employment for locals fortunate enough to ride on the new tech bandwagon.

Which tech will drive these so-called innovations in 2017 and how will markets and regulators push to get into the limelight. Fintech Innovation spoke to Invest Hong Kong’s Head of Fintech, Charles d’Haussy, on his views on how Fintech is evolving in Hong Kong, and where the focus will be for the city.

Truth be told: value perceptions are shifting – but not across the board and certainly not all against incumbent financial institutions. The World Fintech Report 2017 study by Capgemini reveals that customers are balancing the merits of new tech powered financial services versus what incumbents stand for (Figure 2). These perceptions will naturally shift over time as both sides – incumbents and non-finance companies – jostle either via partnership, direct competition, or coopetition, in a race to win the customer’s heart, minds and wallets.

Figure 2: Customer value perception for traditional vs. non-traditional firms, 2016

Customer value perception for traditional vs. non-traditional firms, 2016

Source: World Fintech Report 2017, Capgemini

A few decades from now, we will experience likely be in the midst of another new normal. In that future, accelerated by technology, we will see a new