Keeping up with Global Fintech Trend and Thailand’s Next Move
With the advancement of technologies such as mobile and cloud computing, Customers have started to embrace the idea of on-demand finance. The trends show that more people are comfortable managing their money and operate a business online. Furthermore, they are less willing to put up with going through many processes and spending lots of time on traditional financial services. Overall, the fintech is a booming sector in this recent years, with traditional financial institutions increasing their investment in fintech and alliance with fintech startup to be able to offer financial services products faster and more efficient. Based on Deloitte observation, we have identified five key trends which widely happen around the world.
Trend 1: Financial firms are jumping into the fintech game.
Based on what we saw in a previous year, a large number of our clients in the financial sector are taking aggressive action to determine how they can incorporate fintech into their ecosystems with a few different approaches. For example, some may choose to acting as venture capital or invest in third party firm (startup) or investing in internal projects to see the real scenario and specify the problem which this technology can solve. This approach has been adopted by most of the major financial institutions such as SCB which established a spin-off organization called Digital Venture, similar to K-Bank which has Beacon, Bangkok bank has Bualuang Ventures, and BAY has Krungsri Finnovate. While other firms may join a different consortiums as a partnership and work with the industry such as project Inthanon which is a digital currency project (based on blockchain technology) by Bank of Thailand for a transaction between banks. This kind of approach has been seen a lot in a blockchain project. And some others are watching and seeing what happens next before taking action.
Trend 2: Scope of potential blockchain benefits continue to grow.
One of the main benefits is that blockchain can eliminate the need of an intermediary to do asset transfer. Furthermore, the assets mention earlier are not limited to money. It can be anything with value (in the real world). They could be stock, vehicles, titles, and real estate, etc. Next, blockchain could also create efficiency in money transaction. A typical payment transaction has to go through an intermediary which it took several days and steps to complete the payment. However with the blockchain capability, it compresses the step which usually took several days into a single step that can be done within a few seconds or minutes. And, it can still maintain the same if not better security and accuracy. For example, a few commercial banks in Thailand has a partnership with Blockchain Companies in order to achieve a new international money transfer using blockchain technology e.g. SCB has a partnership with Ripple and Bangkok bank has a partnership with R3.
A third benefit is the creation of an audit trail. Blockchain is a technology which relies on a distributed database. All the information is public and duplicated on multiple locations/databases. The blockchain ledger can be access to verify the occurred transaction and because it’s immutable. It can be assured that the record has not been modified or corrupted as long as it stores on the distributed ledger. As a result, blockchain could help the financial institution to increase transaction speed and transparency.
Trend 3: Regulators are showing interest in fintech.
In many places around the world such as Singapore, Australia, and the UK, regulators are actively looking to set up a sandbox which is a test environment for fintech project. The sandbox will allow the regulator to identify how the technology can be leveraged to solve problems in different scenarios. Including Thailand, a regulator such as BOT is also set up a sandbox for Thai startup and financial institution in fintech projects (e-payment, eKYC, etc.). Many regulators are determining ways they can take part and enable the process, instead of just responding to the trend. As you may see the SEC approach which does not fully ban the ICO but tried to carefully regulate an ICO players. By launching ICO portal, the SEC will be able to screen every ICO project before allow the player to apply for the offering.
Another example from a regulator in US, there are a lot of attention in blockchain technology and what it can be done. The approach they use is that they tried to actively watching while giving space for the player to figure things out. Balancing the innovation with the risk and controls is the main challenge for the regulator. They believe we are currently in the initial observer phase. There’s no formal guidance yet.
Trend 4: Executive are beginning to understand the potential implementation challenges.
The fintech and other emerging disruptive technologies that comes with it has generated excitement to the market and business. However, the disruption on the industry and major changes to the existing ways of operating a business are following. There is an extensive recognition that these technologies can be used to solve certain problems and improve some services. But, the concern lies in the complexity of financial operation and services. Also, the solutions are not as easy as point-and-click. We are currently in the realist phase of what these technologies can do. Next, it is to identify how do we incorporate them?
While there is great enthusiasm about how transformative the technologies can and will be, the reality of implementation leads to operational changes, such as Which problem should be tackled first, and How do we solve them without impact other business. The company CFO and Financial executive are now having a question on how to incorporate and apply new technology, as well as short and long-term impacts on the existing process and business. The changes have many risks but, it also comes with significant rewards.
Trend 5: Industry is realizing this is a marathon, not a sprint
There has been a tremendous amount of hype on fintech and many venture capital activity in this area. There is lots of anticipation for these technologies also a worry around what these technologies can do and causing an effect to the financial services industry.
There are several questions to consider such as:
- Will these new services replace an existing architecture or it can be offer in parallel?
- Does the benefit promised by the new technology can improve existing products and services, or it is just adding features that no one is seeking?
- What kind of changes need to be included in strategic planning?
- Which area of business should fintech investment go?
Many of these fintech technologies are premature; it's not yet fully developed. Furthermore, there is no clear guideline to properly implement there technologies and how they will align with the ways financial services operate. These are the main questions to address whether which approach is most suitable for your organization in this experiment stages. It’s a marathon, not a sprint, properly adoption of this technology require deep research & study as well as the right partnerships, which will take time and patience.
Source: adapted & extracted from Deloitte Five fintech trends: What’s happening now, and the promise ahead