Awkward courtships, but marriages will happen


14 February 2017
Banks and fintech

The combination of fintech and traditional banks represents a formidable force. And so, despite significant cultural differences, the two will inevitably come together, said enterprise software company Software AG in its predictions for the banking industry in Asia Pacific for 2017.

“There will be some seismic shifts in the banking industry in 2017, as threats and opportunities from digital banks, fintech and regulation continue to shake the business landscape in Asia,” said Anneliese Schulz, vice president at Software AG Asia.

According to Software AG, “Banks will start investing in fintech and digital banks that are currently disrupting traditional banking. While traditional banking has the distribution and greater trust (at least among older generations), fintech and digital-only banks have newer, more agile technology … There will be some awkward courtships, but marriages will happen.” 

Getting intimate through data

2017 will also see banks finally beginning to wrap their arms around their most valuable asset: client data. “While banks have spent millions of dollars to collect the data, few have dedicated themselves to fully operationalising the insights to be gleaned from it by using predictive analytics and machine learning.” According to a recent survey by Options Group, banks are expected to hire technology specialists in a big way to turn data into actionable insights. Inevitably, new revenues for banks will depend on how efficiently they can operationalise real time data so that it can be monetised.

Traditional asset management under siege

Traditional asset management will come under siege by robo-advisors. “Given a rising interest rate environment, which few active portfolio managers have experienced, we will see more automation through these robo-advisors, and consolidation in asset management as well,” said Software AG.

Branches get pruned

Branch closures will accelerate as customers increasingly adopt mobile and online banking. Those that remain will be smaller, anchor branches focused on low-volume, high value activities.

Banks open up

Leading banks are leapfrogging regulation to open up their systems and data and develop partner ecosystems, paving the way towards greater choice and competition for customers, and possibly entirely new revenue lines for retail banks. 

“As banks begin to operationalise data, open up and partner with competitors and scale back on the physical world while investing in the digital world, we will start to see which ones will thrive in the new open banking environment,” said Schulz.