Turn to any business news page and you will likely read about Fintech. While it seems to be the latest darling on the block, it isn’t.
The first mention of Fintech was recorded and attributed to Public Relations specialist Justin Westcott in 2007 by tech columnist Amit Agarwal’s webapp, The First Tweet.
It entered mainstream vernacular between 2011 and 2015 when companies from Square through Lending Club provided Small, Medium Businesses (SMBs) an alternative to big financial institutions for services such as payments and loans, and created a buzz in the finance industry.
(Featured Image: Samsung Insights)
Square offered a way for SMBs to collect payments as a Merchant of Record (MOR); and Lending Club provided loans through individual or corporate investors or lenders. This levelled the playing field for SMBs to collect payments as well as take up loans at lower interest rates to build infrastructure.
In simplified terms, Fintech has (as in the case of Lending Club), allowed peers to be your financial institution. It has broken the hold on services such as payment, loans, wealth management, disruptive insurance, investments, etc, traditionally held by large financial institutions.
And the industry is only going to get bigger.
2017 is the year where proof-of-concepts become real services that benefit customers, said Senior Vice President, OCBC Fintech and Innovation Group, Pranav Seth. “The story is it’s Fintech 2.0, and it’s all about collaboration. It is moving beyond proofs of concepts into real, go-to-market solutions together with established financial institutes,” said Mr Seth.
As an example, Mr Seth brought up OCBC’s partnership with Barcelona-headquartered Cognicor. OCBC had initially wanted to use Cognicor’s cognitive digital assistant platform to provide a chatbot service for SMBs. “SMB customers can ask questions and the chatbot will (provide) answer (very quickly). We realised that maybe it’s not the best use case but we learned a lot of about how Artificial Intelligence (AI) worked,” explained Mr Seth.
“We said a better use case (for Cognicor) would be in home loans. So we brought in the home loan team, and we worked with Cognicor to create a home loan chatbot”, said Mr Seth.
Cognicor’s advanced cognitive computer has handled over 3 million automated interactions over the last four years, said Chief Technology Officer and Co-founder, Rosh Cherian. Its platform offered “instant engagement” between customers and financial institutions.
Its efficacy is undeniable. The Business Times reported it had helped OCBC closed more than S$10 million in home loans since January this year. The service named Emma, has handled more than 20,000 enquiries.
Another start-up that has benefitted from working with OCBC is WeInvest. It is an online investing platform that helps customers organise investments into goals and creates a systematic strategy to reach them.
The company’s co-founder and Chief Technology Officer Aananth Solaiyappan (who has been a speaker at OCBC’s The Open Vault) offered another perspective into the Fintech clientele. “Millennials – and the young-at-heart – actually do not want to visit a bank to get advice on investing. They trust their phones, they trust start-ups, they trust companies. They’re a digital-first generation; they probably had email accounts since they were born.
“Folks like that don’t want to walk into a bank, understand 50 different things from a salesperson before they make the decision. So, for them, our platform works really well,” said Mr Solaiyappan.
To understand how The Open Vault choose its partners, Mr Seth explained that it begins with the bank’s inherent needs. “The conversation begins with the problem, or the opportunities statement. What that means is: technology may be able to do many things but unless it is solving a customer pain-point, or a business challenge, or tapping into a new opportunity – be it a business one or customer-related – lets not waste too much time on it,” said Mr Seth.
To identify whom to work with, The Open Vault works with the myriad business units within OCBC to define a very long list of problem statements, said Mr Seth. At the same time, The Open Vault does not negotiate for equity in working with its partners. “The start-ups we work with are not early-stage ones. They are interested in selling their solutions and I want to solve my problems. If I ask for S$30,000 equity, in all honesty, they will not want to, because they’re not early-stage,” explained Mr Seth.
(Photo: Next Technologies)
More than banking solutions
Not all Fintech solutions are directly related to financial services. Some, such as MoneySmart.sg, provide a service to help the public make financial decisions by breaking down the clutter of information around them. “Fintech decentralises many financial decisions from governments and large corporations, and gives individuals more tools to manage their finances. MoneySmart.sg uses technology to give the public more transparency to empower them to make the right financial decisions for themselves,” said Chief Executive Officer Vinod Nair.
For example, MoneySmart.sg was the first to provide homeowners in Singapore an open view on all the available housing loan rates at a single glance. Potential buyers can then make the best financial decisions based on the information. Mr Nair added: “The presence of an independent comparison site challenged banks to up their game and offer more competitive products. At the same time, Singaporeans are also quickly embracing a willingness to do their research online before committing to any financial decisions.”
Then there are companies such as FinAlly that want to put financial control back in the hands of consumers. FinAlly bypasses traditional insurance agents to let the insured choose the best plans for their needs. And it rewards them with hefty commissions that would have gone to the insurance agent. However, FinAlly is quick to add that they are not trying to kick out the middle-man. “We are really about consumer empowerment,” said Chief Marketing Officer Benjamin Tan.
“We believe the best people to plan and control financial needs are the consumers themselves. To do this, they only need some guidance and objective planning tools, and they should be rewarded for doing the groundwork. We still recommend that they go to a financial consultant for complex solutions. In a way, we are helping financial consultants move higher up the value-chain for longer term sustainability,” said Mr Tan.
Banks and Fintech
With payment services such as Apple Pay; Alibaba’s payment and digital bank, Ant Financial; SingTel’s Dash and others encroaching on financial services, surely banks must be feeling the heat. “Kenya’s M-PESA does payment through top-ups, prepaid cards and airtime as a complete payment ecosystem – and they’re doing this through 2G, 3G phones. With basic services such as these, you don’t need fancy phones and technology,” said Mr Solaiyappan.
The disruptions have not dulled banking’s lustre. “We welcome the competition – as long as they’re applying the same standard of safeguarding money,” said Mr Seth. “From our point of view, we are seeking collaborations. I think 20 percent of companies will go directly to customers but 80 percent will work with banks. So it’s going to be a much more diverse playing field. And we’re ready for that,” added Mr Seth.
“The bank of the future is what we call the ‘ubiquitous bank’. Whether you’re a banker or a consumer, you have things to do in your life. You want to buy things, you want to retire, you want to send your kids to school, you want to make sure your groceries are filled – these are life journeys. There is a component of banking in each of these life journeys.
“We want to be sure that when your smart fridge is ordering groceries autonomously, it is using OCBC’s API. So we are working on a whole set of APIs, and talking with whoever wants to build these APIs. We want to be the most convenient and easiest to work with. If you want to do SMB accounting, I want to be with you working with you to make sure that your accounting and banking is integrated. Similarly, if you’re planning for retirement, I can help you draw up your retirement plan: how will you send your children to school, how much will that cost… It’s no longer about buying the financial product but achieving the goal. That’s how we see banking; it will evolve much beyond just products,” said Mr Seth.
Agreeing, FinAlly’s Mr Tan said: “I hope and expect to see a de-emphasis on Fintech as a category; people should just be looking at platforms that simply make life easier and better. Fintech should focus on core technologies applied to finance, such as robotic data analysis and prediction for future, which can only get better and better.”
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