Did you know that street vendors in China now accept payment via mobile? The Panelist and CEO of Peer to Peer (P2P) lender, Yirendai, at The Economist’s latest ‘Event’ in Hong Kong, Finance Disrupted told attendees that “China, is probably the only country that you really don’t need to bring any money or credit cards when you go out.” The moderator and Asia Economics Editor for The Economist, Simon Rabinovitch underlined Fang Yihan’s point by adding that in China you’ll even see street beggars now with a QR code accepting mobile payments.
While the image invoked laughter, it highlights in a very fundamental way just how technology is affecting the world of finance for all walks of life. Technology in finance is no longer just about helping incumbent banks improve their technology. New and nimble tech startups have financial services in their crosshairs but as The Economist moderators asked, is this really affecting the incumbent financial service providers? What change does this mean for the world’s financial architecture? Here are a few key takeaways from the eight panels of the day.
Success in Serving the Underserved
Part of the huge success that some Fintech startups are experiencing is down to the fact that they are making finance accessible to all. For example, Fang Yihan’s Peer to Peer lending service targets the financially underserved. Yirendai’s target market are those who can’t get credit cards or consumer loans from banks without collateral. “No one thought a few years ago that you could borrow fifty thousand RMB without collateral through your phone, but Yirendai did it. And we serve six hundred thousand people already”.
China Roaring Ahead
Given its growing consumer market, financial liberalization and permissive regulation China has become a hotbed for fintech activity. Mobile payments and lending are valued in trillions of RMB while online wealth management is also a hot topic. But, as The Economist asked, when compared to the developments in the rest of the world, will China win the fintech revolution? According to panelist and CEO of Neo Financial Linda Wong, China has already won due to the sheer volume of its market and its inspiring new models in this space. She did concede though that the fintech business models in China still can’t be directly translated to other countries.
Regulators Finding a Balance
Though fintech firms have mushroomed under relaxed regulations in Asia, it appears that this opportunistic window is closing. That doesn’t mean that there won’t be space to grow. Eileen Burbidge, the fintech envoy to HM Treasury in the United Kingdom says that regulators there are trying to be more encouraging. Hong Kong and the UK are in fact collaborating on regulations through a vehicle called ‘Fintech Bridges’ to help Small to Medium Enterprises (SMEs) in the UK deliver services to Hong Kong and visa-versa. Collaboration is clearly key in opening up borders in the sector though when it comes to regulation, Head of Risk and Strategy at the Securities and Futures Commission in Hong Kong, Benedicte Nolens reminds us the devil is in the detail. “There are so many types of ‘Fintech’ applications and every country has a totally different eco system and consequently fertile ground for certain things and not for other things”.
What will the Financial Future Look Like?
In the near future, Artificial Intelligence in the financial world is taking the spotlight. “If Fintech is still a buzzy term and is wildly overhyped, then I would say that A.I. is perhaps more so right now,” Fintech Specialist James Lloyd of Ernst and Young revealed. Kathryn Shih of UBS says her bank is already using it to support the advisory process.
As the conference concluded, Simon Rabinovitch asked what banking would look like in 2030. Farhan Faruqui, Group Executive of ANZ, predicted that, “Bankers of the future will be very different, they will not look like us. It’s going to be people who are creative; Programmers, developers etc. People who are far more focused at looking at customer experience as the outcome rather than building products as a standalone thing.” He went on to explain that the concept of partnerships is going to become far more embedded in us. They would not only be between fintech companies and banks but also with Regulators, technology companies and stakeholders. The point on collaboration was unanimously echoed by the closing panel representing major banks. Pierre Rousseau of Asia Pacific BNP Paribas noted the inevitability of all this. “The only way for us is to work with fintech companies. We cannot avoid it, we cannot say that it doesn’t exist, there are trends there. So we need to work with them. It’s now about how to find the right people to work with.”
