As discussed in last article, the digital transformation of Corporate Banking, the widespread use of Artificial Intelligence and new lending models are the three hot trends that are shaping the innovative FinTech platforms around the globe. Apart from these, Open Banking with FinTech is redefining the financial landscape. Listed below are another three big trends.
Trend 4: API-Led Open Banking Economy
Open API encourages corporations to open up their internal IT systems and data to third-party service providers (TSPs) in a secure manner. For example, when we book our air tickets on travel platform, the whole journey from comparison to payment and confirmation is conducted in one stop through the open API connection, without the user’s effort to connect each airline separately. In fact, the significance of the open API network has already been recognized by HKMA in September 2017 as one of the seven initiatives that help Hong Kong grow in the new era of Smart Banking.
The API economy unlocks countless new value chains with corporations across industries who position themselves as platforms for collaborations. Open API for the banking sector links commercial banks’ databases with a wide range of FinTech companies, financial institutions, and software developers. This contributes to the realization of a seamless network connecting applications, data and devices. The sophisticated network thereby created facilitates the promotion of services, payments, and product customization. As a Cyberport FinTech and industry member, FinMonster has participated in the consultation in the Open API and contributed our suggestion.
Trend 5: A Closer relationship between Banks and FinTech
Commercial banks are increasingly collaborating with FinTech companies to digitize and enhance customer experience. They work collectively and innovatively towards non-conventional data sources and predictive models for faster credit assessment. Innovative products and services such as peer-to-peer lending and mobile payment services are initiated. The collaboration enables better access to financial management tools and minimizes operating expenses.
To foster collaborative FinTech initiatives, the Hong Kong Monetary Authority signed the Memorandum of Understanding (MOD) with the Bank of Thailand on 12 May 2019. One potential collaboration they are currently working towards is a joint research project 「LionRock-Inthanon」Central Bank Digital Currency (CBDC), with their respective knowledge gained from Project LionRock of the HKMA and Project Inthanon of BOT. Expected outcomes are enhanced cross border payments, a transition towards a less-cash society and improved efficiency of payment systems.
Trend 6 Enhanced investment in non-lending services
With growing digitization and operational complexities, more commercial banks are now focusing on high-margin businesses such as personalized services, transaction banking, risk management and foreign exchange to increase their client profitability. The advanced access to technology and data enables commercial banks to offer differentiated services and custom advisory. Meanwhile, with higher risk-management capabilities, commercial banks are more willing to put effort and capital into offering new non-lending services and products, intending to diversify their market.
For example, J.P. Morgan’s Treasury Services business has worked on piloting an artificial intelligence-powered virtual assistant to provide cash management services to corporate customers. Clients can directly ask the virtual assistant for information on balances instead of undergoing certain tasks in the portal such as sending wires or exporting data. The virtual assistant can also learn the client’s behavior and give personalized recommendations. It is expected to improve clients’ experience with enhanced cash management.
Real-life examples
DBS is a modal example of commercial banks working collectively with FinTech companies to challenge traditional financial institutions.
Dated back to early Nov 2017, DBS Bank has launched one of the world’s largest banking API developer platforms with more than 50 successful collaborations. The platform adopts more than a hundred of APIs, providing a vast database of 20 categories such as funds transfer, rewards, PayLah! and real-time payments for companies with focuses from FinTech to lifestyle.
Household names such as AIG, McDonald’s, MSIG, PropertyGuru, FoodPanda, Homage are all stakeholders who aspire to bring more convenience and value to their customers. McDelivery customers can benefit from the convenience of the DBS PayLah! where anyone can send or request payments with no top-ups. A McDonald’s spokesperson said that the DBS API partnership has helped them speed up the payments process and enhance customer experience by taking advantage of digital capabilities.
DBS is attempting to extend beyond their traditional lending businesses. It has partnered with peer-to-peer lending platforms Funding Societies and Moolah Sense to target SMEs which fail to meet their lending requirements. DBS will offer loans to them when they prove they can repay the loans.
DBS is also exploring more possibilities for the application of digital innovations.
To cultivate talent, DBS Hong Kong has just signed a Memorandum of Understanding (MOU) for an inaugural Master of Science in Financial Technology programme (MSc FinTech) with The Chinese University of Hong Kong (CUHK). DBS Hong Kong will offer skilled training, internships, industrial projects and job placements to MSc FinTech students who will be extensively exposed to FinTech projects, ranging from API applications, artificial intelligence, big data analytics, blockchain, the digital customer journey, machine learning to sustainability.
FinMonster, as a pioneer in Corporate Banking FinTech, has already launched the Corporate Loan Comparison Platform and been preaching the building up of a Regional Corporate Financing Platform for the promotion of capital flow to real enterprises and simplification of the loan process which ultimately benefit the business growth of enterprises. We are working towards financial technology transformation. Will you join us?