A report from Citi Group on the state of the fintech arena makes interesting, disturbing and/or exciting reading. This depends on where you are sitting. If you are a bank, you will be disturbed; if you are in the ‘tech’ part of fintech, you will be excited; and if you are a journalist, you will definitely be interested.
There is no doubt in the minds of Wall Street and the banks that the fintech version of Silicon Valley is coming. And there is no doubt in the minds of the authors of the Citi report that China, at least, reached that tipping point (where fintech overtakes traditional banking) a few years ago.
Already, China’s e-commerce ecosystem is far larger than any other country, and there are some ‘tech’ companies that already have more customers than their ‘fin’ (or banking) counterparts. For example, Alipay processes three times as many transactions as PayPal, the default P2P payment service in Europe and North America ($931 billion vs $232 billion in 2015).
The Citi report puts the success of fintech companies down to:
- High national internet and mobile penetration
- A large e-commerce system with domestic internet companies focused on payments
- Relatively unsophisticated incumbent consumer banking, and
- Accommodative regulations.
What it also says, without putting it into words (and by the way, our colleagues are not that impressed by Citi analysis in the main), is that the success of fintech companies is as much about culture as it is about technology or the state of the financial industry.
Furthermore, the report says that if the the incumbent banks in Europe, North America or anywhere else believe they are safe from disruption and are lying around on their laurels, then they had better watch out. And particularly, it seems, in regions with those attributes.
Almost without exception, the Asia-Pac region is more willing to take risks. In billing infrastructure, for example, this region is happy to try high-risk strategies to bring their BSSs into the 21st Century (sometimes with astronomically expensive consequences – no, we won’t tell). And this is also true in fintech.
Every company involved in ‘fin’, ‘tech’ or disruption (that means everyone – Ed.) should look at (and learn from) China and Southeast Asia for ideas, innovation and intelligence about the threats and opportunities that they are about to face.
Otherwise, they are likely to be badly disrupted themselves.