Fintech unlikely to replace traditional financial sector

Fintech companies are unlikely to completely replace the more conventional sectors of the financial services industry as they are mostly inexperienced in financial sector operations, according to a CFA report.

CFA’s ‘Fintech 2017: China, Asia and Beyond’ report found that there were three main ways for fintech firms to develop – to collaborate with banks, make achievements in technological segments, including mobile payments and peer-to-peer (P2P) lending, when offering financial services as banks were weak in these areas, and the last and biggest threat to fintech firms was for banks to develop technologies on their own.

One of the report’s authors, CFA Institute director, content Asia-Pacific, Larry Cao said fintech firms had a natural growth curve in areas where they were usually part of a system and built smart experiences that banks could not or did not want to build.

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“While fintech will have a significant and potentially revolutionary influence on a broad set of sectors within the global financial services, fintech leaders interviewed for our report noted that startups needed a large flow of customers, a large amount of data, and very strong credit risk skills to be successful,” Cao said.

“There was a consensus [that] the number of startups that would become big peer-to-peer winners was going to be in the tens, not the hundreds or the thousands.”

The report also found that blockchain technology would bring the most significant change to the financial services industry at 40 per cent, followed by robo-advisers (22 per cent), mobile payment (19 per cent), P2P lending (eight per cent), crowdfunding (seven per cent), and other (three per cent).

Commenting on the report, CFA Society Sydney president and Morningstar managing director, research strategy, Asia-Pacific, Anthony Serhan, said robo-advice was specifically relevant to the Australian financial landscape.

“In terms of Australia’s unique mandated superannuation system, robo-advisers can deliver tailor-made wealth management services rapidly and conveniently to all investors instead of only high net worth clients,” Serhan said.

“It’s a perfect combination of technology and finance working for the benefit of the end investor.”

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With Apple issuing virtual credit cards for free to its one billion users to enable them to use Apple wallet, with Alipay launching in Australia, and with Facebook just having its peer to peer patent approved for Australia, I would've thought the banks would be well and truly under threat.

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