While James McKeogh, partner at KPMG China, acknowledges that the financial services industry has always been willing to harness the latest technology available, he believes there are compelling reasons why the term “fintech” is currently in vogue.
According to McKeogh, this is due to advances in several key areas. “To interact with a digital environment it’s no longer necessary to go to a big beige box in the corner of the room for a couple of hours every evening,” he points out. “Mobile technology is now in your pocket all the time and offers a very different type of experience and form of interaction.”
The advent of cloud computing has provided access to faster, more scalable, more dependable IT solutions, without the need for multimillion-dollar budgets.
“This means smaller companies can innovate, roll-out and execute with comparatively little investment,” says McKeogh, who will be moderating a session on “Blockchain – Turning Experiments into Real Applications in Banking” at the HKIB Annual Banking Conference.
He also highlights advances in the fields of artificial intelligence and cognitive analytics, on top of increases in the pure processing power of computers.
“This creates the ability to understand even better what people are actually doing, and what’s happening around us, through the huge volumes of data available.”
In addition, McKeogh notes that a younger generation of customers is reshaping the fintech landscape. “Millennials expect better service, for a cheaper price, delivered faster, when needed.”
These demands, together with the possibilities opened up by the rapid evolution of software and hardware, have been forcing the industry’s major players to re-examine how they do business. They are also driving the opening up of the market to small and nimble new companies, some of which have grown incredibly fast.
“Uber and Airbnb wouldn’t have come about without mobile capability,” McKeogh points out. “Financial services has been a closed club and, because of the cost of delivering the services, there is a huge market among the ‘under-banked’ who haven’t been served. That’s where we see the grey markets coming in.”
If the goal is to move to a cashless society, McKeogh says every part of society has to be catered for, and in a cheap and simple-to-use way.
“Currently it’s not the banks that are actually doing this but technology companies such as Alibaba, Tencent, Google and Apple,” he says.
McKeogh believes these companies won’t make money from providing these services, but from the analytics on the data they collect.
And though there has always been a need for services such as market-based lending and peer-to-peer payments, there are now new, highly efficient ways to deliver them.
He points out that for years, the major financial institutions have talked about becoming more customer-centric while continuing to structure themselves in the same traditional ways – around units such as a mortgages group, accounts groups and pensions groups.
“Why do they not have groups such as, say, the ‘millennials team’ or the ‘new parents team’, and focus more on the customer through them?” he asks. “They don’t do that because, basically, it wouldn’t work [for them].”
He suggests smaller companies with one product offering – such as mortgages – find it much easier to be customer-centric, and focus on, say, first-time mortgagees, people who are remortgaging or expats.
This trend works in the consumer’s favour, he says. “It’s forcing big businesses to think more about the customer.”
McKeogh believes the future is bright for fintech in Hong Kong, given that its local development is industry-led and government supported. And he doesn’t foresee the growing use of fintech having a detrimental effect on employment levels – though some adjustments will need to be made. “People will probably need to be repurposed and retrained to do other jobs,” he explains.
