Could fintechs overtake banks in the digital financial service space?

The Internet boom has pushed 9 out of 10 digital merchants to accept digital payments.

Fintech players are dominating the digital financial service industry but banks still have an ace up their sleeves according to Willy Chang, associate partner at Bain & Company.

Speaking at the panel discussion at the Asian Banking & Finance FSC Conference, Chang explained that Southeast Asia has experienced extremely strong growth in the digital financial service sector however there is still plenty of headroom to go.

As an example, Chang mentioned how overall consumer expenditure on e-wallets grew from 1% to 4%.

“It's a small number, but the relative growth is huge. And if you look at players like Shopee or Grab, and many other players, that kind of usage growth and value has been tremendous,” Chang said.

Chang said that fintechs’ biggest advantage over banks is their reach. These fintechs may have millions of customers registered to them or actively engaging with them on a daily basis.

However, Chang said that these fintechs don’t necessarily have or they are still starting to build the capability to assess creditworthiness or even have competitive sources of wholesale financing.

“And that's where banks have a different set of strengths. They may not have 20-30 million customers that they engage with on a daily or monthly basis, but they are more sophisticated in terms of credit scoring, in taking deposits and providing financing,” Chang said

Chang added that it’s only a question of how fintechs and banks play to each other’s strengths through partnerships.

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