Big banks get a ‘fintegration’ facelift

The cash-centric payment paradigm transforms as banks team up with fintech firms to digitalise financial transactions Photo: Le Toan

Back to the future

When Citi launched a number of partnerships last year to provide the digital services favoured by their customers, like the ride-hailing service Grab, online retailer Lazada, and online accommodation rental platform Airbnb, they were indeed trying to satisfy their customers’ financial needs today and in the future. The partnership with Grab, for instance, according to the New York-based lender, involves Asia’s first ‘pay with points’ service, using credit card points from Citi cardholders. Citi has also linked up with Amazon to offer a ‘shop with points’ service for customers.

As Citi made these customer-centric moves, HSBC claimed itself as one of the pioneers in digital solutions and financial technologies in Vietnam. This year, the bank unveiled HSBCnet Touch ID and a digital platform for customs payments, following a partnership with the Department of Taxation to launch an online tax payment platform in December 2015.

“We are leading the way for online and mobile banking, and in the future we will continue to innovate and introduce more digital solutions for our corporate clients. HSBC strives to stay ahead of the curve – so we can guide our clients as they travel into these uncharted digital waters,” said Jason Tan, regional head of Client Management, Global Liquidity and Cash Management at HSBC, in a seminar on leveraging technology for business transformation in Ho Chi Minh City last week.

For Nirukt Sapru, CEO of Standard Chartered Bank (Vietnam), his bank is definitely not out of the race in fintech development globally when they have been in fact actively responding to opportunities in the traditional banking industry, as part of an attempt to surge ahead of a changing financial landscape.

“In Vietnam, we are the first bank ever to launch Straight2Bank mobile wallet payments and collections for corporate clients, through our partnership with MoMo, a mobile money service operated by M_Service JSC,” Sapru said.

“The Straight2Bank Wallet is a game changer in digitalising cash transactions while promoting financial inclusion. The solution helps clients reach both banked individuals and those with little or no access to formal financial channels. There is zero disruption in processing, and, with no physical cash involved, it provides greater security, cost efficiency, and speed of remittance.”

These are just a few examples of how disruptive technologies have come into everyday life, helping change bank customers’ experience and the landscape of the banking industry, as well as making financial products and services more accessible to the broader public.

Friends with benefits

While the customer-facing action is resulting in better service, behind the scenes, it may look like a battle between fast, disruptive startups, and slow-moving, conservative banks. But these days it is shifting from one of confrontation to one of likely collaboration for everyone’s benefit.

“Banking institutions are fully aware of the increasing disruption caused by new technological concepts, ideas, and competition from participants in the fintech industry,” said Sapru. “The choice facing banks now is: will they wait to be disrupted or will they embrace new ways of thinking and create better products through a combination of internal innovation and selective partnerships with the right fintech companies?”

To answer such a question, banks including Standard Chartered have chosen the latter and engaged in partnerships with fintech companies, which has resulted in winning situations for the bank, the bank’s partners, and most of all, its customers.

“Fintechs – although seemingly a threat to banks – are really enablers that banks should partner with in order to offer customers the best of both worlds. It is highly unlikely that fintechs can operate without traditional banks, and therein lies the prize that banks need to be aware of and embrace,” Sapru added.

Darryl West, group chief information officer at HSBC, wrote in an article that some banks worry that fintechs will disrupt the banking industry in the same way that downloads disrupted the music industry.

“But in fact, banks and fintechs are entering partnerships, giving banks access to new and exciting technologies, and giving fintechs access to funding and a chance to deploy their ideas and products on a large scale,” West noted.

Banks and startups generally display complementary strengths and needs, according to global head of Policy for Citi FinTech Andres Wolberg-Stok. “Startups have their strengths, banks have theirs. When you bring them together, banks know how to comply with regulations and how to keep consumers safe. And startups know how to create new things at speed, and how to focus obsessively on customers and customers’ needs,” he said in an interview with VIR.

“It’s not going to be a zero-sum game, where someone needs to lose in order for someone else to be able to win. Everyone can win: the startups need the banks and the banks need the startups. If you accept that premise, then banks need to learn how to quickly identify and integrate the best new ideas that come out of the fintech world. We call this new skill ‘fintegration’, for fintech and integration.”

The transformers

When the State Bank of Vietnam set up its Steering Committee on Fintech, it was with the aim of setting a legal framework to facilitate the development and performance of fintech companies and nurture a fintech ecosystem within the nation. The model of collaboration between banks and fintech startups thus became relevant in this context, as it helped drive everyone forward and encourage progress towards the country’s goals of financial inclusion and digitalisation.

“Vietnam is increasingly catching up with other countries in the region, where fintech has been developing rapidly. We have seen an increasing number of fintech companies enter the market in recent years, especially in the area of mobile payments, which has witnessed a lot of development,” said Standard Chartered’s Sapru. “Peer-to-peer lending and other payment technologies are also beginning to come to Vietnam.”

He stressed that with Vietnam’s young, tech-savvy population and high internet and mobile penetration, prospects for the fintech sector here are bright. Standard Chartered expects strong development in the sector in the time to come.

“We believe the best way for banks and fintech startups to succeed is by working in an ecosystem,” said HSBC’s West.

“The financial services industry is going through a period of extraordinary transformation. Digital technology is bringing a new level of connectivity and power to customers’ fingertips.”

In a cash-centric society such as Vietnam, the digitalised future will transform payment systems in a dramatic fashion. “The payment ecosystem is already evolving with cards and online payments and ultimately we are on a path that will lead us to a cashless economy,” said Hanh Nguyen, country head of Global Liquidity and Cash Management at HSBC Vietnam.