Because of their low operating costs and consortium construct, virtual banks also offer an opportunity to provide services to the underbanked. In Singapore, for instance, the license eligibility criteria specifically details the need to reach under-served segments of the local market such as gig workers.
Recently, an APAC-based FinTech firm that provides money management and tax services to the self-employed announced it is partnering with a food delivery provider to help riders meet their tax obligations and grow their retirement savings. How convenient!
More and more, we are seeing regulatory changes create new opportunities (e.g., virtual banking in APAC and open banking/PSD2 in EMEIA) for firms to think globally and leverage new technologies.
Nontraditional entrants gain momentum
Tech-savvy companies ranging from food delivery services to travel agencies have access to loads of valuable customer data along with the right distribution methods in place. This allows them to build out their current services and create new revenue streams with a complimentary offering, though they must be mindful of operating in a strongly regulated financial services industry. For example, a travel agency might seek to provide a service that helps customers save for future vacations, allowing the agency to own the lifecycle of your next holiday.
Nontraditional players are moving with speed, keeping the customer at the heart of what they do and taking on complex regulatory requirements, even if it means “failing fast.” This “fail fast” and iterate approach is not in the DNA of large financial services firms, who are often so risk averse they foster a “can’t do” culture.
Firms must place a greater focus on putting the customer at the heart of their platform. One way they can do so is by formally appointing a dedicated Chief Client Officer (CCO), something we’re starting to see in the investment management world today.
As more nontraditional companies realize they have the distribution capabilities to offer investment services, they are taking more and more business from traditional players. So while we have yet to witness one of the tech giants capsize the industry, these smaller nontraditional players could eventually create the same effect.