Driving FinTech Innovation in Financial Services – Deloitte
Article Synopsis :
The global FinTech market is quickly evolving and the Hubs within the ecosystem have demonstrated the ability to mature in a relatively short amount of time. Southeast Asia in particular, with favorable industry regulations and digital savvy customers, is booming.
The financial services industry in general is in a state of rapid evolution, disrupted by continuous innovation and subject to external pressures such as increased regulation and new competitors.
FSIReview “Driving FinTech Innovation in Financial Services”, from Deloitte explores the strategies helping financial institutions achieve success amid digital disruption. Key contents of the report include:
1. FinTech Hub 2016:
- The top 5 emerging hubs are London, Singapore, New York, Hong Kong and Silicon Valley. These hubs have the appropriate ingredients including talent, capital, progressive regulation and government support, and an ecosystem that fosters FinTechs.
- Second-tier hubs such as Belgium and South Korea focus on developing key technologies such as payments, KYC, etc.
- Third-tier hubs include Mexico, South Africa, India and Kenya—all mature markets with factors such as low penetration of banking and insurance services, and regulatory regimes not necessarily conducive to FinTech growth.
2. Building a smart financial hub: An inside view of the making of Singapore’s smart financial hub, including an interview with Sopnendu Mohanty (Chief Fintech Officer of the Monetary Authority of Singapore (MAS)) to find out more about its Fintech views and plans. Key takeaways from the interview include:
- MAS is in the process of setting up a culture of R&D to foster FinTechs.
- FinTech trends include financial inclusion; easy access to capital, and infrastructure upgrades in the form of Blockchain and APIs.
- FinTech is viewed as enabler not disruptor providing agility and improved profitability to customer-centric businesses
- The biggest challenge for FinTech adoption is the inability of financial services to embrace it due to legacy infrastructure. This in turn contributes to the lack of skilled labour. Then there are regulatory barriers and other macro/micro economic shocks. MAS is working with international bodies to overcome said challenges.
- MAS seeks to create a Smart Financial Centre to increase efficiency, better manage risks, and ultimately improve human lives. MAS has several initiatives going, such as Sandboxes to foster R&D, research development grants, Fintech roadshows, and Financial Sector Technology & Innovation schemes to facilitate ecosystem and talent development.
- MAS plans to encourage building a cluster of sophisticated risk analytics and portfolio management FinTech companies to help meet the needs of wealth managers. This will result in the increased proliferation and penetration of Robo-advisory services.
Blockchain has enormous potential to drive simplicity and efficiency across the financial service industry. However Blockchain adoption comes with its own set of challenges, such as: regulation, lack of standardization, and lack of a legal framework. Blockchain’s transformational power is most keenly apparent in business operations.
4. Future of General Insurance:
The General insurance industry is ripe for disruption. 2016 witnessed a record number of InsurTech startups. Ex-industry transformative forces such as self-driving cars and the sharing economy are maturing quickly. Implications include commercially owned policies (versus personal policies), and shorter policy periods. Add in digital intermediaries, episodic insurance policies and Blockchain, and the future looks uncertain, but promising.
5. The Future of Investment Management:
Real-time data processing sustains the investment management value chain. Application Programming Interfaces (APIs) bring transparency, reusability and stability to the overall investment management architecture. The integration of APIs into operations holds the potential to unlock new business models moving forward.
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Digital Insurer's CommentsRapidly advancing technologies, rising customer expectations and evolving regulatory environments are combining to disrupt financial services worldwide.
While traditional players, struggle with legacy platforms hampering their ability to innovate and grow, well-capitalized FinTechs and InsurTechs, commited to delivering unique experiences and superior service, look to make their mark.
Digital transformation is a must for legacy insurers. Some combination of internal re-engineering or replacement of staid legacy systems and external partnering with InsurTechs is required.
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