In Asia, the demands of a growing digitally-savvy consumer population and strong government support have resulted in the emergence of various new FinTech services in the past six months. With many of these services being developed by non-traditional financial services companies, the industry incumbents -banks and insurance companies- have been viewed as behind the curve in embracing digital change. Tight regulation, legacy IT systems and risk aversion at senior management levels are the key factors discouraging or stifling large-scale digital transformation.
However, inaction is in fact today's greatest risk. Analysts are now predicting that by 2020, digital laggards in the financial services sector may lose up to 35 percent market share to digital pure-plays. Embracing digital is now imperative for survival, and given that the development of digital capabilities through R&D will take a substantial amount of time, traditional financial services providers ought to seek external assistance for an immediate and timely response.
The Economist Intelligence Unit (EIU) has recently conducted a global survey of 1,045 senior business leaders and found that financial services firms currently have the largest number of digital partners of any sector. Half of the financial services professionals surveyed also mentioned that their companies had more than five digital partnerships in place and acknowledged that these partnerships had played a key role in driving revenue growth.
Partnerships with Start-ups and Technology Platform Leaders
Digital partnerships enable firms to acquire and adopt emerging new technologies. Innovation labs and start-up accelerators are common means of developing and integrating technologies like augmented reality banking apps and optical identification technologies. In Asia, Cardable, a start-up under Telstra's muru-D accelerator programme, matches consumers with the best credit card that suits their lifestyles and spending patterns, while providing real-time location-based recommendations that help them better utilise their credit card promotions and privileges.
Apart from working with start-ups, nearly half of the EIU survey respondents expected their companies to enter into a partnership with a technology platform leader over the next few years. This can already be observed through current collaborations between JPMorgan Chase and Lloyd's and Apple to utilise its mobile payment solution, Apple Pay. Similarly, banks in Taiwan have been working with Telstra Ventures partner, Gorilla Technology Group, to utilise the latter's proprietary facial recognition technology as a security measure.
Partnerships for New Products and New Markets
The motivations for entering these partnerships are as varied as the forms these alliances take. Based on the EIU survey, the development of new financial products and services is the main driver of digital partnerships. In 2014, Indonesia's Bank Mandiri partnered goSwiff, a Singapore-based software firm, so that it could offer mobile point-of-sale capabilities to its merchant customers.
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