Disruption in Finance: How are Banks, Fintechs and Tech Giants battling it out?
Banks in the financial services industry are in the midst of ramping up their digitisation efforts, in a bid to stay relevant to its customers. Facing stiff competition from fintechs and tech giants, digitisation initiatives aim to enhance a traditional bank’s ability to compete against disruptive start-up rivals. This includes tech giants who are gaining interest in the integration of financial services into its operations.
Hence, banks are currently facing a risky position where it could lose the loyalty of its customers to its growing list of competitors.
Fintechs gaining strong foothold in the sector
Technology has become so essential in our daily lives that it is inevitable for financial services to embark on a digital route. On the other hand, fintech start-ups have discovered the importance of leveraging on technology and have since been able to provide financial solutions, which traditional financial institutions are unable to deliver. This includes a large variety of services such as peer-to-peer (or P2P) lending, online payments and foreign exchange services, digital wallets and e-money, automated or robo-investment advice, artificial intelligence (AI), big data analytics, blockchain and cryptocurrencies and many more. While these products and services are all different, they all make use of new or developing technology to provide traditional financial services in a more cost-effective, accessible and consumer-friendly way. Or either that, facilitate the expansion of new or innovative financial products and services.
However, with the red tapes and regulatory framework that banks have, these often obstructs their ability to adopt new technologies at a faster pace. As such, banks often face the most challenges in disrupting the traditional financial landscape.
The above in particular appeals to the millennial generation in Singapore who are not only the most valuable customers for consumer banking, but are taking over 50% of the workforce by 2025.
Are tech giants potentially taking over finance in future?
Research by finance and tech industry experts report that banks were significantly lagging behind tech giants in the development of technologies like cloud computing, AI and big data analytics. In 2016, research by Capgemini and Efma states that only 13% of banks globally felt that their core systems can sustain a digital ecosystem.
While banks continue to deliberate over going completely digital, tech giants have been using this opportunity to encroach on the market share traditional financial institutions have. For instance, distribution is what tech giants specialise in, leveraging their superior customer insights and embeddedness in consumers' lives which gives them an upper hand against banks who are still lacking in data analytics. Tencent – a Chinese Investment Holding Conglomerate whose subsidiaries provide various internet-related services and products, telecommunication services as well as technology – for example, provides its customers with a wide range of services from entertainment to payment services and its chat application ‘WeChat’, which has about 938 million monthly users. Their tech savvy means they may quickly gain a competitive advantage over banks in one of their most lucrative business areas.
Banks are stepping up their game in light of competition and disruption
Traditional banks must now reconsider the way to better meet customers’ needs if they want to prevent them from moving towards fintech or other tech giants. Currently, 87% of traditional financial services companies in Singapore ranked pressure on profit margins as the top fintech-related threat, followed by loss of market share at 66%.
Curbing the pressure, DBS Bank announced a $20 million investment over the next five years in a broad-based programme to train its 10,000 Singapore-based employees in digital banking and emerging technologies. It currently has the world’s biggest banking application programming interface (API) platform with over 155 APIs that developers can plug into to create a variety of services. By opening up an extensive library of APIs, DBS hopes that organisations with products and services that touch some aspects of the financial system – be it payments, fund transfers or payroll processing – would plug into its platform rather than turn to fintech start-ups or tech companies.
Ultimately, banks would not be able to keep tech giants from becoming major players within the financial services sector given the funding at their disposal, as well as the ease with which they enter new business areas, and their high customer trust. Instead, banks should be looking further ahead at how the financial landscape would be transformed in the near future and how they may play their part in it.
What programming languages are in demand within APAC?
At an entry-level, candidates would need at least HTML, CSS and even Python. At middle management level, the technical skills in demand include Java, SQL (Structured Query Language) and software development. Professionals like 'full-stack' developers in comparison can also bring multiple programming language skills similar to Java developers, C++ developer or Python programmers. Other programming languages that are picking up in demand are Ruby, PHP, AngularJS, Lisp and Hadoop. Knowledge of distributed systems, APIs and protocols (HTTP, AMQP, JMS, MQ, SOAP) are preferable as well.
The four main transferable ICT skillsets that may be used in non-ICT jobs as well as those outside the sector includes SQL, Java as well as C and C++ programming languages. Those armed with SQL skills, for instance, could use them in jobs including management and business intelligence analysts.
Who are the biggest hirers within technology in Singapore? And how does this relate to the hiring trend within the development space?
For each of the next three years, 1,000 tech jobs would be created at large financial institutions and start-ups, according to the latest government plan.
The main focus of DBS, UOB and HSBC – hiring within digital banking. HSBC for instance, is setting a high bar when it comes to the recruitment of designers, project managers and other digital banking specialists to drive its digital projects set for the coming years.
Although banks such as Barclays have offshored some of their tech jobs (mainly lowly level) away from Singapore, many firms are adding to their tech headcount. 64% of Standard Chartered’s IT vacancies are in Singapore, where it is mainly focused towards senior financial-market developers. DBS have also been hiring 200 developers, architects and engineers in 2017 and will continue to do so till end-May 2018 in which most of them will be based in Singapore.
“The bank is recruiting across all levels of seniority in Singapore and India, our two main markets for technology jobs. Most of the new hires will be developers and architects. These functions have been the focus of DBS’s tech hiring since 2015, when it began insourcing many of the development jobs that had previously been performed by third-party IT vendors. We’re looking for people who can code, rather than generalists like business analysts or project managers. And we’re not specifically looking for technologists with banking experience, as we already have plenty of them in the firm.” says Soh Siew Choo, Managing Director and Head of Core Systems Technology at DBS.
The experience of working in an “agile environment” is also much more critical now to get a tech job at banks as individuals would need to be able to adapt quickly to its volatile environment. With digitalisation and automation, job roles would evolve, and existing professionals must be equipped with new skills and competencies.
If you would like to find out more about the talent pipeline of organisations within the financial technology industry, do follow us on our LinkedIn page for more industry updates.
Source: Medium, TODAY Online, The Straits Times, Channel News Asia, TechRepublic, Computer Weekly, eFinancials, Business Insider, PwC.