The short answer to this, yes, due to legacy technology.

Banking is traditionally defined as the process of serving customers financial needs (pay someone, get credit, protect their cash and livelihoods etc.)

But the institutions who has been providing these services — the big banks are feeling the heat.

Especially when these 3 key questions are being warped due to technology:

1. Cost to acquire new customers

2. Cost to serve existing customers

3. Revenue to be made from existing customers

Things are changing very quickly with regulators seeing the need to improve, with the rise of technology and the ‘software eating the world’ prophecy.

“Banking will be necessary, but banks may not be in the coming 5 to 10 years” — Piyush Gupta, CEO, DBS Bank

The focus has to start with customers, their needs and wants.

Why do they need to go to a bank in the first place?

Nobody likes waiting in line to speak with someone just to get a simple task done. Most customers that we have surveyed and spoken to don’t actually want a bank account, but they want the security of the institution and a surplus on their cash.

Customers don’t want a credit card or loan, but rather, that expensive handbag, gadget or house that they are not able to presently afford.

The most taxing part about this is often that the banks are built as silos and often have complicated products which are not entirely transparent on the fees and late charges.

This is implicated when the business model is driven by profiteering from consumers inconveniences.

This is exactly the part that needs to change.

Therefore, after the financial crisis in 2008, many fintech startups spawned across the world seek to re-design different functions of delivering the personal finance experience. What we are experiencing looks alot like this:

In essence, the banks become the backend (where all your money is actually kept) and the frontend consumer-facing part are now the startups, where often are young companies who has customers interest at heart. It has been evovling since then.

The promise is clear: Faster, Cheaper and Better than the big behemoths before them.

Some fintech startups have even progressed to becoming banks of their own with actual credit facilities to serve their consumers (e.g. Ant financial, WeChat pay, Revolut, Monzo, Starling Bank and Moven).

The Fintech & Digital Banking Wave In Singapore

In 2016 the Monetary Authority of Singapore (MAS) spelt out a mandate to solve 100 problem statements by the industry and consumers.

It was a clear indication that Singapore is aiming to become a fintech hub of Asia (rivaling Hong Kong), to embrace technologies to serve consumers needs better.

In 2020, we are pending the outcome of the digital bank liscenes, and how that would spell change for consumers and SMEs alike.

Here's the list of potential digital banks:

• Singtel and Grab

• Sea Limited

• Razer led consortium

• EZ Link led consortium

• MatchMove with Singapura Finance

• Standard Chartered with NTUC enterprise

• Ant Financial

• iFAST consortium

• PhilipCapital consortium

• AMTD consortium

And this is in addition to our 3 full retail banks:

• DBS bank

• OCBC bank

• UOB bank

These three above are already moving fast to try and improve the whole digital experience and I must say doing a very decent job at that, with DBS Digibank, UOB mighty and the OCBC app which have been definitely improving over the past 4 years since the MAS laid out the clear direction to digitise.

Conclusion - The Consumer Wins

With all that being said and personal experiences both as a fintech startup and a consumer, it is no-doubt an uphill battle. With any revolution, there will always be high regulatory barriers to overcome and work within.

Most importantly at the end of the day, the customer wins. It will be interesting to see how the landscape pans out in the next 2 years as these digital banks start to launch and acquire users, as seen with what is happening in Hong Kong reight now.

We are only at the very beginning of this fintech movement in Asia.

My view is that as financial services takes center stage, more technology giants would takeover the roles of banks, with trust built on existing customers relationships. GRAB Bank? Facebook Bank? Apple Bank? Alibaba Bank? Microsoft bank anyone?

Stay tuned for my next Opinions piece on DeFi!

The next piece I will be writing will be about Decentralised Finance - or DeFi.

Now that takes things to a whole new level when it comes to Financial innovation!