Across the globe, Big Tech is having an increasing influence on financial services. In Asia, local tech companies like Tencent, Alibaba and Grab, and global juggernauts like Apple, Amazon and Meta are leveraging their vast resources and technological expertise and partnering with fintechs to build and launch a wide range of innovative financial products and services, direct to consumers. This is putting immediate pressure on incumbent banks to step up their own digital transformation efforts in order to stay competitive.
The entry of Big Tech into the financial services sector means banks now have to compete for market share in payments, lending, investment and even insurance. Big Tech’s major advantage is that its core products are embedded into consumers’ daily lives, which makes managing finances simple and convenient. Add in the ability to offer highly competitive pricing, innovative services, and a more personalised experience than many traditional banking products, and it’s no surprise that the entry of Big Tech into financial services has been a catalyst for accelerating innovation in the traditional banking space.
Technology transforming digital banking
In particular, Big Tech is having a significant impact on the rise of digital banking across Southeast Asia, where in Singapore, Malaysia, Indonesia and the Philippines, regulators have recently awarded new digital banking licences to conglomerates featuring a number of tech giants. High-performing digital banks leverage technology to provide customer-centric services, often at lower prices than traditional banks because they don’t have the same overhead costs of bricks and mortar branches. Technology companies have a huge advantage in this space thanks to their enormous tech budgets and the swathes of data that they collect on consumers that can be used to create hyper-personalised services.
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Apart from the Chinese tech giants Alibaba and Tencent, another Big Tech company that has been incredibly successful in Asia’s financial services space is South Korea’s Kakao, which is the parent company of one of the region’s earliest profitable digital banks, Kakao Bank. Meanwhile, in Southeast Asia, the key tech companies making a play for financial services are Sea Group, Grab and GoTo, which have collected six digital banking licences between them in the region to date.
The Philippines’ most popular digital bank, Maya, is also the product of Big Tech, with leading technology company, Voyager Innovations, behind the innovative and customer-centric products and services on offer from the bank.
The aggressive entrance of Big Tech into the digital banking space is likely to continue disrupting the traditional banking industry in the short term, with tech companies having the resources and expertise to offer a wide range of financial services that are more convenient and affordable than those offered by traditional banks. Many banks will be faced with the choice of either digitally transforming their services, or partnering with a Big Tech company to avoid being left behind.
Globally, we’re seeing a growing number of traditional financial institutions partnering with Big Tech in order to remain competitive, and recently in the USA we’ve seen a number of financial institutions banding together to launch a tech-driven mobile wallet, with JPMorgan Chase, Bank of America, Wells Fargo and others joining forces to launch Paze, in an attempt to fight off Big Tech.
More than banking… Big Tech is also disrupting payments, lending
Beyond digital banking, Big Tech is also expanding into other areas of the financial services sector, such as payments, lending, and insurance. For example, Ant Group, the financial services arm of Alibaba, is one of the largest payment providers in Asia, and Tencent, another Chinese tech giant, is also a major player in the payments space.
In lending, global online tech-enabled retailer Amazon has launched a lending program for its merchants, while Alibaba has launched a lending program for its small businesses and Ant Group writes microloans for billions of retail consumers. These lending programs are often more convenient and affordable than traditional lending options, and offer consumers a seamless lending experience right when they need it.
The entry of Big Tech into the financial services sector is creating new opportunities for consumers and businesses, but it also poses some very real challenges for the traditional banking industry.
Traditional banks need to innovate and adapt in order to stay in the game with these deep-pocketed tech giants.
How Big Tech is disrupting financial services in Southeast Asia
Making financial services more accessible
Big Tech companies use their reach and scale to make financial services more accessible to people who have traditionally been excluded from the financial system. For example, Maya Bank in the Philippines registered one million customers just five months after its public launch, leveraging technology to make it quick and easy to open a bank account without maintaining a minimum balance, something that has been a barrier to many Filipino consumers.
Providing more personalised services
Big Tech companies leverage their data and analytics capabilities to provide more personalised financial services to their customers, such as Amazon Lending, a short-term loan offering for Amazon sellers which uses data from its own platform to assess creditworthiness and credit needs.
Another example is Singapore-based Grab, which is now offering cash advances to its driver partners based on their driver behaviour (e.g. number of completed rides), automatically deducting repayments in-platform for a seamless offering called Partner Cash Advance.
Making financial services more convenient
Big Tech companies make financial services more convenient for their customers, with tech giants like PayPal, Amazon, Google and even streaming companies like Netflix enabling customers to make payments with just a few clicks, and over a time period that suits them.
As we predicted at the end of 2022, the entry of big tech into the financial services sector is a significant trend that is transforming the industry. Traditional banks need to be aware of the potential impact of Big Tech and adapt their business models accordingly so they can continue to serve their customers and remain competitive in the years to come.
The article titled “The transformative impact of Big Tech on Asia’s financial services landscape” was contributed by Rohan Tripathi, Regional Director, Customer Value, Mambu APAC
About the author
Rohan is Regional Director of Customer Value, APAC at Mambu. Rohan and his team ensure that clients realise maximum benefit from Mambu’s cloud banking platform, based on their strategic objectives and pain points. The team also provides all round support for clients throughout the commercial decision making process, and helps ensure Mambu is aligned to the clients’ long term business goals.
Rohan is passionate about exploring new business models that emerge as a result of digital transformation, enabled by new technology. Prior to joining Mambu, Rohan worked for several top-tier consulting firms and banks in the region. His experience focuses on the financial services industry, across topics of growth strategy, financial modelling, operating model definition and inorganic growth.
Rohan has an MBA from the University of Oxford (Said Business School).