Banking/FinTech Collaboration Grows In China


In China, digital financial services gain ground among collaborative efforts between tech-savvy upstarts and traditional players. Elsewhere, Monetary Authority of Singapore is eyeing digital-only banking licenses.

There’s no shortage of evidence of FinTech collaborations with traditional financial providers — to mutual benefit. In China, reported the South China Morning Post, the trend is on the upswing.

The publication noted that the shift has been a fundamental one away from previous mindsets, where FinTech firms came to market with the aim of disintermediating traditional banks from their financial service perches.

The move toward collaboration has, among other things, boosted several types of banking activities for companies, such as China Merchants Bank and Ping An Bank, according to the publication. Retail efforts have benefitted, while, according to commentary from DBS Bank Associate Research Director Cindy Wang, “Chinese banks are still at the Banking 1.0 stage, as most of them serve clients offline. FinTech companies could help banks serve clients through their online platforms, using mobile app[s] to expand customer base[s] and shorten new account approval time[s] through artificial intelligence (AI) and Big Data analysis.”

In one example, LexinFintech said it contracted with 19 banks and finance companies, such as Industrial and Commercial Bank of China and Bank of Tianjin, to link borrowers and creditors.

Separately, in reference to the move to digital banking, as done in Asia, Singapore might follow in the footsteps of Hong Kong in issuing banking licenses. As noted in this space and elsewhere, the path toward digital banking licenses received a nod from the Monetary Authority of Singapore (MAS), and the shift would let digital-only banks, operating with non-bank parentage, enter the financial services arena.

MAS said in a statement, according to Bloomberg, “We have been engaging relevant stakeholders to ascertain the unique value that such entrants could bring to our banking landscape, and understand how potential risks will be managed and contained.” In addition, MAS said local lenders have been allowed to launch digital-only businesses since 2000, while banks such as DBS and OCBC Bank have been competing against FinTech firms.

“I see no reason why it would not,” said DBS CEO Piyush Gupta in an interview with Bloomberg when asked if Singapore would issue the digital license. In reference to the operational costs saved by virtual banks, Gupta noted at DBS’ shareholder meeting that digital banks could see as much as $100 of income from a cost base a little above $30. DBS’ cost-to-income ratio stood at 44 percent last year, Bloomberg reported.

“The real challenge is if the regulators create an unlevel playing field, and let the new bank licensees come in and do banking on different terms,” he told Bloomberg.

Reuters reported separately that measures in recent years that have led Singapore and other locations to be attractive to FinTech include “state funding, light-touch regulation and moves to allow startups to test financial products in a controlled environment.” However, in a statement sent to that newswire, OCBC Bank CEO Samuel Tsien cautioned against an overly generalized approach.

“With the rapid evolution of FinTech over the past several years (where [FinTech firms] began as startups looking to disrupt financial institutions to [FinTech firms] as ecosystems orchestrated by large technology companies), it is unavoidable that you will see digital-only banks without bank parentage wanting to operate here. However, the operating model of such banks cannot be a one-size-fits-all, regardless of the operating environment,” Tsien said, taking note of the relatively small domestic market.