Retail banks are facing disruption from fintech startups, tech giants, telecom companies, and others utilizing new technologies like mobility, IoT, analytics and open APIs. Alternative lending models are transforming the banking sector. In response, many banks are increasing innovation investment, focusing on startups through accelerators, incubators, venture funds and partnerships. However, cultural differences, regulations and security risks pose challenges to bank-startup collaboration.

1. ADAPT TO SURVIVE
How Retail Banks are
Adapting to FinTech Disruption
How Retail Banks are
Adapting to FinTech Disruption
Alternative lending models are transforming the banking sector, creating both competitive threats and evolutionary
opportunities for financial institutions in Asia. But with an estimated 4,000 firms challenging banks in every product line,
the level of disruption facing the financial industry has reached a tipping point, as this infographic shows:
RETAIL BANKS ARE FACING DISRUPTION
FROM THE FOLLOWING AREAS:
Startups
Tech Companies
(Apple, Google)
Telcos, Retailers
and Insurers
NEW TECHNOLOGIES HAVE EMERGED
WHICH ARE STARTING TO HAVE A DRAMATIC
IMPACT ON THE BANKING INDUSTRY:
Mobility
Internet of Things
Analytics/Big Data
Open APIs
72% of retail banks regard the threat from at least one group
of these potential competitors as either high or very high.
Source: Innovation in Retail Banking, Efma and EdgeVerve Systems Limited
2 4 6 8 10 12 14 16 18 20
2015
2014
2013
2012
2011
2010
BILLIONS OF DOLLARS
Peer-to-Peer (P2P)
P2P is affecting product areas
like personal and small
business lending, and money
transfers and as a result,
Fintech Investment has grown
exponentially in recent years.
Source: Digital Disruption: How FinTech is Forcing Banking to a Tipping Point, Citi GPS
THE LARGEST SUB-SECTORS FOR INVESTMENT IN FINTECH, RANKED IN ORDER OF INVESTMENT, ARE:
£
1
$
€
$
$
1. 2. 3.
Payments Lending Wealth Management
OPINIONS ARE DIVIDED ABOUT THE FUTURE OF THE FINANCIAL
INDUSTRY, BUT THE MAJORITY OF BANKS PREDICT DISRUPTION
Banks will become minor players
Fintech phenomenon is overstated
Banks will continue to dominate
Banks and Fintech will have about equal share
A mix—banks and Fintech—each dominating sectors
5
10
20
24
33
% respondents
Source: The Disruption of Banking, The Economist Intelligence Unit.
IN RESPONSE, BANKS ARE FOCUSING ON INNOVATION
2009
15%
2014
84%
2015
84%
Proportion of banks increasing their innovation investment from the previous year:
69% of banks believe that
start-ups can have a high or very
high impact on innovation.
Yet only around 40% of banks
have a positive or very positive
attitude to working with start-ups.
ACCORDING TO THE BANKS
THEMSELVES, THE MOST
SIGNIFICANT CHALLENGES
INVOLVED IN WORKING
WITH START-UPS ARE:
45%
Cultural
Differences
53%
Rules and
Regulations
Security
Risks
Discover How to Adapt to FinTech
Disruption at Asia’s Only Event Focused
on Innovation in Digital Lending:
86%
WILL INCREASE THEIR
INVOLVEMENT WITH
START-UPS IN
DIGITAL MARKETING
WILL INCREASE
THEIR INVOLVEMENT
WITH START-UPS
IN PAYMENTS
Source: Innovation in Retail Banking, November 2015, Efma and EdgeVerve Systems Ltd.
NEW STRATEGIES FOR BANKS
Accelerators / Incubators
~20% of banks now have their own accelerator/incubator or are
partnering with an external accelerator/incubator, in order to work
more closely with innovative start-ups.
Corporate Venturing
<10% of banks are investing in start-ups using a corporate venture
fund, with a further 10% making ad-hoc investments.
Alternative Partnerships
There are many other types less common types of partnership
between banks and innovative start-ups emerging including:
 Banks providing lending through P2P lending platforms,
 Banks licensing personal financial management technology,
 Banks launching new mobile payments services.
$$
$
$
$
$
VARIED APPROACHES
Banks in High Income Countries:
 Have made a positive movement relative to
less developed countries in the last 12 months
in terms of innovation objectives and
performance
 Are more concerned about the threat of
industry disruption
 Are more likely to be investing in
startups or working with
accelerators and incubators
Global Banks:
 Are most likely to be aiming for
innovation leadership now and are
most likely to have a corporate venture
fund or an incubator which may give them
an innovation advantage over their smaller
domestic competitors in the next few years.
Adapt to Survive
Given that start-ups are responsible for most
of the radical innovation in financial services, it
is essential that banks:
 Monitor the progression of innovative
start-ups in financial services.
 Watch how other banks are
taking advantage of these trends
globally.
 Start working with start-ups
either as partners or suppliers.
 Find ways to overcome the
regulatory and cultural issues when
working with start-ups.
Source: Innovation in Retail Banking, November 2015, Efma and EdgeVerve Systems Limited Digital Disruption:
How FinTech is Forcing Banking to a Tipping Point, Citi GPS The Disruption of Banking, The Economist Intelligence Unit
But it’s not just technology that is changing, disruptive
business models are also emerging, most notably:
30
20
10
0
Despite these challenges, most banks said they expect
to increase their involvement with innovative start-ups:
$
$
$
$
$
$
$
$
$
$
$
$
Li Hui Hui
President of Global
Business Management,
Deputy GM of Strategic
Development,
Board of Directors
China HengFeng Bank
Bhaskar Katta
Head of International Retail,
Wealth and Private Banking
Operations
ANZ
Torsten Kleine Buening
Head, Governance –
Enterprise-Wide Risk
Management
Standard Chartered
Aishwarya Kunal
Vice President, Fixed Income,
Structured Products & Loans
International Personal Bank
Citibank
19th
-20th
July 2016 | Singapore
This unique event will provide a platform for Banks, Fintech companies and other
financial institutions to learn the most innovative lending practices in Asia and
across the world that resonate with the sophisticated market demands.
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