Is FinTech the fourth industrial revolution? Will our future banks be called WeChat, Uber and Facebook? Can RegTech combined with AI replace courts of law? The 2016 FinTech Forum arranged by the American Chamber of Commerce in Hong Kong made us all think…
On 2 September 2016, The American Chamber of Commerce in Hong Kong (AmCham) held the 2016 FinTech Forum “The U.S. – Hong Kong FinTech Link” in KPMG’s premises in Causeway Bay. The forum was a half day event with speakers and panelists from a wide range of backgrounds, from Nicholas W. Yang, Secretary for Innovation and Technology for the HKSAR government,to Hugh Madden from ANX International.
FinTech the fourth industrial revolution?
The atmosphere at the forum was open and frank and many participating speakers as well as members of the audience shared their views in the Q&A sessions. That the industrial evolution is going faster than ever before is clear, and when one of the key speakers said that “blockchains” was a new word in his vocabulary since about a year, it opened up the discussions even more.
In this fast changing world no one can expect everyone to “know everything about everything”. At the same time all the information is out there, so we can definitely be expected to try to learn. For myself, I learned about RegTech for the first time at this event, a technology we will definitely come back to in future posts.
From Germany we have learnt about Industry 4.0 (“Industrie 4.0”) where internet of things (IoT) and a very high level of automation creates possibilities for super smart and super agile factories. At the AmCham event, several of the speakers spoke of FinTech to be the fourth industrial revolution.
If you Google the term “is industry 4.0 the same as the fourth industrial revolution?” you don’t get a direct clear hit. What is clear though is, no matter if its factories or banks, the way that we produce goods or handle money has all changed with the multitude of possibilities that cloud computing, big data, IoT etc. has given us.
RegTech – the “wow” factor
Before the first panel session, we got to watch a video message from Tim Hwang, founder and CEO of FiscalNote, and his presentation really hit the “wow” factor.
In an earlier post, we wrote about IBM’s Watson and a demonstration we attended that showed how you could get valuable insights from your CRM system through Watson’s cognitive capabilities.
What Tim told us was that he and his team had created “predictability for court cases”. This by taking the vast amount of regulations that governments have produced over the years, and by uploading all this data to a cloud platform they had created, as Tim called it, “analytics in the legal space”. Where now a client could query the database with natural language questions to find out if they were in line with the current legislation. It’s well worth a trip to FiscalNote’s website to take a look, especially the page that relates to future legislation, and “FiscalNote for state” with their “Virtual Whip board” .
Do you bank with Uber or WeChat?
After Tim’s video message, the 1st panel consisting of Henri Arslanian, Melissa Guzy, and Benedicte Nolens took to the stage> The session moderator by Jyoti Vazirani from KPMG.
A question that was discussed in many different ways was “what is really a bank today” and “how, and if, are these new “banks” to be regulated”. One of the panelists asked “if I were a millennial, who would I choose to be my bank?”, adding ““hats off” to the Chinese for allowing WeChat “banking””.
Meanwhile, Uber is working with Green Dot to provide an easy way for their driver-partners to be paid. And with Alibaba’s Alipay and Tencent’s WeChat providing customers with what they really want in regards to ease and flexibility, the message from the panel was that the traditional banks have to be really concerned.
The panelists added that the purchasing and procurement departments of bigger traditional banks have to change their ways if they wanted to be able to work with smaller start-ups and mimic services provided by WeChat etc. The bureaucracy and long payment terms (60-90 days) could kill a small start-up. The message was “If it satisfies your own DD [at the bank] then just do it”.
FinTech or TechFin?
At the end of the forum we were given KPMG’s and H2 Ventures “FinTech 100” report which contained a lot of interesting information. At the same time during the first panel session, a question was raised whether some of these companies that they were talking about should not be called TechFin companies instead of FinTech. This as companies, such as WeChat, come from a technology “base” rather than being set up by former bankers who had realized that things could be done so much better, i.e. the start of FinTech.
This discussion was linked to the question about regulations. Who is to regulate these new “banks”? One input from the audience was that “as soon as the companies are deemed to be banks then they would have to get in line and follow the regulations”. But I, as well as the panel, do not think it’s going to be so easy. If you are a Tech company, with a huge subscriber base, and you add “banking” functionality, will you then move in “line” with the other banks and make things cumbersome and complicated? Or will you use your huge customer base to create the rules for yourself? Probably the latter…
With Alipay expanding to Europe to enable Chinese tourists to pay, the question is how and if regulators are to catch up – because the TechFin or FinTech companies will not wait.
Do you have the right to win?
The 2nd panel of the day consisted of Renu Bhatia, Hugh Madden, Gavin Leo-Rhynie and Serina Wong moderated by Fangfang Chen from State Street Asia Limited.
The panel focused very much on the availability of talent in Hong Kong and Asia. One quote that stuck was “do you have the right to win”, or as I read it, “are you doing all that you know that you should do – in order to succeed”?
If you don’t “know” how to win, or if you don’t know where to get the knowledge, then it can be understandable that you fail. But when you listened to the 2nd panel it was quite clear that both companies and local governments know that they need to scale up with the right talent to reach outside their home markets, or as in the case of governments, support companies to do so.
The panel also said that companies have to change your internal culture if you are to attract the right talent. At old traditional banks the work for the IT department can often be very repetitive, and when a new idea comes it’s easy to say “no”. There was also a question from the floor in regards to “if you say “no” before you ask “how” – then it’s a fireable offense” i.e. that a good idea is shut down too early because it’s easier to say “no” than to think “how”.
In a comment to this statement the panel said that financial institutions should focus on automating repetitive work in order to be able to provide new services. Something that links back to the 1st panel and the wish from the 1st panel for the procurement departments at big banks to make it easier for smaller FinTech start-ups to work with these big banks.
One of the panelists also suggested that traditional banks should explore the consortium models to try out new technologies. To share both cost and risk on an equal basis and thus cooperate instead of hindering each other.
Do you want to know more?
Times are changing fast, no matter if we call it Industry 4.0 or the Fourth Industrial Revolution. The pace of evolution lead by the FinTech, or TechFin, companies is very fast, and the statement from one of the panelists “my baby’s first bank account will be with Facebook” is most likely true.
In conclusion the 2016 FinTech Forum was a very interesting event, from the “wow” factor in regards to the possibilities of RegTech, to the hope of easier banking in the future pioneered by FinTech companies, potentially in collaboration with traditional banks.
If you want to know more about FinTech or RegTech or any of the other topics that we at Ripple Effect Consultancy have looked into, then drop us a line (click the contact button below) and we would be happy to talk to you.
/Jens and Gushi
At the pen for Ripple Effect Consultancy