Banks: Fintech startups are your friends
By Masyitha Baziad April 5, 2016
- Banks have the credibility, fintech startups have the innovation
- Combine the two and ‘you have a killer formula,’ says senior banker
THE banking sector in Indonesia has successfully faced numerous challenges, including various financial crises, but now seems to have been caught flatfooted by the digital disruption, especially financial technology (fintech) startups.
But rather than fight the tide, banks should ride it, says one senior banker.
“Today is a most challenging time for the banking sector, because technology is bringing constant and rapid changes to our customers’ lifestyles,” says Arwin Rasyid, who previously led Bank CIMB Niaga Indonesia.
The main challenge is that banks have large operations and are heavily regulated, which make it hard for these financial institution to adjust to change.
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“Because of their large-scale operations, especially in Indonesia, banks need to spread their focus before they can even think of innovation or investing heavily in technology,” says Arwin, speaking at a panel discussion organised by venture capital firm Alpha JWC in Jakarta last week.
This is also the reason why banks need to see fintech startups as partners, not disruptors or competitors.
“Together, banks and fintech startups can deliver modern financial solutions that are fresh and one-of-a-kind, and which can solve customers’ problems yet remain safe and reliable,” says Arwin, speaking to Digital News Asia (DNA) on the sidelines of the event.
Banks need to embrace the fresh ideas offered by fintech startups, and find a way to work with them.
“If banks see fintech startups as competitors, then it is the wrong way to look at it. Banks have the reputation, credibility, and the customer base, while fintech startups have the ability to innovate and think the unthinkable.
“Combine the two, and you have a killer formula,” he adds.
Besides his experience in the banking sector, Arwin also led Indonesia’s biggest telecommunication provider, PT Telekomunikasi Indonesia (Telkom), from 2005 to 2007.
Arwin (pic), who started his career with Bank of America in 1980, stepped down from his position as president director of CIMB Niaga in February 2015, citing personal reasons.
Under his leadership, CIMB Niaga launched its digital lounge innovation in 2013, aiming to stay abreast of the changing lifestyles of Indonesians.
“Technology has touched the daily life of our customers, and the idea of not having to queue at physical banks fits the changing lifestyle so well. Banks have no other choice but to move to branchless banking,” Arwin said in an official statement then.
In 2014, CIMB Niaga tried to attract more digital-savvy millennials by sponsoring the popular running event called ‘The Color Run,’ which was a hit, even trending on Twitter. Over 11,000 people took part in the run, most of them millennials.
It is not known how successful the sponsorship was in terms of increasing its customer base, but it certainly worked for CIMB Niaga as a branding exercise.
“In banking, we define customers between the ages of 18 to 37 as millennials,” says Arwin.
“Every bank wants them – however, millennials are also the ones who will change the direction of a bank’s operations,” he adds.
Digital-savvy millennials are forcing banks to adapt to their lifestyles, which means banks need to pay attention to digital and technology trends, he argues.
One advantage fintech startups have over banks is their understanding of the mobile environment, and many have made mobile banking their core business.
“Mobile is the future of banking. Banks which do not want to move to mobile will definitely lose the battle,” says Arwin.
“Fintech startups are disbursing loans through apps – a process that takes months to be approved by banks.
“These are disruptions banks should not compete against – rather, they should collaborate, invest in, and become part of the ecosystem,” he adds.
The good news is that banks are beginning to wake up to this reality, according to Arwin, which is why he believes that partnership between banks and fintech startups are going to increase in the next two years.
Some such partnerships have already been forged. For example, PT Maximilian Kesles Indonesia, a fintech startup with an e-money app called Kesles (from cashless in English), has partnered with Qatar National Bank (QNB) Indonesia.
Business reimbursement startup Jojonomic is going to partner with Bank Mandiri to ease the reimbursement process through Mandiri’s mobile money offering.
Finally, Bank Sinarmas – a subsidiary of conglomerate Sinarmas Group – has been acting as an escrow agency for Indonesia’s peer-to-peer lending startup Modalku, monitoring all funds that flow through the fintech platform.
Banking disruption: It's about collaboration, not competition