Fintech folks, take a chill pill, please
By Karamjit Singh December 30, 2016
- Hype around fintech could likely contribute to global warming
- Don’t follow the money, follow the talent, pre-money
THE headlines are getting shrill and the buzz around fintech is getting so hot that I fear it will contribute to global warming. One sign of how detached from reality the fintech buzz is can be seen in the recent article, Goodbye banks. Hello fintech! by Dr V Sivapalan, co-founder of Proficeo Sdn Bhd and president of the Malaysian Business Angels Network.
Deeply involved in the Malaysian digital ecosystem since the first dot com era in the late 1990s, Sivapalan is as rationale and grounded as they get – having witnessed too many exciting companies leveraging on the promise of the internet and mobile to disrupt the staid Brick & Mortar world, go bust instead.
And yet, he has seen fit to join the fintech tsunami, declaring even that banks, which are facing their Kodak moment, will cease to exist by 2025. Leading me to decide that, my new year wish, not resolution, is for the entire fintech ecosystem, especially those aiming to disrupt banks, to take a chill pill and come back down to planet earth. We welcome you back.
Because on planet earth they will realise that aside from the apparent low cost of scale they feel they enjoy, their purported digital technology superiority over banks, their leadership advantage with banks apparently bereft of intelligent leadership that leads them unaware of the threat of digital and unable to respond therefore, the fintech gang will realise that, on planet earth, they still need to earn the one asset that all banks have and which all the media headlines they enjoy, will not earn them.
“A lot of people make the mistake of thinking banks are in the business of lending, in trade finance etc. No, banks are in the business of trust, which is why we are the most heavily regulated institutions,” a senior banker explained to me recently over a conversation about how they are responding to their customers changing needs and to the fintech wave.
The banker, clearly annoyed that banks have been cast as being unable to respond to digital disruption, also reminds me that during the first dot com wave in the late 90s-early 2000s, banks were apparently going to be sidelined as well. Back then though it was thought that telcos would evolve to compete with some banking services as they too enjoyed the trust of customers.
Yet he points out that nothing came of that even though the telcos were a formidable new threat – being profitable, having millions of customers and having access to funding.
And while we read about how much funding has flowed into fintech globally, follow the money has always been seen as a reliable proxy to how strong the disruptive potential is of an internet business, approximately US$13.8 billion (RM61.9 billion) in 2015, more than double the amount investment during 2014, yet Southeast Asian (SEA) fintechs have raised a pittance versus this total amount.
Look at Omise, the Thailand based payment startup that raised US$17.5 million in its Series B this past June. For a business that aims to disrupt multibillion dollar incumbents in Asia, not just SEA, that’s not really a lot of money. But then I am most probably underestimating the low cost of scale fintechs enjoy. I would love for someone to enlighten me though.
And when it comes to fintechs, I am not following the money. I am following the talent. And not the talent that joins after a fintech raises money as Omise announced when it raised its Series B. I am not dissing them but that is not passion-driven, change-hungry talent.
Specifically I am looking to see when top tier talent in the SEA banks start leaving to launch their own disruptive fintechs. Surely with all the headlines and climate-change inducing sizzle emanating from the sector, the smarter ones among them must be seeing the writing on the wall and are intimate with the weaknesses of their lumbering organizations to capture value from the digital disruption happening.
Let's see them leaving to launch their startups, quickly capture value and sell their companies to the highest bank bidder.
Has that happened yet? Not that I know of. Will it happen in 2017? That’s what I will look for. Maybe then I too will join the likes of Dr Sivapalan and get hyper excited about the potential of fintech, especially in the banking sector.