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The 8th Gadjah Mada International Conference on Economics and Business
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Title The Future of Banking Institution With The Rise of Financial

Technology: A Content Analysis
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Corresponding Name: Tasya Rahman
Email: tasyrahman@gmail.com
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Institution: Universitas Bakrie
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Imbang Jaya Universitas Bakrie ijmangkuto@bakrie.ac.id +62-811-
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 THE FUTURE OF BANKING INSTITUTIONS WITH THE RISE OF FINANCIAL
TECHNOLOGY: A CONTENT ANALYSIS

Tasya Rahman
Faculty of Economics and Social Studies, Universitas Bakrie, Indonesia
(tasyrahman@gmail.com)

Imbang Jaya Mangkuto

Faculty of Economics and Social Studies, Universitas Bakrie, Indonesia
(ijmangkuto@bakrie.ac.id)

ABSTRACT

Introduction/Main Objectives: The purpose of this study is to identify the risks and benefits of fintech
and interpreting the predicted future of banks with the rise of fintech by scrutinizing the contents of the
Big 4 and consulting firms’ annual fintech and banking industry reports and the contents of blog posts
from global and Indonesian platforms to better represent the market. Background Problems: Over the
past few years, fintech has proven themselves to break the entry barrier of the banking industry as their
adoption rate continued to grow rapidly and it has triggered the discussion of banking industry’s future
as fintech competitor. Novelty: Thus far there is little to no independent study that explores this issue
except the annual reports released by the Big 4 or notable consulting firms to which the methodology is
undisclosed and carry a potential of conflict of interest. This study combines the reports with the voice
of the consumers from blog posts to minimize biases in predicting the future of the banking industry.
Research Methods: This study utilized content analysis method and the contents are drawn from the
reports published no later than 2014 to maintain relevancy of findings and from blog posts by utilizing
Google SEO. The contents are then analysed through NVivo 12 software. Finding/Results: The result
identified convenience as the most important benefit to fintech adopters and they viewed operational
risk as the most threatening one. The possible futures that banks can explore are digitalizing their
products and service and partnership, acquisition, or investment to fintech companies. Conclusion:
Despite the rise of fintech, the final finding of this study reveals that banks will not cease to exist in
many years to come. This study, although limited in scope, will be of interest to any academic
researchers and industry practitioners who are seeking to better understand the nature of banks and
fintech.
Keywords: Bank, Fintech, Content Analysis, Disruption
   
JEL Classification: G20, M13
INTRODUCTION
The banking industry historically has been the most resilient industry to ever be disrupted. With its
complex regulations, the industry expected to withstand its glory and immunity towards changes.
According to an interview conducted by Accenture in 2010, no influential banks’ executives believed that
the industry would be digitally disrupted. They believed in the impregnable nature of their business model
and that fast-following strategies would remain the most successful (Skan, Julian, 2015). Over the span of
nine years since the study was conducted, the overriding belief that complex regulations and risky market
would threaten new players to enter the banking industry ceased to exist.
In 2018, KPMG recorded USD 57.9 billion investment in financial technology (fintech) globally,
sealing the deal with 875 ventures (Blackman, 2018). This number has increased significantly from just
USD 38.1 in 2017, as reported by KPMG. Out of USD 57.9 billion invested within last year, around USD
30.8 billion was funded by Venture Capital (VC). The VC industry specializes in investing in innovative
companies with a huge potential for growth. As stated by Ian Sigalow, co-founder and partner at
Greycroft VC, their fintech portfolio is also more global than other sectors they invest in. This is because
there are opportunities to achieve billion-dollar outcomes in fintech, even in countries that are much
smaller than the United States and that is not mutually exclusive in many other sectors (Tabatai, 2019).
VC faith towards fintech firms has come to fruition because backed by venture capitalists that provide not
only financing but also mentorship, strategic guidance, network access, and other support (Strebulaev &
Gornall, 2015), the fintech industry has proven to topple down the market-entry barrier due to high
adoption and engagement rate by the market itself, reaching 64% of global adoption rate in 2019 (Bull et
al., 2019). Protection of complex regulations might now become a false sense of security for those in the
banking industry.
EY Global Fintech Adoption Index revealed that the strength of fintech lies in their more attractive
rates and fees, easy account setup, access to different and more innovative products and services, better
experience, better product features and quality of service (Bull et al., 2019). From the five categories of
fintech; money transfer and payments, budgeting and financial planning, savings and investment,
borrowing, and insurance (2019), borrowing, or better-known as peer-to-peer (P2P) lending in fintech
industry, is the service that possesses almost all of the strength of fintech. P2P lending is appealing
because it is relatively easy to setup an account, granting an overall better experience and quality of
service. In comparison, to set up and approve a credit card or loan, banking institution usually takes 2-3
weeks processing time, meanwhile fintech financing and lending service promises one-day and even 1-3
minutes processing time and approval. The processing time is a crucial deciding factor and its speed is
threatening the banking industry as many have drifted away from banks to rely on fintech financing and
lending service for its convenience. As per September 2019, Bank Indonesia via Otoritas Jasa Keuangan
(OJK) recorded a total of IDR 5,580 trillion loans have been provided by banks . At the exact same time
of the month and year, OJK reported fintech lending have loaned IDR 60.41 trillion throughout the year.
Fintech lending indeed has grown significantly over the past five years but amount-wise, it only makes up
for 1.08% of retail banks’ total loan. Thus, the declining interest income for European, North American,
and APAC banks throughout 2014 to 2017 as reported by BCG may have other contributing factors other
than the rise of fintech (Grasshoff et al., 2019).
 Now banking institutions may argue that the slow processing time is necessary to thoroughly examine
and manage credit risks, hence convenience of applying for a credit is not how banks play. It could be
hard for fintech to fight back when a case such as the likes of UangTeman that must stop its lending
service in June 2019 due to poorly managed capital becomes more prevalent in the fintech industry. And
yet, despite banks may be heavily regulated and thus risks are supposedly well-managed, they still have a
gaping loophole in their competitive advantages to attack their fintech challengers. Whilst fintech may
fall short in terms of managing credit risks or funds, fintech service mobile-phone payment is far ahead
on the run and banks have not yet pulled up a fight. Despite all the complications fintech bring, it is still
worth noting that the industry will likely determine which banks will survive through the next decade
(Grasshoff et al., 2019).
From the background above, this study aims to explore the emerging world of fintech and its
implications and influences towards the future of the banking institutions by scrutinizing the contents of
annual fintech reports from Big 4 and reputable consulting firms and blog posts.
LITERATURE REVIEW
1. Financial Technology
KPMG defines fintech as a portmanteau of finance and technology. The term refers to businesses who are
using technology to operate outside of traditional financial services business models to change how
financial services are offered. Fintech also includes firms that use technology to improve the competitive
advantage of traditional financial services firms and the financial functions and behaviours of consumers
and enterprises alike (KPMG, 2019). In 2017, Ernst & Young argued that the changes fintech bring to
how financial services are offered will enable, enhance and even disrupt financial services (EY, 2017).
That argument resonates with McKinsey’s belief that with fintech union comes both disruption and
synergies (Galvin et al., 2018). With their definition of fintech, EY embraces fintech as an industry that
includes not only early-stage start-ups and new entrants, but also scale-ups, maturing firms and even non-
financial services firms (EY, 2017), putting a good faith towards the incumbents that they may once again
rise as the dominant power.
2. Retail Banking: Competition of The Future
The position of banks, particularly retail banking in the market, has been challenged by the rise of
financial technology companies that provide similar financial services to retail banks’ products and
services but with a better economic benefit, convenience, and service experience in general. Keith Pond
(2017) noted that the risks to retail banks are ever changing and ever increasing in complexity, with
threats arising from areas as diverse as criminality, competition, repayment capacity and technology. In
his analysis of retail banking competition using Michael Porter five-forces model of competition, he
recognised the threat from new entrants. Retail banking markets such as payments markets can be
threatened by new entrants who specialize in one aspect of the business (Pond, 2017) and that proves to
be true as fintech mobile-payment and transaction service is dominating the others.
In a discussion of whom will win the competition of the future, EY attempted peace by arguing that
unless banks and fintech firms get better at working together, neither will reap the full benefits of
innovation (EY, 2017). Lex Zhao, an early stage investor in One Way Ventures, also disregarded the
concept of a one-true winner because the reality is that both sides need each other just as much as they
need to compete with one another (Zhao, 2018) – and therefore peace can be compromised. This scenario
singles out the potential future of banking industry to operate alongside with fintech providers. This study
will explore the other possible future for the banking industry.
3. Fintech Adoption Intention
The process of adopting or using a service is divided into three stages: pre-encounter stage, encounter
stage, and post-encounter stage (Lovelock & Wirtz, 2010). During pre-encounter stage, Lovelock and
Wirtz identified information search as one of the elements that contributes to the first stage of Service
Consumption Model (2010). Kotler and Keller (2016) also incorporated information search into their
Five-Stage Model of Consumer Buying Process that they acknowledged as the starting point for
understanding consumer behaviour towards a product or service. From the perspective of consumers, the
primary role of information search is to comprehend or gain better understanding of a product or service
to make a well-informed choice so as to reduce the risk. Lovelock and Wirtz (2010) also implied that
information search could lift uncertainties about the outcome of a service that positively correlates to the
level of perceived risk consumers theoretically face during pre-purchase stage because Kozup (2017)
concluded that perceived risk is inherent in consumer product evaluations and decisions.
Johnson (2003 cited in Fischer 2017) argued that to understand the risk in context, consumers also
need to understand the perception of the positive impact because Alkahami and Slovic (1994) theory of
inverse relationship between perceived risk and perceived benefit revealed that there is a negative
correlation between the two. Although perception can be subjective, Stone and Winter (1985 cited in
Kozup 2017) argued that the distinction between objective and perceived risk and benefit is meaningless
because during information processing, concepts are not only dealt with to the degree perceived but also
most probably ‘exist’ to that degree (p. 12).
METHOD, DATA, AND ANALYSIS
1. Research Method
To date, there is little to no independent research that studies the potential future of the banking industry
in respect to the rise of fintech. The Big 4 and some notable consulting firms regularly release reports on
how the two industries’ growth affect each other with each of the report carrying a potential bias or
conflict of interest. However, their reports are still the best source currently available to understand the
competition of banks and fintech from a wider perspective as the general public’s knowledge of the two is
still fairly limited. Therefore, this study aims to compile the data and discussions from the report to draw
a possible scenario of the banking industry’s future and attempts to incorporate consumers’ opinions in
the form of blog posts into the data set to minimize biases and the conflict interests of the reports. Hence,
this study is categorized as a qualitative descriptive study leveraging on secondary data. The descriptive
qualitative studies are generally characterized by simultaneous data collection and analysis of a specific
event under study. Due to this characteristic, the nature of the data is likely to be unstructured (Lambert &
Lambert, 2012). Thus, content analysis method is used to analyze the data because of its ability to
produce a systematic and comprehensive summary or overview of the data set as a whole. Content
analysis is based on examination of repeatedly appeared data. These data then are systematically
identified across the data set and grouped together by a means of coding system. The base of developing
the coding system is the unit analysis and the researcher has to decide on the unit of analysis (Silverman,
2004), therefore deep explorations by the author are mandatory to craft hypothesis regarding the
phenomenon being studied (Indahsari, 2017).
An iterative process of content analysis is followed. The reports and blog posts are coded using two
units of analysis: the aspects of adoption intention model as depicted in the conceptual framework and
positive and negative connotations of the sentences towards the future of banking industry with the rise of
fintech. To analyze word frequency, the full text of all the reports and selected blog posts are run
separately for the purpose of comparing. Words commonly used in constructing sentences such as “after”,
“the”, “I”, and other words that would not contribute to a meaningful interpretation should be eliminated
(Indahsari, 2017). Plural and singular words are also merged. NVivo 12, a software for qualitative data
analysis, was used to perform content analysis of the reports and blog posts data. Figure 1. outlines how
the research is conducted.

Content
Review
Site Analysis
Blogposts

Preliminary Analysis
(NVivo Coding)

Research
Findings

Word Frequency Auto Code

Analysis Sentiment

Figure 1. Research Design

2. Data Collection and Analysis
As portrayed in Figure 1, the first step of how the research is conducted is content review. Content review
is a part of data collection in which the reports and blog posts are selected. Selection of data rely on the
topic of the discussion and for reports, it has to be published no later than 2014 to maintain the relevancy
of the data. Whereas for blog posts, a secondary analysis is conducted to ensure that the post and the web
that posted it holds a high credibility to be used a reading and information reference. The first step of site
analysis is author enters query search on Google on the relevant topic of banks and fintech and select the
posts that appear on first page of search result by utilizing Google Search Engine Optimization (SEO) and
then validate the site by using Alexa, a web-based tool developed by Amazon to track website traffic. The
organic traffic of the blog should not be lower than 50% or views of the post are no fewer than 10,000 -
exceptions applied to authors of the posts or sites that are renowned in the industry. Table 1 provides the
partial list of reports and blog posts that were analyzed in this study. The full list can be found in
appendices. There are 10 reports and 30 blog posts in total with 15 global posts and 15 Indonesian posts.
Table 1. Reports and Blog Posts Analyzed in This Study

Report 1 EY Global Fintech Adoption Index 2019

Ernst & Young, 2019
Report 2 Global Risk 2019: Creating a More Digital, Resilient Bank
BCG, 2019
Report 3 Regulation and Supervision of Fintech
KPMG, 2019
Blog Post 1 https://www.quora.com/Will-Fintech-startups-replace-banks-in-
the-future
Title: Will Fintech startups replace banks in the future?
Date: 16 May 2016
Blog Post 2 https://www.forbes.com/sites/allbusiness/2019/10/12/fintech-
startup-companies-key-challenges/#bf646f23e45b
Title: 10 Key Issues For Fintech Startup Companies
Date: 12 October 2019
13,259 views
Blog Post 3 https://www.forbes.com/sites/forbesfinancecouncil/2019/09/09
/five-trends-shaping-fintech-into-2020/#2d8167ca2f13
Title: Five Trends Shaping Fintech Into 2020
Date: 9 September 2019
12,123 views
Blog Post https://www.cnbcindonesia.com/tech/20190502122456-37-
16 70055/fintech-menjamur-begini-nasib-bank-di-masa-depan
Title: Fintech Menjamur, Begini Nasib Bank di Masa Depan
Date: 2 May 2019
Traffic: 68.9%
Blog Post https://www.cnbcindonesia.com/tech/20190923192231-37-
17 101602/di-masa-depan-tak-ada-lagi-fintech-dan-bank-kok-bisa
Title: Di Masa Depan Tak Ada Lagi Fintech dan Bank, Kok Bisa?
Date: 23 September 2019
Traffic: 68.9%
Blog Post https://www.wartaekonomi.co.id/read258252/fintech-dan-bank-
 18 jangan-saling-sikut-mending-kolaborasi-ini-manfaatnya
Title: Fintech dan Bank Jangan Saling Sikut! Mending Kolaborasi,
Ini Manfaatnya
Date: 25 November 2019
Traffic: 79.7%

After content review or site analysis, the data is then analyzed through the first analysis technique:
preliminary analysis. Preliminary analysis is conducted by purposely grouping frequently appeared data
and using the groups as a coding system. The code is known as unit analysis and in this study, the unit
analysis is tailored to each of the purpose of the study: identifying fintech adoption intention and
predicting the future of the banking industry. Figure 2 displays the unit analysis for fintech adoption
intention.

Economic Benefit

Perceived Convenience
Benefit

Transaction Process Fintech

Adoption
Intention
Security Risk

Perceived Financial Risk

Risk
Legal Risk

Operational Risk

Figure 2. Unit Analysis

Each of the unit analysis of perceived risk and perceived benefit are a code and once preliminary
analysis is performed, the code is then run to generate Word Frequency Analysis using NVivo to analyze
the content and find frequently appeared word to determine the most common risk and benefit that is
associated with fintech. For the purpose of predicting the future of banking industry with the rise of
fintech, the unit analysis is divided into two: positive implication and negative implication of a sentence
that refers to banks’ future. Instead of running these codes for Word Frequency Analysis, Auto Code
Sentiment by NVivo is conducted to determine the significance of the sentences’ implication – how
significant is the positive and how severe is the negative? So that banks will be able to come up with a
solid strategy by being fully aware of what lies ahead.
RESULT AND DISCUSSION
1. Perceived Risk
At the preliminary analysis stage, there are 58 references related to perceived risk. Table 2 provide each
of the unit analysis’ number of references and the average weight.
Table 2. Number of Perceived Risk References
Percentage
Risk Aspects Frequency
(N = 59)
Security 11 18.64%
Financial 3 5.08%
Legal 17 28.81%
Operational 28 47.46%

According to preliminary analysis, operational risk turned out to be the highest risk of fintech with
47.46% domination. The challenge of viable business model, growing competition from within financial
and non-financial industry, poor risk management, delivering the promise of innovation and reliable
services, and the most recent one is the question if automation of credit scoring really is the best outcome
and if it holds the best interest of the consumers in mind. The discussion of operational risk generally
leads to the question of sustainability of the firms according to preliminary analysis references.
However, Word Frequency Analysis from perceived risk coding revealed that the word “regulatory”
and “regulators” significantly appeared, followed by the word “governance”, and “protection”, signalling
that regulations and poor or lack of protection are the biggest risk of fintech that the consumers perceived
and not operational risk. Table 3 presents the NVivo result of common concerns of using fintech.
Table 3. Perceived Risk Word Frequency Analysis
Word Length Count Similar Words

regulatory 10 11 regulatory
technological, technologies,
technology 10 11
technology
increasing 10 7 increasing, increasingly
regulation, regulations,
regulators 10 6
regulators
governance 10 5 governance, government

developments 12 4 development, developments

effectively 11 4 effectively

protection 10 4 protection
challengers, challenges,
challengers 11 3
challenging
 Legal risk is indeed always become the main topic of the discussion regarding fintech risks since the
threat of new regulations may limit its growth or even exterminate some of its existence – and operation –
altogether. The most vulnerable service to legal risk is P2P lending with their issue of loan sharking
business due to their exorbitant interest rate with no ceiling rate to protect the consumers as a result of
credit-scoring system. The issue has first concerned regulators, particularly in Indonesia with OJK, in the
early days of P2P lending in 2018 that the lending platform may actually be a loan sharking business
disguised in a façade of technology. If regulators were concerned, it is expected that they immediately
establish a regulation that protects all parties involved in P2P lending practice but that is unfortunately not
the case. Thus far there is only one regulation for P2P lending business established in 2016 by OJK itself.
But not only the POJK 77/2016 regulation is very much outdated, the content barely grazes over the
surface. Prevention and mitigation of risks is singlehandedly transferred to the platforms and therefore
regulators bear no liability of failures. In the end, instead of protecting the consumers, the government is
laying them bare for the vultures.
Fintech needs to be equally regulated as banking institutions with a respective regulation to their
products or services with an exceptionally strict regulation for the lending business. Fintech P2P lending
serves the subprime and the underbanked, a very sensitive target market which has triggered the financial
crisis in 2008. Over the years of fintech P2P lending, their service has indeed proven to work and even to
the extent of driving a country’s economy through financial inclusion, including Indonesia according to
PwC, but learning from the Great Recession where opportunity is given to someone or to a group of
people who actually cannot afford it will create more disasters rather than benefits to society and the
economy. Therefore it is crucial for regulators to take fintech seriously and equally regulate it as banking
institutions because it contributes to the rise and the downfall of financial industry the same way banking
institutions do, so to let them play under the regulation radar – not entirely unregulated but still not
sufficiently regulated – may trigger another history of financial devastation.
2. Perceived Benefit
Unlike perceived risk result, perceived benefit result showed a consistent pattern. At the preliminary
stage, convenience are the highest benefit perceived as shown in Table 4 below.
Table 4. Number of Perceived Benefit References
Percentage
Benefit Aspects Frequency
(N = 28)
Economic Benefit 6 21.43%
Convenience 17 60.71%
Transaction Process 2 7.14%
Others 3 10.71%
References that do not belong to any of the unit analysis are classified as others. The references belong
to this unit analysis are the benefit of fintech firms playing in an emerging and initially unregulated
industry. To further analyze, Word Frequency Analysis was also conducted for perceived benefit. Table 5
displays the frequent words used to address fintech perceived benefit.
Table 5. Perceived Benefit Word Frequency Analysis
 Word Length Count Similar Words
experience 10 3 experience, experiences,
experiments
functionality 13 3 functionality

innovative 10 3 innovative

attractive 10 2 attractive

management 10 2 management

proposition 11 2 proposition, propositions

technology 10 2 technology

From the total 28 benefit references coded, the words “experience”, “functionality”, and “innovative”
are the most prominent. The three words revolve around the perceived benefits of fintech having better
experience as a result of various options of innovative products and services and a good range of
functionality from better product features and quality. The question that hovers around fintech is how
long will the benefit remain benefits? In 2017, easier to set up an account was the top benefit. In 2019, it
became obsolete as it is now a prerequisite. In 2019, attractive rates and fees became the top benefit (Bull
et al., 2019) although this is possible to last a little bit longer than convenience as it is an economic
benefit and everybody loves economic benefit. However, based on this study, attractive rates and fees
have become secondary and convenience is what really defines the game now. That was from the fintech
perspective. Banks themselves have begun digitalizing their products and services in order to be
accessible anywhere and anytime, providing better consumer-oriented service. Banks have also started to
develop innovative products either by producing and/or launching it in-house or through partnership deals
with fintech. It appears that it will not be long that these benefits become mutually exclusive to fintech.
3. Interpretation of Banking Institutions’ Predicted Future
The word of bank has quite a few type of businesses, such as Consumer Banking, Corporate Banking,
Trade and Finance, Wealth Management, Credit Cards, and Payment Services. While they are
interrelated, they are different to each other. The Trade and Finance and Corporate Banking are the most
unlikely for fintech. Whereas Consumer Banking for their lending products, Wealth Management, Creditc
Card, and Payment services are vulnerable to fintech competition.
The competition of fintech and banks is the talk of the town – but on a global scale. Analysts, experts,
and consumers alike are so immersed in discussing how the future of both parties is going to play out.
People from all over the world voice out their opinions on the internet, creating a pool of meaningful data
source. Table 6 presents the total references of implications of the predicted future of banking institution
from 10 reports and 30 blog posts.
Table 6. Number of Implication of the Banking Future References
Percentage
Implication Frequency
(N = 160)
 Positive 113 70.63%

Negative 47 29.38%

The result in the table shows that there is a significant amount of positive implications (70.63%)
towards the future of banking institution despite the rise of fintech. It seems that banks have not lost the
faith of the people and that banks will continue to do its part in competing with fintech without ever being
eliminated – like the word disruption suggests. That is to say, competition and/or collaboration between
them will see no end because the positive implications that refer to banks outliving the fintech disruption
suggests that they will have to coexist and walk alongside each other to rise stronger.
The following research finding attempts to outline the sentiment of each references to identify the
significance of the positive implications and the severity of the negative implications. Table 7 provides
the summary for the NVivo auto code sentiment results on positive and negative implications towards the
future of banks.
Table 7. Auto Code Sentiment on Implication of the Banking Future
Very Moderately Moderately
Implication Very Positive
Negative Negative Positive
Positive 6 23 22 7

Negative 9 14 7 3

On positive implication, the auto code sentiment presents the result that there are 22 moderately positive
references and 7 very positive references. The distribution of the sentiment is displayed on Figure 3.

Figure 3. Auto Code Sentiment Results on Positive Implication

There are a lot of opportunities to explore between banks and fintech to join forces. The positive
sentiment mostly refers to banks’ ongoing attempt to catch up with the fintech pace, either by launching
their own “fintech” as an extensive of their products or the talk of partnership, acquisition, and
investment. Indonesia too, reckoned the fintech force. Indonesian banks have been trying aggressively to
digitalize their products and contribute to the growth of fintech for the past one year by establishing
Venture Capital firm as a subsidiary entity to initiate strategic partnership between the bank and fintech
companies that they invested in. However, banks may prefer to take a “shortcut” to participate in the
fintech industry by investing in a sizeable fintech company instead of launching their own fintech to save
resources. That leaves the options of strategy for banks to digitalize their products and services and
partnership, acquisition, or investment in fintech companies.
Realizing the two possible futures for banks is easier said than done. There are challenges that banks
must overcome in order to reap the full benefits of fintech’s innovation. Even the analysis result warned
that banks are complicated, with their heavy regulations and organisational complexity that may hinder
the positive outcomes. The auto code sentiment of negative implication references identified 9 very
negative sentiment, 14 moderately negative, 7 moderately positive, and 3 very positive. The distribution
of the sentiment is displayed on Figure 4.

Figure 4. Auto Code Sentiment Results on Negative Implication

Partnership between banks and fintech is a double-edged sword. The power they hold together as a
synergy is not debatable, but on the other hand the process to go there has been proven to be nothing but
arduous. It has been proven that the size and organizational complexity of a bank makes operationalizing
and scaling partnership difficult (Blog Post 8) and that banks were also excruciatingly slow to respond to
the preferences of their customers and exploit the power of smartphones (Blog Post 6). There is no single
decision maker in banks and they are slow to adopt new technology due to the hierarchy and possibly the
inclination that they do not need it or it is too expensive to develop for what it is worth (Skrinner, 2019).
But that could not be more wrong. Accenture revealed that Southeast Asian banks are threatened to lose
USD 5 billion revenue in 2025 due to the fast-growing digital payment (Straitstimes, 2019). The S&P
Global webinar on April, titled Coronavirus: The Global Impact (APAC Session) reported that in times of
the COVID-19 lockdown, digital payment revenue has been skyrocketing due to the increasing e-
commerce transactions (Nariyanuri, 2020). This proves that banks really do need the technology to
digitalize their products and services and fortunately, the progress has been going well as more banks now
offer digitalized transactions both globally and in Indonesia, indicating that banks are now adopting
technology faster than it used to. In terms of mobile payment, the Indonesian market is dominated by
ride-hailing service GoJek and Grab, and e-commerce platforms such as Shopee has been trying to launch
their own mobile payment, ShopeePay. Like most e-commerce platforms, they provide the option of debit
cards or credit cards to pay and hence banks play an important part in fintech payment system. GoPay and
GrabPay balance topup also leverage on banks’ money transfer service. Banks monetize this by charging
for transaction cost.
Another option is to invest or acquire fintech firms. Acquiring means banks will have to be involved in
managing the firm and it could be resource-consuming but acquiring a promising fintech is still a cheaper
option than building it from scratch. Investing in fintech also has various implementation schemes. It can
be done directly through a corporate VC as a subsidiary of the bank or indirectly through a third-party
VC. Establishing VC as a subsidiary, known as corporate VC, has been done by two of Indonesia’s
biggest banks: Bank Mandiri with Mandiri Capital Indonesia and Bank BCA with Central Capital
Venture. They typically invest in Series B to Series C fintech firms, hence already sizeable. However,
establishing corporate VC and managing portfolios is difficult and may be mutually exclusive to large
banks as smaller banks may not have sufficient fund. A more feasible investment scheme for all sizes of
banks is investing through a third-party VC as corporate partners. Start-ups innovation platform can also
be third-party VC such as Plug and Play whose corporate partners fund their portfolios and in Indonesia,
the corporate partners are among the big names of Indonesian banks such as Bank Negara Indonesia,
Bank BCA, and Bank Tabungan Negara.
As for the case with the growing P2P lending, pursuing the underbanked market is also not a prudent
objective for banks as it is not sustainable. Banks are superior in terms of financial capability and their
access to big cheap fund. They have the leverage to play in big ticket investment, especially corporate
banks, and in this field no fintech will attack them because they do not have the equal financial capability.
Now big ticket investment returns in the long-run and it may deteriorate banks’ revenue for a couple years
before paying off and in the long while, if banks would like to serve the small-size underbanked
consumers and subprime lenders through P2P, they are capable to do that too. The question is, for how
long will serving the underbanked benefits banks? Another thing that banks are superior for is the level of
trust. Fintech cannot compete with banks on trust aspect, thus fintech has a good chance in pursuing
lending products to SMEs and consumers. As long as the borrowers get the money, they do not bother
about trust from fintech. In contrary, for funding and investment products, trust matters to consumers.
The important question is, what is the verdict? Will banks lose? The answer is an absolute no. Aside
from the superiority of fund and level of trust, banks are better and proper entities to control and manage
risks due to the regulations and compliance that they must abide. Meanwhile start-ups are generally more
lenient towards risks because they are the risk takers. In terms of risk management, banks also have the
prudent credit underwriting processes compared to fintech by combining automation of credit scoring to
human analysis, accounting for both “hard” and “soft” information of the lenders and thus assess the risk
accordingly. Nonetheless, this is mutually exclusive to big banks. Small banks might be disrupted entirely
by fintech as they are not going anywhere. Their resources are limited and they have been serving niche
market that is relatively small in the past. The Central Bank has always been promoting the consolidation
of banking industry, but the outcome is not that successful. In times of fintech challenge, the future of
small banks is not quite good.
Another challenge for banks that is referred as negative implication revolves around the competition
within the banking industry itself. Smaller banks are perceived to stand no chance to win over fintech due
to their financial constraints (Report 2). There is a possibility that small banks will turn the table. They
may be able to afford the fintech firms’ technology and implement it to their business process and
delivery. This way, small banks may maintain their position in the market with some limitations including
their relatively small consumers base. Being able to afford the technology is one thing but leveraging it to
their fullest advantage is an entirely different issue, hence the benefit of the technology may not worth the
cost. The main reason that the price of technology is getting more affordable over the years is because it
is scalable. In a case where the technology is not scalable, the cost is extravagant. But small banks have
another option. In a discussion of which one between small banks and big banks will be the most likely to
quickly adapt into “fintech”, small banks are the obvious answer. Their organization is not as complex
and they do not inherit the long arduous corporate ladder, hence the synergy between fintech and small
banks is friendlier to approach. Small banks may be able to acquire or merger with fintech firms in the
future to appeal to more consumers with more attractive offerings and technology, and with the threat of
banking regulation looming over the fintech firms, the search for shelter is inevitable and small banks are
the friendlier partner.
Eventually, will fintech take away some of banks’ market share? Yes and no. Technically, fintech
“creates” the market such as for the underbanked, so it cannot be considered “stealing” banks’ market
share. In a case of consumers using both banks and fintech, they are not going to leave banks and switch
entirely to fintech because fintech will not be able to offer some of banks’ services and products due to
the regulation and if they would want to serve that segment, they will have to fall under bank category
and will then not be able to have the freedom of fintech and/or start-up firms ever again. But with the
presence of fintech expanding the total addressable market, banks’ market share will definitely be diluted.

CONCLUSION
The study reveals that preliminary classification from the word frequency analysis result can develop a
pattern to identify each and every attribute of risks and benefits of fintech clearly. From the reports and
blog posts, the number of risk references is higher than the benefits. The most significant benefit is
convenience and the most risk perceived is operational risk. Despite the scrutiny, if fintech players
wanted to wipe banks off of the market, the result of this study has proven that it is going to take the life
out of fintech to do that. To put it simply, banks are untouchable. If banks successfully overcome their
issues of slow to adapt new technology and complex organization, they will be able to live out their days
withstanding their glory. The suggestions of what banks can do to survive the fintech disruption are
digitalizing their products and services, which is the most feasible, and partnership, acquisition, or
investment to fintech firms.

IMPLICATION/LIMITATION AND SUGGESTIONS

While this study can provide a new insight there are limitations to the reports and blog posts. The major
limitation is because the reports are published by consulting firms, very few of them disclosed the
methodology. The gap between quantitative and qualitative research is also huge in terms of number of
respondents so the results may not be coherent. Therefore blog posts were utilized to specifically
represent the public opinion in order to validate the research findings in an attempt to minimize bias and
lack of representation.
Because fintech as an industry is still relatively in the early stage of growth, consumers opinions are
still very limited. The blog posts analysed in the study were mostly written by someone who is relatively
better-informed of the industry than the regular consumers. For future relevant research as this study, it is
recommended to also capture the voice of the “real” consumers. It can be done through social media such
as recording Twitter content relating to the topic of the study over a certain period of time. Despite these
limitations, Big 4 and consulting firms’ annual fintech and bank reports as well as blog posts can be a
useful tool to understanding the competition between fintech and banks.
From the practical standpoint, the study found that fintech consumers can articulate the benefits and
risks of fintech. Discussion of risks both in fintech and banks is generally very exclusive to better-
informed consumers, but at the very least they understand why they decided to use fintech. This suggests
that banks need to actively promote their benefit over fintech to their consumers, especially in social
media because it is the era of millennials and generation Z consumers. Furthermore, virality is currently
the key trend in marketing strategy and that to pursue the path to becoming consumer-oriented service,
banks may try to be closer and communicate more with their consumers and not just answering questions
and complaints via social media like Indonesian banks are doing right now.
In delivering information and communicating with consumers via social media, language matters. The
majority of retail banks’ consumers are individual consumers, so to use a friendly approach can be the
key. But in serving the corporate banking consumers, friendly approach may seem unprofessional.
Because corporate banking is big money, trust and professionalism matter a great deal and corporate
banks must demonstrate those very characteristics to the consumers in the way of how the bank speaks
and communicate to them.

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APPENDICES

Reports Analysed in This Study

Report 1 EY Global Fintech Adoption Index 2019

 Ernst & Young, 2019
Report 2 Global Risk 2019: Creating a More Digital, Resilient Bank
BCG, 2019
Report 3 Regulation and Supervision of Fintech
KPMG, 2019
Report 4 The Future of Digital Banking
KPMG, 2019
Report 5 Synergy and Disruption: Ten Trends Shaping Fintech
McKinsey, 2018
Report 6 Fintech and Regulatory Compliance: Understanding Risks and Rewards
Deloitte, 2018
Report 7 Unleashing The Potential of FinTech in Banking
Ernst & Young, 2017
Report 8 FinTechnicolor: The New Picture in Finance
McKinsey, 2016
Report 9 The Future of Fintech and Banking: Digitally Disrupted or Reimagined?
Accenture, 2015
Report 10 Retail Banking 2020: Evolution or Revolution?
PWC, 2014

Global Blog Posts Analysed in This Study

Blog Post https://www.quora.com/Will-Fintech-startups-replace-banks-in-the-future

1 Title: Will Fintech startups replace banks in the future?
Date: 16 May 2016
Blog Post https://www.forbes.com/sites/allbusiness/2019/10/12/fintech-startup-
2 companies-key-challenges/#bf646f23e45b
Title: 10 Key Issues For Fintech Startup Companies
Date: 12 October 2019
13,259 views
Blog Post https://www.forbes.com/sites/forbesfinancecouncil/2019/09/09/five-
3 trends-shaping-fintech-into-2020/#2d8167ca2f13
Title: Five Trends Shaping Fintech Into 2020
Date: 9 September 2019
12,123 views
Blog Post https://www.forbes.com/sites/alexlazarow/2019/07/31/how-fintech-is-
4 eating-the-world/#31b16f22c2f3
Title: How Fintech Is Eating The World
 Date: 13 July 2019
10,721 views
Blog Post https://fortune.com/2019/11/13/fintech-third-wave-automation-bank-
5 trends/
Title: How Fintech’s Third Wave Will Change How You Bank
Date: 13 November 2019
Blog Post https://www.forbes.com/sites/jeffkauflin/2019/11/04/dawn-of-the-
6 neobank-the-fintechs-trying-to-kill-the-corner-bank/#5c307ea2b0f6
Title: Dawn Of The Neobank: The Fintechs Trying To Kill The Corner
Bank
Date: 4 November 2019
26,419 views
Blog Post https://www.forbes.com/sites/willyakowicz/2019/10/28/the-underbanked-
7 is-the-next-trillion-dollar-opportunity-in-fintech/#15b0a0c04d58
Title: The ‘Underbanked’ Is The Next Trillion-Dollar Opportunity in
Fintech
Date: 28 October 2019
15,625 views
Blog Post https://www.forbes.com/sites/ronshevlin/2019/10/14/bank-fintech-
8 partnerships-the-fad-is-over/#48d0eeaf7527
Title: Bank/Fintech Partnerships: The Fad Is Over
Date: 14 October 2019
16,439 views
Blog Post https://www.forbes.com/sites/ronshevlin/2019/07/29/why-fintech-
9 startups-fail/#6ab4fa536440
Title: Why Fintech Startups Fail
Date: 29 July 2019
13,697 views
Blog Post https://thefinanser.com/2019/09/the-two-big-issues-bank-ceos-have-with-
10 fintech.html/
Title: The two big issues bank CEOs have with FinTech
Date: 16 September 2019
Blog Post https://thefinanser.com/2019/09/the-two-big-issues-bank-ceos-have-with-
11 fintech.html/
Title: The two big issues bank CEOs have with FinTech
Date: 16 September 2019
Blog Post https://thefinanser.com/2019/07/banks-and-fintech-partnerships-a-clash-
12 of-extremes.html/
Title: Banks and FinTech Partnerships: A Clash of Extremes
Date: 11 July 2019
Blog Post https://thefinanser.com/2019/08/where-top-us-banks-are-betting-on-
13 fintech.html/
Title: Where Top US Banks Are Betting On Fintech
Date: 30 August 2019
Blog Post https://thefinanser.com/2019/08/fintechs-lies-damned-lies-and-
14 statistics.html/
Title: FinTech’s lies, damned lies and statistics
Date: 16 August 2019
Blog Post https://thefinanser.com/2019/07/the-end-of-fintech.html/
15 Title: The end of FinTech
Date: 1 July 2019

Indonesian Blog Posts Analysed in This Study

Blog Post https://www.cnbcindonesia.com/tech/20190502122456-37-70055/fintech-
16 menjamur-begini-nasib-bank-di-masa-depan
Title: Fintech Menjamur, Begini Nasib Bank di Masa Depan
Date: 2 May 2019
Traffic: 68.9%
Blog Post https://www.cnbcindonesia.com/tech/20190923192231-37-101602/di-masa-
17 depan-tak-ada-lagi-fintech-dan-bank-kok-bisa
Title: Di Masa Depan Tak Ada Lagi Fintech dan Bank, Kok Bisa?
Date: 23 September 2019
Traffic: 68.9%
Blog Post https://www.wartaekonomi.co.id/read258252/fintech-dan-bank-jangan-
18 saling-sikut-mending-kolaborasi-ini-manfaatnya
Title: Fintech dan Bank Jangan Saling Sikut! Mending Kolaborasi, Ini
Manfaatnya
Date: 25 November 2019
Traffic: 79.7%
Blog Post https://katadata.co.id/berita/2019/10/07/perbankan-dan-fintech-
19 pembayaran-bukan-lawan-tapi-kawan
Title: Perbankan dan Fintech Pembayaran, Bukan Lawan tapi Kawan
 Date: 7 October 2019
Traffic: 83%
Blog Post https://finance.detik.com/fintech/d-4674364/fintech-disebut-jadi-saingan-
20 bank-konvensional-benarkah
Title: Fintech Disebut Jadi Saingan Bank Konvensional, Benarkah?
Date: 21 August 2019
Traffic: 30.8%
Blog Post https://finansial.bisnis.com/read/20190315/90/900128/tiru-fintech-bank-
21 bank-besar-ini-mulai-lincah-salurkan-kredit-online
Title: Tiru Fintech, Bank-Bank Besar Ini Mulai Lincah Salurkan Kredit
Online
Date: 15 March 2019
Traffic: 52.4%
Blog Post https://pasardana.id/news/2019/11/19/fintech-makin-eksis-tren-kolaborasi-
22 dengan-bank-makin-berkembang/
Title: Fintech Makin Eksis, Tren Kolaborasi dengan Bank Makin
Berkembang
Date: 19 November 2019
Traffic: 84.9%
Blog Post https://www.liputan6.com/bisnis/read/4106400/pendapatan-bank-bakal-
23 terganggu-karena-fintech-di-2025-benarkah
Title: Pendapatan Bank Bakal Terganggu karena Fintech di 2025,
Benarkah?
Date: 8 November 2019
Traffic:73.8%
Blog Post https://kompas.id/baca/ekonomi/2020/01/06/tekfin-dan-perbankan-saling-
24 topang-kembangkan-inklusi-keuangan/
Title: Tekfin dan Perbankan Saling Topang Kembangkan Inklusi Keuangan
Date: 6 January 2020
Traffic: 47.1%
Blog Post https://www.wartaekonomi.co.id/read268701/kolaborasi-bank-dan-fintech-
25 bisa-dorong-inklusi-ekonomi
Title: Kolaborasi Bank dan Fintech Bisa Dorong Inklusi Ekonomi
Date: 27 January 2020
Traffic: 79.7%
Blog Post https://www.cnbcindonesia.com/tech/20191111184038-37-114440/fintech-
26 menjamur-bos-bca-perusahaan-besar-gak-boleh-serakah
Title: Fintech Menjamur, Bos BCA: Perusahaan Besar Gak Boleh Serakah
Date: 11 November 2019
Traffic: 68.9%
Blog Post https://keuangan.kontan.co.id/news/fintech-tumbuh-pesat-bank-getol-
27 investasi-modal-ventura?page=all
Title: Fintech tumbuh pesat, bank getol investasi modal ventura
Date: 4 December 2019
Traffic: 51.8%
Blog Post https://republika.co.id/berita/q1nre4349/kolaborasi-dengan-fintech-jadi-
28 kunci-perkembangan-bank
Title: Kolaborasi dengan Fintech Jadi Kunci Perkembangan Bank
Date: 28 November 2019
Traffic: 57.7%
Blog Post https://www.cnbcindonesia.com/profil/20190701135028-41-81849/bri-
29 buka-bukaan-soal-kompetisi-kolaborasi-dengan-fintech
Title: BRI Buka-bukaan Soal Kompetisi & Kolaborasi Dengan Fintech
Date: 1 July 2019
Traffic: 68.9%
Blog Post https://money.kompas.com/read/2019/10/07/122447726/sinergi-fintech-
30 dan-perbankan-tak-bisa-dihindari-mengapa
Title: Sinergi Fintech dan Perbankan Tak Bisa Dihindari, Mengapa?
Date: 7 October 2019
Traffic: 55.1%