1.

What is Fintech and overview

To begin, what is Fintech? The term Fintech refers to the synergy between finance
and technology. The Financial Stability Board (FSB) defines fintech as
“technologically enabled financial innovation that could result in new business
models, applications, processes, or products with an associated material effect on
financial markets and institutions, and the provision of financial services”. Fintech
can take the form of software, a service, or a business that provides technologically
advanced ways to make financial processes more efficient by disrupting traditional
methods.

Fintech has revolutionized many different markets, most notably the banking,
trading, insurance and risk management industries. Fintech companies, including
startups, technology companies and established financial institutions, take
advantage of emerging technologies, such as big data, artificial intelligence,
blockchain and edge computing to make financial services more accessible and
more efficient.

The areas that fintech covers can be broadly described as: (i) credit, deposits, and
capital-raising services; (ii) payments, clearing and settlement services, including
digital currencies; (iii) investment management services (including trading); and (iv)
insurance. Some of the most popular areas are: mobile wallets and payment apps,
crowdfunding platforms, virtual currencies and blockchain technologies, robo-
advisors, stock trading apps, insurtech.

2. Opportunities
As technology is becoming ever more central in the finance industry, the reality is
that both banks and fintech companies need each other just as much as they need
to compete with each other. Collaboration between banks and Fintech companies
brings many benefits.

Firstly, cooperation helps both sides building up brand reputation. If one of the
partnering companies has a good reputation, that reputation can trickle down to the
other company when the two work together. When a highly regarded fintech
company launches an app with a bank, the bank can profit from the stature and
status of the fintech company. For instance, HSBC has worked with Xero, one of the
World’s Most Innovative Growth Companies in 2014 and 2015, to develop direct
bank feed. Another way that the partnership can improve reputation is by
demonstrating to a consumer base that the two companies have their customers’
best interests in mind.

Secondly, Fintech with cloud-based AI service, allows banks to do contextual

recommendations (investment, foreign exchange) and cross-sell offer via mobile,
with real-time integrations. With the support of Fintech, banks can create right data
strategy to make the contextual recommendations their customers want, at the times
and in the environments most appropriate for those customers to take actions that
drive desirable outcomes, such as short-term savings goals, or building on long-term
financial investments. Moreover, banks can integrate their data strategies with
diverse applications to create not another banking app but a diverse customer
experience platform that supports an ecosystem of services, providers, and end-
users.