MAS: Fintech may hurt HK, South Korean banks most

SINGAPORE: Among banks in Asia’s biggest economies, those in Hong Kong, South Korea and Singapore stand to lose the most in the face of competition from financial technology companies, according to Singapore’s regulator.

Operating income at Hong Kong lenders could drop by about 7% due to being displaced in payments, deposit and lending, according to estimates made by the Monetary Authority of Singapore in its annual Financial Stability Review. South Korean and Singapore banks could see reductions of more than 5%, the regulator said in a report published yesterday. The estimates are “based on an unmitigated scenario in which banks do not take actions to address the fintech competition,” the MAS said. “The competitive threat and its corresponding impact is expected to vary across business lines,” it said, adding payment is the largest area of risk.

As financial institutions across the globe grapple with the potential threat posed by technology to the banking, insurance and asset management industries, they’re also exploring potential benefits and cost savings. Global banks from HSBC Holdings Plc and UBS Group AG to Goldman Sachs Group Inc have been researching applications tied to data analysis, artificial intelligence and blockchain. “In reality, banks can also harness technology – those that adopt a digital model successfully could perform better compared to those that do not,” the MAS said.

The potential cost savings from new technologies could represent 10% to 20% of Asian banks’ operating income, according to analysis by the regulator, Capgemini SE and SNL Financial.