Tech firms to overtake traditional banks — Expert
KUALA LUMPUR: Banking industry expert, Brett King, has predicted that technology companies wi l l overtake traditional banks to become the world’s largest financial institutions by 2025.
“By 2025, the biggest bank in the world will not be any of the banks today, but technology companies providing financial services that are integrated in peoples life,” said King, who is also the founder/ chief executive officer of the New York- based mobile- banking service, Moven.
Last year, King said, China’s electronic payment gateway – Alipay – processed US$ 17 billion ( US$ 1 = RM4.28) payment through mobile phones in one day on its Singles’ Day shopping spree that fal ls on Nov 11 yearly.
“About 96,000 transactions were handled per second on that day, which are more than double the combined transactions made by MasterCard and UnionPay,” he said.
“What’s interesting is, Alipay is an online payment platform and not a traditional bank,” he told Bernama recently.
King said it was widely expected that China’s mobile transaction volume would reach about US$ 3.5 trillion in 2017, from the US$ 2.9 trillion recorded in 2016, owing to the increase in mobile phone users.
Hence, technology companies would be the future competitors for traditional banks due to the rapidly changing customer behaviour, he said.
On the survival tips for physical banks in the future, King suggested they could par tner with technology companies to leverage the latter’s financial technology ( fintech).
“There is no need to build their own technology but partnering them and encouraging to invest in fintech is the cheapest approach. Acquiring from them is going to cost more,” he said.
A financial institution, said King, should be able to execute real- time delivery banking experiences in the future as people would expect immediate delivery services by then.
Asked if traditional banks would gradually disappear in the future, King dismissed the idea but predicted the number of branches would be halved by the end of the next decade.
“We are not only seeing the branches being reduced, but its size ( sq ft) is also shrinking,” he said.
For instance, bank space in the US has been reducing by 15- 20 per cent over the last five years, he said.
Whi le in Mal aysia, he expected the size of each branch to decrease by three to five per cent annually in the next decade.
“It does not mean that banks are closing down their business, we just do not need the branches for banking service anymore,” he said.
On the cyber risks exposure faced by fintech, King said, the companies should always invest in the maturation of technology as quickly as possible, as a mature technology always helped to reduce risk.
“Would cyber attack stop people from using technology for financial transactions? No, it will not.
“The more the attack occurs, the stronger the immune system of a technology will get,” he said. — Bernama