Platform firms, online marketplaces biggest competition faced by lenders

Advertisement
Font Size

By Melissa Luz T. Lopez, Senior Reporter

PLATFORM COMPANIES and online marketplaces are the biggest competition faced by banks, an industry expert from IBM said, noting players need to look beyond banking to keep profits afloat.

Likhit Wagle, IBM’s general manager for Global Banking and Financial Markets for Asia Pacific, said the likes of Alibaba and Lazada stand as the biggest disruptors in financial services as they could potentially box out banks for payments.

“The really significant issue the banking industry is facing is it is going through substantial disruption is mainly due to what I would call the platform companies. It’s not so much the [financial technology firms]…which are engines for innovation,” Mr. Wagle said in an interview with BusinessWorld during his visit to Manila last week.

“The problem though is not fintech but platform companies… If you look at Alibaba and Tencent, they have substantial financial services businesses,” Mr. Wagle added, referring to Chinese tech giants.




Billionaire Jack Ma’s Alibaba Group has rolled out its Alipay platform, with its asset base already bigger than global banks like New York’s Goldman Sachs.

More than seeing financial technology companies as the threat, the industry expert said banks should take the chance to tap their digital solutions and collaborate to innovate banking products.

Still, he stopped short of pushing lenders to acquire fintech firms to plug the gap, saying that they run the risk of obtaining technology which could become “dated” rapidly.

Platform companies are actually the bigger competition for banks, Mr. Wagle said, as he pointed out that e-commerce has been gutting out the need for the services offered by banks as platform firms now offer their own mobile wallets to process payments and shipments.

The edge of these online companies is offering “instant fulfillment” to its customers, particularly as they are able to meet a wide array of needs and services sought by a consumer.

“If you take somebody like Alibaba, when you get up in the morning, you do not turn around and say I want to use my credit card. You get up and you might have to buy a pair of shoes or pay something. What platforms like Alibaba are able to do is satisfy all of those needs in a single platform, including the financial services element,” Mr. Wagle said, noting that this could be a “Kodak moment” for traditional firms.

“If they are able to do that, customers will not come off their platform and onto their bank. This is not just business that’s going to disappear from the banks — this could actually take away all of their business.”

To keep up, banks should consider embracing artificial intelligence to improve cross-selling and offer ancillary products to clients, which can be tailor-fit to the needs of a consumer through data analytics.

Tapping cloud computing and blockchain could also cut by as much as 40% of information technology costs for banks, while also improving security and efficiency.

Mr. Wagle said the Philippines is very much ready to pursue this track given a rapidly-growing economy, wide Internet usage, and a tech-savvy population armed with smartphones.

“It has to happen very fast,” he said, or else the country runs the risk of lagging behind its peers in the region. Digitizing government payments as well as offering a national ID system would boost efforts to bring more transactions online.

Advertisement