“Alibaba has zero branches, it’s got no infrastructure. Despite that today it is doing everything a bank does: it raises money, it lends money, it does payments.” said Piyush Gupta, Chief Executive DBS Bank.
While the media frenzy is on Fintechs, CEO of DBS may have a point: Banks might have overlooked fast emerging partners that is also fast becoming new digital competitors. As of now, the obvious ones are:
1. Telecommunication Service Provider who have access to virtually every accountable citizen in the world through their use of mobile phones
2. Large retailers raising their own capital and launching their own banking services, e.g. Walmart and potentially Starbucks
3. M-Commerce, E-Commerce giants taking advantage of mobile disruption to expand into virtually every territory, e.g. Alibaba and Amazon
Of particular interest to this article is how the rise of M-commerce giants have been seen as an imminent threat by bankers. Riding on the back of mobile phone and mobile data consumption growth, e-commerce is on an accelerated growth path. E-commerce players have been building digital capabilities and expanding beyond e-commerce itself. This threatens traditional business models.
E-Commerce Business Model and Drivers
If the threat is anything real, then, this author believe that it is fundamentally a business model and platform/ecosystem warfare.
E-commerce starting out from marketplace platform have been building out other platforms. It continues to do so at a speed and scale that was not possible with traditional business model.
Banks on the hand, continues to grapple with regulatory and business model limits. Any attempt to scale out and scale big is accompanied by heavy doses of regulatory oversight. It is a business model simply not suited to take on that of the e-commerce companies.
Bankers reaction to the threats from e-commerce players range from mild to severe:
1. Move in to the competitors turf, i.e. Setup their own e-Commerce engine
2. Consolidate and re-architecture the physical branch experience.
3. Promote more transaction through their existing channels by way of marketing, heavy discounting and loyalty rewards
4. Establish Partnership with other platform players, e.g. Apple, Media Company and Telco
5. Acquire synergistic Fintech startups; launch Fintech lab or accelerator hubs; launch Hackaton.
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Davis Chai is an Architect in the FSI industry for the past 10 years. His career involvement in the industry informed his work and allowed him to contribute to this blog.