Pandemic a 'wake-up call' for institutions to embrace fintech

Zhou Mo

Pandemic a 'wake-up call' for institutions to embrace fintech

The coronavirus pandemic is a “wake-up call” for financial institutions to embrace financial technology, the development of which has accelerated as a result of the public health crisis, said Joe Ngai, senior partner and managing partner at McKinsey, Greater China.

As governments worldwide enforced lockdowns and travel restrictions to curb the spread of the virus, which has so far claimed more than 206,000 lives and infected over 2.98 million people globally, the demand for remote online banking services has grown.

Generally, the growth and development of fintech has intensified in terms of customer behavior, as people are now more willing to seek digital banking services, rather than going to physical banks to handle financial matters, Ngai said.

“The coronavirus outbreak is a wake-up call for large financial institutions that have yet to embrace fintech, for they’ve to think about, ‘If my branches cannot open, how do I interact with my customers? If I cannot see customers face to face, how do I make credit decisions?’” he told China Daily in an interview.

“Before the outbreak, financial institutions were already looking at technology. Most of them have invested in technology, but I think the coronavirus will accelerate the development.”

Ngai noted that uncertainty about returns from IT investment still presents a major challenge for financial institutions in undertaking digital transformation, but there are also obstacles from the “softer” side.

“When people look at how much I’m spending on IT, the return on investment is sometimes not so clear. But it’s sometimes not only around hardware, it’s also around culture, it’s also around the operation model,” he said.

“For financial institutions, the most difficult thing is trying to figure out how to get better returns from their investment, how to change their culture, people and their mindset. The softer side is much more difficult for larger financial institutions. It had faced the challenge before and it will continue to be a challenge.”

According to a recent report by the China Banking Association and PwC, traditional banks are, generally, adopting a positive attitude toward fintech development despite multiple difficulties, and are continuously increasing investment in the sector to win a bigger market share. But information security and regulations have been two issues that bankers are concerned about.

About 57 percent of bankers surveyed said the information security risk brought by fintech is something they’re worried about most. Nearly 60 percent believe that government regulatory capabilities need to be improved to better serve fintech development.

As the pandemic continues to batter global businesses and roil markets, Ngai stressed the importance of agility and adaptability for enterprises to survive and grow in this difficult time.

“My advice would be to be agile. You have to maintain the agility, and the ability to change and adapt to the new environment quickly, because maybe the world would become one that would see many more such unforeseen challenges, and we have to be ready for that,” he said.