Tag Archives: Fintech
LONDON (Reuters) – Britain’s banks may be overstating their ability to stop “fintech” firms stealing customers and eating into profits, the Bank of England (BoE) said on Tuesday.
The BoE was publishing the results of its 2017 stress test of seven major banks: HSBC, Barclays, Lloyds, RBS, Santander UK, Standard Chartered and Nationwide.
For the first time, it included an “exploratory” scenario on how lenders would cope with a seven-year downturn and competition from financial technology – or fintech – firms.
Fintechs offer payment services and aggregate different bank accounts and balances via smartphone apps. New European Union rules from January will make it easier for them to compete with banks.
Fintech is creating opportunities for customers and businesses, BoE Governor Mark Carney said.
“In the process, however, it could also have profound consequences for the business models of incumbent banks,” Carney told a news conference.
The BoE said the banks tested concluded they could cope with prolonged low growth and fintech competition without making big changes to business models or taking on more risk.
The emergence of fintech, however, may cause “greater and faster disruption” to banks’ business models than the banks themselves project, the BoE said.
Fintechs may make it easier for customers to manage their money more effectively to avoid costly overdrafts. They could also direct customers to cheaper credit and avoid going into the red.
“These dynamics seem likely to impact both the quantity and price of banks’ overdraft products, which could lead to a material reduction in their profitability,” the BoE said.
Overdraft revenues contribute 2.6 billion pounds ($ 3.5 billion)to annual pretax profits at major UK banks, it added. Banks could also lose to fintechs some of the 800 million pounds in fees they charge for providing payments services.
Fintechs may also break or weaken the link between a bank and its customer.
“For instance, in the future, it may be possible for a customer to manage their finances with only minimal direct engagement with their banks.”
Stiffer competition from fintechs means that banks could have to double spending on marketing and cut their aggregate annual pretax profit by a billion pounds.
The BoE said banks in the test may also have overstated their ability to slash costs to maintain steady returns on equity to investors and keep offering a broad range of services.
“Supervisors will now discuss the results of the exercise with banks, including the potential implications of these risks,” the BoE said.
Reporting by Huw Jones; Editing by Mark Potter
BEIJING (Reuters) – China Citic Bank Corp (601998.SS) and search engine giant Baidu Inc (BIDU.O) launched on Saturday a direct banking joint venture, dubbed AiBank, to capitalize on China’s rapidly growing fintech sector.
AiBank is one among several tie-ups between an internet firm and a lender in China’s booming online finance market where technology gurus like Alibaba Group Holding Ltd (BABA.N) and Tencent Holdings Ltd (0700.HK) have already set up their own finance arms to offer a range of financial products including payment, wealth management and micro loans.
A direct bank offers services over the internet instead of through physical branches.
AiBank will focus on lending to individuals and small businesses while leveraging big data and artificial intelligence to build new risk control models, Li Rudong, president of the new bank said at a launch event in Beijing.
Li said 60 percent of the new bank’s employees will be technology staff.
“AiBank is the future of intelligent finance…It is an institution that understands customers best and understands finance best,” said Baidu Chief Operating Officer Lu Qi.
Mid-tier lender Citic Bank owns 70 percent of the joint venture, while Baidu controls the remaining 30 percent. The direct bank has a registered capital of 2 billion yuan.
China’s banking regulator approved the establishment of AiBank earlier this year.
Reporting by Shu Zhang and Elias Glenn; Editing by Muralikumar Anantharaman