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A booming new industry promises to transform lives -- and disrupt banking

Investment in financial technology companies is unquestionably frothy in Asia, with deal values more than quadrupling last year to $4.3 billion. In the first three months of 2016, Asia-Pacific fintech investment was six times higher than in the same period a year before, reaching $2.7 billion.

This suggests fintech is taking off in the region. However, most of the investment has been into major Chinese companies providing payment or lending services, rather than injections into struggling startups. In April, Ant Financial Services Group, the Alibaba Group Holding affiliate that runs payment platform Alipay, announced it had completed a $4.5 billion fundraising round, bringing in nearly twice as much as all other fintech companies in the region combined brought in during the first quarter.

Alibaba is already a global household name. With its Alipay digital wallet, it is part of the first wave of digital disruptors that many people can list, alongside PayPal, Google Wallet, Apple Pay and Facebook Messenger, which are taking a bite out of financial institutions' business worldwide.

But Alibaba is not the only big company in Asia luring investment. In January,, China's second-largest e-commerce company, raised $1 billion for its consumer finance subsidiary, JD Finance. Shanghai Lujiazui International Financial Asset Exchange, a peer-to-peer lender and broker which is controlled by Ping An Insurance Group and which recently rebranded to from Lufax, has raised more than $1.2 billion.

These are behemoth companies that have built-in critical mass, brand loyalty through other businesses, and lower entry costs than independent startups. Indeed, Alipay and Tencent Holdings' Tenpay now have as many or more customers as many of the country's top banks. Alibaba and Ant Financial have also invested in Paytm, a mobile payment and commerce platform in India, suggesting that they plan to spread their fintech wings around the region.

TRANSFORMATIVE POTENTIAL Do these trends make fintech in Asia somehow less valuable because it is not about investing in small entrepreneurs?

No, ultimately fintech is not about the money raised but about how the innovations transform lives. Fintech innovations in China primarily revolve around mobile payments and peer-to-peer lending. They are reducing long lines at banks and the need to carry excessive amounts of cash.

Cashless payments are increasingly the norm in China. Indeed, research group eMarketer forecasts that 195 million Chinese will be using their phone as a wallet by year-end. That would mean about 38% of all smartphone users in the country will be making transactions with their phones.

Banks have been involved in some of these solutions, but not enough. Any innovation that removes a bank from customer interaction removes an opportunity to sell a variety of products to that customer. What banks need to do is keep up with the innovations. They can match the built-in scale and critical mass of their digital competitors. There is no reason, other than a lack of investment in fintech, that they should not be delivering new solutions to customers.

Globally, we see banks working with fintech startups so that new ideas can be shared successes. A recent study by Accenture of major European banks found that nearly half are currently working with fintech startups.

In the Asia-Pacific region, banks are mentoring smaller fintech startups as well. However, the next step for banks is to bring their innovations to life. Simply put, we need less talk and more action. For one thing, the banks could open up their systems to enable them to interface with new technologies. They should also be moving forward with blockchain technology.

Banks cannot stop the competition they are now facing. Each new innovation aims to lure more customers for financial services, which will only be successful if they are more intuitive, faster or cheaper than existing offerings. Ultimately that means the winners will not be the companies that announce fresh funding rounds. Rather, the winners will be the customers.

 Richard Lumb is group chief executive of Accenture's financial services operating group.

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