Fintechs pose disintermediation threat: CFA

The latest CFA Institute report shows fintechs specialising in blockchain, robo-advice, mobile payments and peer-to-peer lending have the highest potential to disintermediate the financial services industry.

CFA Society Sydney president Anthony Serhan said innovation in these areas will likely disrupt financial institutions together with artificial intelligence, big data and cyber security - albeit with "limited discussion."

Serhan noted within Australia's superannuation system, robo-advisers can be most beneficial by delivering tailor-made wealth management services rapidly and conveniently to investors instead of only high-net-worth clients.

"It's a perfect combination of technology and finance working for the benefit of the end investor," he said.

"Robo-advisers for example offer low marginal cost wealth management service via the internet and mobile devices with the help of internet technologies, big data analysis, quantitative financial models and algorithms."

In May, the institute announced it will add AI and big data in its exams. A spokesperson from the CFA Institute told Financial Standard it will also include coverage of cryptocurrencies and automated retail platforms.

The New Fintech 2017 report also found while technological innovation is a strongpoint for fintechs, a lack of experience in operating in the sector means they'll unlikely replace the traditional function of big players such as banks.

CFA Institute director of content for Asia Pacific and co-author of the report, Larry Cao said fintechs have the ability to build smart experiences that banks couldn't or didn't want to build.

Cao urged banks and fintechs to collaborate with a long-term view in mind, stating this is a "win-win strategy."

Banks are also weak in technological segments like P2P while fintechs offer more room for innovative ideas and technological skills but at lower profit margins, Cao added.

Fintechs will continue to capture the technological development market because traditionally banks haven't been eager to develop these kinds of businesses - but a change in attitude would pose the biggest threat to fintechs given banks' sheer scale and resources, he said.

Read more: FintechAICFA InstituteAnthony SerhanCFA Society SydneyFinancial StandardLarry Cao
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