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Earning trust a big challenge for fintech start-ups

SINGAPORE — Earning customers’ trust is an uphill task for financial technology (fintech) start-ups, due to their lack of track record and brand history, which is why it is important to join with established institutions to get a leg up in the industry.

SINGAPORE — Earning customers’ trust is an uphill task for financial technology (fintech) start-ups, due to their lack of track record and brand history, which is why it is important to join with established institutions to get a leg up in the industry.

That was the observation made by speakers on a panel discussing the impact of disruptive technology on the finance industry. They were speaking yesterday at the Fintech 2020 Singapore conference hosted by banking and payments technology provider FIS.

“Trust is the hardest for fintech start-ups,” said Mr Ned Phillips, founder and CEO of robo advisory provider Bambu. “When DBS launches a product, the question people have is whether to buy the product or not, not whether DBS will be around tomorrow or not, because it will. But for business-to-consumer fintech start-ups, you actually pay a huge amount of customer acquisition cost to buy the trust.”

Mr Phillips added that start-ups can partner with industry players with an existing customer base in order to shorten the process of building trust. This is also a more financially-efficient way to introduce and sell their products to the customers.

However, Mr Charlie O’Flaherty, head of digital strategy and distribution at wealth-management firm Crossbridge Capital, said trust can be a challenging issue even for established brands, especially when it comes to customers who are millennials. This calls for the need for financial services companies to be more transparent.

During the 46-minute discussion, panellists also mapped out the future of the finance industry, where artificial intelligence (AI) and big data are used alongside human employees to serve customers. Mr Alex Medana, chief executive of fintech advisory firm FinFabrik, said: “We are not there yet ... (but) I think wealth advisers will think of AI as their friend, so (we will see) the hybrid model.”

Mr Phillips agreed that the robo advisers available in the wealth management space today are just the beginning. In the near future, the greater use of data analytics would allow these automated, algorithm-based platforms to better understand the profile of clients and improve services by offering them more relevant products.

“Where is it going in five years? I think it’s the use of data analytics. The AI starts to know the person that they are dealing with. For example, if somebody tells us they are low-risk but every time we show the news, they read about PE (private equity) or alternative investments, we may want to go back and say ‘you may not be who you think you are’,” he said. LEE YEN NEE

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