The financial technology (fintech) industry, though heavily regulated, is an attractive industry for entrepreneurs. But experts are divided on whether there are enough players in the sector.

Soft Space director of strategy Chris Leong believes there “are more people trying to get into the payments industry and it is regarded as the industry to look at – entrepreneurs are drawn to opportunities and would get into this sector and region”. However, he said, fintech is a highly regulated industry and for the business to work, they must understand the complexities in terms of regulations that governs the industry.

Perfectsen chief marketing officer Seng Teong Chua did not see it that way, saying that not enough people are joining its ranks despite its growing potential. “We feel not many people or startups are rushing in this industry, due to its inherent challenges, slow adoption, regulations and limitations,” he said.

Nevertheless, he is bullish about the potential market, especially in Malaysia. Malaysia’s financial system is strong with high adoption rates, high volume of transactions and many people are connected on-line, some with multiple devices.

Many financial institutions are already in the midst of upgrading their systems and hiring relevant manpower to address new challenges, while the country has a strong and active regulator that keeps the ecosystem ripe for the introduction of innovations, Chua explained.

Chua sees a bright future for fintech in Malaysia due to several factors and believes the industry is being pushed to progress with pressure coming externally, internally and from customers. With the rapid growth in mobile device usage, the right strategy is to attract users with data plans. The financial technology industry also diversifying into loans and remittances, and it is just a matter of time before all these services are made available locally.

Chua said banks are looking at innovating and starting to ask themselves what they can value-add to their customers, besides just traditional transactions. “External competition and players outside of the financial space are coming in, from pure online banks to mobile operators. Customers are also becoming more digital savvy, knowledgeable and demanding, and if their existing provider or solution is not up to their mark, there is nothing stopping them from switching to others,” he said.

Leong believes there is huge potential in the industry due to shifts in the financial borders. He explained that the potential is increasing with the financial institutions shifting towards fast, secure and seamless technologies, while consumers are pushing the boundaries even further when it comes to the financial industry.

“According to a study released by Accenture, 51 per cent of customers what their bank to proactively recommend products and services that can help meet their financial needs,” said Leong. Malaysia has potential, with the increasing importance it has given to technology, and a growing middle class that has adopted technology as part of their lifestyle.

“Banks would need to keep up to the growing trends in the industry. Malaysia is quick adapting trends from Western countries, and both financial institutions and fintech solution providers are moving quickly in catering to the changing financial trends,” said Leong.

Both Leong and Chua agree that changes in technology is one of the biggest challenges in the fintech industry, but entrepreneurs should take it as an opportunity rather than a challenge.

For Leong, besides changes in technology, other challenges include certification, customer trends, absorbing the risk of fraud and penetrating the highly regulated market, as well as educating the market. Educating the market is a big challenge; the adaptation to change can be tricky, especially in the financial sector. Fintech vendors must be sure to wholly educate and gain market confidence to successfully break through the industry.

Chua concurs that the speed of digitalisation and the reactions of the industry players are also a major challenge. IT infrastructure changes are driving the sector, but fundamentally the way customers consume financial services is reshapping the industry.

“People are moving away from retail outlets into online, mobile or social media banking, comparing rates on third pary sites, proliferation of cyber attacks and data privacy,” said Chua. He told Malay Mail that these changes will not only affect a particular division but the entire organisation.

Perfectsen and Soft Space were semi-finalist in the Swift Innotribe Startup Challenge in 2013 and 2014 respectively.

This article is taken from The Malay Mail