Asian banks are on a "burning platform" but the biggest threat does not come from small fintech firms, said DBS chief executive Piyush Gupta yesterday.
Instead, large "platform" companies like Alibaba - which offer a range of banking services from lending to wealth management - are a more significant concern.
Mr Gupta was speaking at the Asia PE-VC Summit 2016, a conference for private equity and venture capital investors held yesterday at the Marina Mandarin Singapore.
Fintech firms are "attacking" every part of the banking value chain but very few have managed to scale up successfully, he noted. "Even the ones with a good value proposition or seem to be different are not able to hit the ball out of the park."
This is because their solutions have yet to be proven - for instance, many fintech firms specialising in lending make use of credit models that have not been tested through troughs in the economic cycle.
In addition, it can be extremely costly for fintech firms to build up a customer base from scratch - a lot of funds are needed and many companies falter at this stage, Mr Gupta said. Amid these challenges, small fintech companies are not as significant a threat to banks compared with large "platform" companies which are building ecosystems and tapping their existing customer bases to grow.
Chinese tech giant Alibaba, for instance, offers payments, lending, wealth management and insurance services and has been growing these at breakneck pace.
The company gave out about 60 million lines of credit during its Singles' Day shopping festival, Mr Gupta said, adding: "No bank in the world does that in a day. These companies have an installed customer base and so are a far more formidable challenge for banks."
All is not yet lost for banks but they have to be willing to transform. This means there are opportunities for fintech firms to take part in that transformation, Mr Gupta said.
"To be able to accelerate their own transformation, it makes sense for banks to work with fintechs... Banks are realising it's not necessary to do everything on their own," he added.
But not all banks will succeed.
"This transformation will be achieved by only a minority... Some will succeed but many won't. And when many don't, there will be a huge opportunity for platforms and other non-bank companies.
"I think the window is five years. Over the next five years the landscape is going to continue to change dramatically. If you're going to transform and have a reasonable position in this brave new world, it has to be done now."
