FINTECHS lag banks when it comes to providing financial services to Singapore's businesses, with limited product offerings and most businesses preferring banks to them, according to a report.
Businesses' financial needs span a range of products, from payments and loans to treasury management solutions. However, fintechs are limited in terms of product offerings, often restrained by regulations and balance sheet size, said the Singapore Fintech Association (SFA) and Ernst & Young (EY) in a report on Friday.
In contrast, banks offer the entire breadth of services, noted SFA and EY, who surveyed 272 micro, small and medium-sized enterprises (MSMEs). About 60 per cent of them were small and mid-sized businesses, whose annual revenues range from S$1 million to S$100 million.
Most local firms also preferred accessing financial services through banks instead of fintechs, the report found.
For example, 84 per cent of mid-sized businesses would rather get secured loans from banks than fintechs. In the same vein, 78 per cent of small businesses preferred banks to fintechs.
Hence, "fintechs continue to trail behind banks in relation to the provision of financial services to MSMEs", said SFA and EY.
It also supports the thinking that fintechs should partner, rather than compete against, financial institutions in order to be successful for many of the product offerings, they said.
This also comes amid concerns of data protection when using fintech. The report said data protection was the top concern raised by businesses of all sizes, even if some of them have engaged fintech providers before.
For instance, among small and medium-sized enterprises that have used fintech services, about 50 per cent of them said data protection was a worry.
"Fintechs can properly communicate their data protection standards and strengthen their brand image to not only retain adopters, but also to attract non-adopters," suggested SFA and EY.
But that's not to say that MSMEs don't have gripes with banks' services. Some believe that their banks fail to meet their expectations when it comes to pricing; they also expect better speed and quality of service from their banks.
According to the report, about 43 per cent of MSMEs are not happy with their current banks’ fees, which they think are too high.
Apart from fees, 33 per cent and 32 per cent of respondents expressed dissatisfaction towards the speed of service and quality of service, respectively.
Such pain points could be addressed by fintechs in collaboration with banks, the report suggested.
"Banks benefit from the agile and swift processes, innovative mindset, and speed to market offered by leaner and more versatile fintechs," said the report, "whereas fintechs gain from banks’ financial strength and deep-rooted positioning in the financial services sector".
The report was launched on Friday and is supported by NTUC U SME and the Networked Trade Platform. Koh Poh Koon, Senior Minister of State for Trade and Industry, attended the event.