Extract from View From Asia, fDi magazine, Financial Times, London, June 2018
Fintech (financial technology) is a new financial industry that applies technology to improve financial activities with key areas being the automation of insurance, trading, and risk management. Global investment in fintech increased more than 2,200% from US$930 million in 2008 to more than US$22 billion in 2015 .
Potential remains big. From the demand side across much of South-east Asia, the unmet need for basic banking services is significant. KPMG reported that only 27 per cent of the region’s 600 million inhabitants had a bank account in 2016 .
From the supply side, a new wave of startups is increasingly “disaggregating” global banks. Milken Institute’s Centre for Financial Markets reported that much of the venture capital in Asia has mostly flowed into China, particularly among a handful of large tech companies. Yet, other countries also are seeking to position themselves as fintech hubs. Straits Times reported that multimillion-dollar investments were reported last year in Hong Kong in “digital wallet operator” TNG FinTech Group, in India in online lending platform Capital Float and in South Korea’s second-largest cryptocurrency exchange, Korbit. In Indonesia, motorbike delivery and ride-sharing app Go-Jek’s acquisition of payment portals Kartuku and Midtrans, and savings and lending network Mapan, is poised to be a digital payments leader. in Singapore, “digital disruptors” Blocko, Spark Systems, AGDelta, Flywire and six other companies won awards for implementing innovative financial technology solutions.
PWC and Startupbootcamp reported that the top Asia fintech trends in 2017 were (1) Financial inclusion Institutions facilitating microfinance in Asia will continue to play a critical role in improving access to finance for the underbanked (2) Wealth management (more emerging technologies like chatbots, robo-advisors and IOT are being adopted by tech savvy Wealth Managers) (3) RegTech (expect a rise in both government regulatory and non-governmental compliance initiatives to automate low-risk background checks) (4) InsurTech (more Internet-First Insurers and digital insurance companies using sophisticated data models and analytics for risk and claims management and customer onboarding).
Challenges include aggressive enforcement of the Bank Secrecy Act and money transmission regulations, representing an ongoing threat to fintech companies. Customers’ expectations of businesses are also increasing greatly, expecting the same level of service and access from firms of all sizes, a seamless mobile experience from their financial services providers, being able to pay with a credit card at all shops and from their mobile phone anywhere.
Asia businesses that do not adopt the latest technologies risk losing their customers.