“Asia is well poised to ride the wave of financial technology in the coming years. Every young generation sees a horizon of opportunity and here in Asia, we’re certainly seeing this reflected in the rapid growth of the fintech industry,” said Krupal Raval, Senior Vice President (Finance), at Digital Realty.
According to a recent Accenture report, fintech investment in Asia Pacific is expected to at least quadruple in 2015, growing from US$880 million in 2014 to nearly US$3.5 billion in the first nine months of 2015. “The increased investment in the sector, particularly in this region, is testament to the great opportunity available, not just in the financial hubs of Asia, but for the growing startup contenders in the region as well,” said Krupal. “With the convergence of certain trends, fintech in Asia is well-placed to see growth in the coming years.”
The top five trends are:
Fintech changes the financial hub landscape
While there are a number of Asian cities that have solid fintech foundations, such as Singapore, Hong Kong, and mainland China, other markets are quickly evolving contenders in the industry. Digital Realty has seen a lot of growth in fintech in Malaysia, Indonesia, Korea, Japan, and India, with priorities ranging from payments to security, which could shift financial hubs to these markets, the company said.
A changing but fragmented regulatory environment
A key ingredient to growth is a regulatory environment that encourages fintech startups and companies to develop. "Singapore, for example, has done well to ensure that regulation and government support have enabled such startups to grow sustainably and adhere to the guidelines set forth by bodies such as the Monetary Authority of Singapore (MAS). Countries like Indonesia and Malaysia have also put forward regulations to help ensure that financial players, the economy, and consumers are well-protected," the company noted in a statement.
Traditional banks fight disruption from startups
Traditional banks fight disruption from startups
A number of startups in the fintech sector are blurring the lines between the roles of banks and the disruptors themselves. Now, financial institutions are leveraging technology to gain an edge against startups chipping away at roles they have traditionally held. For example, DBS Bank has focused on innovation anchored around increased focus on digitisation to further enhance processing efficiency, making the customer experience more interactive and intuitive, and using structured and unstructured big data analytics, to put their customers and the centre of their business, Digital Realty said.
Evolution of payments
A great proportion of Asia’s population are unbanked – as the number of digital natives grow in the region, this presents a huge opportunity for these people to gain their first access to banking and mobile payments options through their smart devices. Initiatives have pushed for increasing the reach of access to financial services through the Internet and mobile networks. In India, for example, mobile companies are applying for licenses to operate “payment banks” that can handle deposits and payments, but not loans, Digital Realty observes, predicting that the push to access the unbanked through digital channels will continue to rise in the region.
The rise of P2P, driven by China
Evolution of payments
A great proportion of Asia’s population are unbanked – as the number of digital natives grow in the region, this presents a huge opportunity for these people to gain their first access to banking and mobile payments options through their smart devices. Initiatives have pushed for increasing the reach of access to financial services through the Internet and mobile networks. In India, for example, mobile companies are applying for licenses to operate “payment banks” that can handle deposits and payments, but not loans, Digital Realty observes, predicting that the push to access the unbanked through digital channels will continue to rise in the region.
The rise of P2P, driven by China
Digital Realty is also upbeat about peer to peer (P2P) lending, which allows the man in the street to bypass banks in borrowing funds. Individuals can lend and borrow from other individuals instead. In China, the number of P2P lending platforms has grown from 948 in February 2014 to over 1,700 in March 2015. In Southeast Asia, P2P payments are picking up steam, according to a recent Forrester report. Regulatory challenges still exist but more regulators are beginning to make changes to its regulatory framework to allow P2P players to start operations.
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