The face of banking is changing across the region
According to analysis by KPMG International and CB Insights, US$4.6 billion in venture capital-backed fintech funding went to the Asia-Pacific region at the end of Q3 2016. Much of this investment went to China, driven by high mobile internet adoption rates and a tech savvy-millennial user base.
Asian fintech sectors predicted to get VC interest this year include payments, regtech, data & analytics, and mobile. Adoption of mobile money and mobile payments in Asia will see the market encompass a range of demographics, from Chinese millennials with WeChat, to Sri Lankan retirees receiving pensions onto their Dialog eZCash mobile money account.
Across Asia, fintech driven by regulatory ‘sandboxes’ are enabling financial institutions to experiment with financial technology, notably in Australia and Singapore, the latter being the “preferred gateway” to Asia, with its progressive regulation.
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Months ahead of Hong Kong and Malaysia, the monetary authority of Singapore (MAS) last year launched a sandbox to enable financial institutions to quickly test innovative financial services. The regulation recognised the need to balance experimentation with security, building on the work of MAS’s FinTech and Innovation Group, with its “Vision of a Smart Financial Centre, where technology is applied pervasively to create new opportunities and improve people’s lives.”
Capitalising on the market for personal improvement is fintech entrepreneur Justin Teo, 28, who saw an opportunity for Singapore’s millennials to get faster, safer holistic personal money management. With co-founder Jacob Lim, Mr. Teo noticed his friends had between two to three bank accounts each, and it could take up to several minutes load each one. The answer? FinGo, an app to aggregate all their bank accounts at once and make payments.
“In Singapore there isn’t time to trace your spending by toggling through different interfaces and there is certainly an opportunity in Asia to market to an increasingly busy and selective user-base,” he explained.
“Software technology has a lower cost barrier to entry compared to physical production, but we must still compete against established institutions. Incumbents have more resources and a head start. Still, there is room for survival, as startups can innovate faster. Challenging the industry from scratch requires plugging knowledge gaps and sourcing outside expertise.”
Consequently FinGo partnered with secure data aggregation specialists eWise. The app will enable Singaporeans to safely make money transfers and view multiple bank accounts on a single screen.
Interestingly, much of the web penetration in Singapore and elsewhere in Asia is via smartphone rather than desktop so it’s important for this mobile user-base to use secure client-side data aggregation to provide a holistic view of their wealth, on the move.
The need to provide a better customer service experience in Asia will drive more personalised financial services, accounting for mortgage, savings deposits, and checking accounts. A majority of traditional financial services are providing relatively poor customer-focussed digital account openings, on-boarding and cross-selling processes. This creates an opportunity for institutions to become more digital-oriented banks. Accordingly, financial institutions in the Asia Pacific region are seeking to hire more tech specialists than investment bankers this year to enhance products and upgrade systems; that’s according to a survey by Options Group Inc.
Elsewhere across the region key developments include:
- Hong Kong transforming from big corporate to nimble start up, driven by Hong Kong’s capital markets, experience and a cultural shift from conservatism to experimentation, signalled by Hong Kong’s Monetary Authority September 2016 creation of a regulatory sandbox to drive innovation.
- India’s highly educated population making use of demonetisation and advances in mobile banking to create payment apps. While credit scoring for the underbanked will help smaller merchants grow, competition for Venture Capital will be rarer for local startups in a highly competitive landscape.
- Japan: Considerable amounts of personal cash savings and corporate cash will support money management for individuals and SMEs, driving investment advisory, robo-advice and personal financial management tools.
- Australia driving data security backed by the government’s intention to combine cybersecurity and Fintech. According to Australia’s Special Adviser to the Prime Minister on cyber security Alastair MacGibbon, cyber security can be a foundation for the country’s information economy. A report produced by Data61, a Sydney-based fintech hub Stone & Chalk, KMPG, and the Australia Israel Chamber of Commerce, says that Australia is too dependent on others for the protection of its most critical information, and should protect its own security economy. It will be interesting to see how Australia’s emphasis on security informs the rest of the region.
“Watching our idea come to life in a competitive environment is a goal we want to achieve,” shared Justin Teo of FinGo, and it’s likely that with innovation and energy he will. And the time is right.
“The face of banking is changing,” said a partner at Options Group in Hong Kong: “We’re at a juncture where increasingly it’ll be about technology, automation and big data rather than about the rock-star investment bankers.”
While it may be a little unfair to dismiss investment bankers as rockstars, as the industry changes so will we, as fintech and its associative cultures permeate all financial institutions at all levels, in all territories: A recent McKinsey report found that widespread adoption and use of digital finance could increase the gross domestic product of all emerging economies by 6 per cent, or US$3.7 trillion, by 2025.
In the nearer term, this change will be marked by an open minded approach to technology in Asia particularly as fintech dominates the C-suite, and as the capacity to implement sophisticated personal financial management improves across the region.
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