Fintech-based growth for Asia’s financial markets

Asia's financial markets

Fintechs in Asia are riding the digital payments growth wave. With unprecedented innovation, the region has renewed its leadership in modern global banking. From large conglomerates to virtual banks and payments, firms here have sought to conquer the digital growth curve.

Digital banking, which requires heavy investment, has rendered previous traditional banking practices obsolete. Digitalization represents a new growth opportunity and has made Asia’s financial services industry (FSI) more accessible and inclusive. These disruptive technologies offer new opportunities and have driven change in the region and especially innovation in China.

There has been an explosion in the number of technology companies providing financial services solutions in Asia. The strong economic recovery in the region has also led to an increasing number of high net worth individuals seeking customized banking and wealth management solutions.

Access to tailored advice, non-traditional investment with the explosion of cryptocurrency prices and advanced engagement solutions have led to the promotion of cashless payment approaches such as e-wallet or e-payment applications. Industry experts also expect digital lending to accelerate in Asia.

M&A deals are also increasing investment in the fintech startup space to realize technological advancements and provide cross-sector offerings. This has already been seen in investments from non-financial services sectors such as telecommunications, retail and media.

Asia’s fintech industry during the pandemic

The Covid-19 pandemic has been disastrous for the banking industry in many ways and has led to several changes in the financial services industry. But the fintech scene has continued its upward trend in 2020 despite the pandemic. After being the first region in the world to be hit by the Covid 19 pandemic, Asian countries were the first to stop economic activity, though also the fastest to ramp it back up.

The FSI industry struggled to support regional growth while combating the pandemic, making Asia fertile ground for the development of digital banking. The region has proven to be a booming digital market as policy and regulation play a larger role in post-pandemic economic recovery. A large portion of private market funds in emerging Asia have invested in fintechs.

Consumers are also seeking technologically advanced access to financial services as the pandemic has exposed the need for digitization. The largest banks in Asia, with strong balance sheets, have delivered double-digit growth this year. With strong consumer spending growth in Asia Pacific, particularly in Southeast Asia, companies have rushed to expand their geographic footprint in this expanding market.

Across Asia, established banks are partnering with fintech startups to boost digital payments, according to Mckinsey’s Future of Asia report. These include Kasikornbank and Grab of Thailand, which have teamed up to launch GrabPay by KBank, a mobile wallet. Another example is BRI (Bank Rakyat Indonesia), which has partnered with Alipay to expand acceptance of mobile point-of-sale payments for Chinese tourists visiting Indonesia.

Asia’s fintech ecosystem

Singapore and Hong Kong have led the turnaround in the digital banking industry, shaping the financial services sector in the APAC region. But according to a KPMG report, growth momentum is picking up in China and India, driving innovation and growth in payment services and fintechs.

The Chinese and Indian financial markets continue to open up, across various market segments such as incumbent banks, electronic payments and fintech startups. Most Asian governments are supporting the fintech industry by relaxing regulatory requirements. The governments of India, Indonesia, Vietnam, and Malaysia aim to increase competition and drive digital progress.

Through the Asia Pacific Economic Cooperation, modern regulators across the region have established so-called sandboxes and other types of innovation facilitators such as FinTech accelerators, incubators and innovation centers. These currently exist in Hong Kong, China, Indonesia, Japan, Korea, Malaysia, Russia, Singapore, China’s Taipei and Thailand. According to the IMF, a sandbox allows for live testing of small-scale innovations by private firms, both regulated and unregulated, in a controlled environment under the supervision of the regulator.

China – Fintech Center of the World

China’s banking and securities industry contributes significantly to global economic growth and its huge GDP makes it the third largest in the world. The country is positioning itself as the dominant economic power in the Asia-Pacific region and has the largest banking system in the world with 40 trillion. USD, the largest banking system in the world, larger than that of Europe. The world’s five largest banks by total assets (Industrial & Commercial Bank of China, China Construction Bank Corp, Agricultural Bank of China, Bank of China and Mitsubishi UFJ Financial Group) are all from China.

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The views expressed in this article are those of the authors and do not necessarily reflect the views or policies of The World Financial Review.