The wave of financial technology (fintech) has come at such a pace that within months, start-ups have the potential to turn into companies worth more than US$1 billion, known as unicorns. Through technology and innovation, fintech businesses have disrupted the way banks traditionally function. From payments to lending and wealth management, these companies are winning over customers by tapping on unmet customer needs and providing better financial services.
On a global scale, greater than US$13.8 billion in venture capital (VC) was invested in various fintech companies in 2015 – more than a double of what was invested in 2014. Most significantly, there are 19 fintech unicorns worldwide capable of challenging banks.
Home to some 2,500 fintech start-ups, Asia Pacific isn’t immune to the fintech phenomenon. At the helm of fintech disruption in the region, China is undoubtedly making headway with Alipay, the world’s largest mobile payment company. Its digital insurance segment isn’t doing too bad either, being led by Ping An, in partnership with tech giants Alibaba and Tencent. While in India, a booming online payment segment has been brought on by e-commerce website PayTm, a household name capturing over 122 million users.
Besides propelling efficiency and improving convenience, fintech businesses in Asia Pacific such as China’s Lending Club, have made it possible for fintechs to access cheaper international funding sources. In developing countries such as India, fintech firms are helping to reach the underbanked and unbanked population through mobile applications which offer more services than that provided in brick and mortar bank branches.
While China and India experience much greater penetration rates for fintech services, other Asia Pacific countries such as Singapore, Indonesia, Malaysia, and Thailand have been experiencing less disruption. With a burgeoning financial sector prompting both benefits and drawbacks for fintech start-ups, it is expected that Singapore’s demographic of ultra-high net worth and wealthy individuals will help fintechs reach a tipping point in just 2 years. Indonesia, Malaysia, and Thailand on the other hand, have an insignificant number of banked users adopting fintech. Though with high mobile penetration rates and government support, it may reach tipping point in another 4-5 years.
Developing countries in Asia have large young population who will rely on their mobile phones for all types of transactions. The biggest challenge for a fintech is how it will continue to drive the experience beyond the mobile application or online site. The fire has been ignited in the payment sector but will also spread to other parts of the banking. Innovation will continue to be a driving force in Asia as fintechs and banks both develop new platforms services for the increasingly connected consumers in Asia.
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