Treasury Today Country Profiles in association with Citi

Surveying the Asian fintech landscape

Growth of plants

Fintech in Asia is growing at a considerable rate and playing an important role in this growth is the various accelerator programmes that exist across the region. Treasury Today Asia sat down with Steven Tong, Managing Director at Startupbootcamp in Singapore recently, who gave us an insight into the current fintech landscape across the region and why your next treasury solution may be the brainchild of a small start-up.

London is often cited as being the capital of fintech, but we have seen lots of activity recently in Asia. What therefore is the overall status of the fintech industry in Asia when compared to other regions?

Whilst fintech is certainly beginning to gain a lot of momentum here in Asia, the region is still lagging behind Europe and North America. This trend is not only limited to fintech however, the whole start-up ecosystem still has some way to go before it reaches the same level. This is reflected in the solutions which we see being produced – many are too similar to those that already exist and offer little excitement, whilst others require further work to achieve their potential.

There are a number of reasons for this, but primarily I believe it is because Asia’s developed countries lack an entrepreneurial spirit. Take Singapore, Japan and S.Korea for example, in these countries there is little incentive for young people to go and join a start-up when they can fairly easily get a job in an established financial institution, earn more money and arguably have greater job security.

On the flip side however, there has been lots of impressive work done by start-ups in China, India, Australia and increasingly in the ASEAN region.

China is especially ahead of the curve, particularly in regard to the wide variety of financial transactions that can be done on a mobile phone – even the western world lags behind China in this respect. And more broadly there is a unique willingness to explore new solutions in China, not just from individuals but from businesses as well from corporates to the end user that you don’t see anywhere else in the world.

The only problem is that the market in China is so large that these companies are very insular and few solutions are geared to spread beyond its borders.

Aside from the talent issue in the more developed economies what are the other challenges that fintech faces?

There are a few problems fintech in Asia has at this present time. Number one is perception. The vast majority of fintechs are small start-ups that have little to no reputation. Individuals and corporates are therefore unlikely to use them simply because these pose a much greater risk compared to using an established financial institution.

This is why it is a myth that fintech is there solely to disintermediate these institutions. The truth is that most start-ups are in fact looking to partner with an established financial institution to piggy-back off their reputation in the market and reach their customer base. But attracting the attention of these big firms is a challenge in itself for many small start-ups.

The second major problem is regulation. The easiest way to destroy a start-up ecosystem is to over-regulate it and this is a real concern in some countries. For the most part we are seeing the region’s regulators exploring the space and treading carefully given its infancy, but there are some that are taking a more progressive stance. In Singapore for instance, the Monetary Authority has pledged their support to fostering fintech. This includes the creation of a new fintech and innovation group, the exploration of application programming interfaces (APIs) technology to name but a few initiatives.

Of course, whilst fintech shouldn’t be over-regulated, it cannot be unregulated. We have seen the dangers of this in China where billions of dollars has been lost in peer-to-peer lending scams, simply because the sector was unregulated.

Smart and liberal regulation is therefore the key and not only will this help fintech thrive, it will also boost its perception and the confidence individuals and companies have using the products it creates.

How can fintech change the transaction banking and corporate finance landscape?

From the banks perspective it is clear that they need to do more to innovate and one of the most effective ways to do this is to partner with fintech.

Of course, banks are fintech in their own right and we have seen many institutions open innovation labs or fintech working groups. But, it would be fair to argue that these will take a long time to bear fruit compared to partnering with fintech start-ups. And in my view it will be those that are more progressive and move the quickest that will come out on top in the end.

From a corporate treasury perspective the biggest impact that I foresee fintech having, in the short term at least, is around regulation. Regulation technology (regtech) will be a game-changer and solve many issues that corporates and their banking partners currently face around know your customer (KYC) and anti-money laundering (AML).

The other space ripe for disruption is trade finance which is still very paper based and we have seen many companies look to use various tools, including the distributed ledger, to improve this space.

How does Startupbootcamp operate and what are you looking for in a fintech start-up?

The goal of Startupbootcamp is to connect the fintech start-ups that exist across the region with investors and established financial services companies with the final objective being to commercialise their offerings. We speak both corporate language and the language of fintech and therefore are uniquely positioned to marry the two worlds together.

To do this we spend a lot of time meeting the fintech communities across the region and running ‘FastTrack’ events to see whether these companies have the potential to join the accelerator programme. Typically we meet 400 start-ups a year and a number of these are then invited to join our accelerator programme.

Those that are invited then spend three months with us in Singapore and have access to experienced mentors from numerous areas of finance who can help them develop their product. This whole process culminates in a ‘demo-day’ where our investors are invited to view presentations from our start-ups with a view to invest.

We have found that those which stand out do so not just because they have a unique product that can meet a specific need but also because they have a leadership team with a vision and drive – this is often overlooked but it is vital to make a success of the product.

Treasury Today Asia will be taking a more holistic view of fintech in the region in the July/August edition of the magazine. Also, we will continue to cover the fast moving fintech space both in print and online throughout the rest of the year.