Insight & Analysis

Asia fintech rising

Published: Jul 2017

Startupbootcamp and PwC’s annual ‘State of fintech’ report shows that China and India are dominating Asia’s fintech landscape.

The rise of fintech in recent years has been staggering. In monetary terms, for instance, five years ago the global level of investment in fintech annually stood at US$3.1m. In the first quarter of 2017 alone, global investment in fintech topped US$1.8bn.

As the level of investment in fintech has increased, so have the innovative solutions developed by a plethora of companies around the world.

It is this progress that has been charted in Startupbootcamp and PwC’s latest ‘State of fintech’ report.

AI, cyber and mobile

Looking back over the last five years, the top three trends in fintech, according to the report, have been AI, cyber-security and mobile payments.

AI is a concept that has existed for some time, although it is only recently that companies have been waking up to the almost endless amount of opportunities that AI presents them. Most notably they are keen to utilise its potential to allow them to make faster and better decisions.

In the treasury space, we are beginning to see the early signs of this happening. Organisations such as Microsoft, for instance, are leveraging AI to better forecast accounts receivables and in turn make better risk management decisions.

Treasurers are also increasingly aware of, and concerned about, cyber-security. And for good reason. The report cites that in the past five years cybercrime damage has more than doubled.

The market is responding to this by investing and coming together to share insights and develop solutions to counter the threats. The challenge will be staying ahead of the cyber-criminals who are also investing and working together.

The final megatrend has been the rise of mobile payments. Data from the report highlights that today, 5.5bn people age 14 or over have close to 5bn mobiles. This number is increasing, especially in Asia, where economic development continues to see the rise of the middle class in many emerging economies.

Because of mobile penetration, contactless payments will reach a global value of US$95bn by 2018. This rise of mobile financial services is also lowering the cost of basic financial services and driving more financial inclusion.

Again, some treasury teams around the world have looked to leverage mobile payment channels to enable them to tap into new markets and work with their customers in new and imaginative ways. This was something that Sonam Donkar, Associate Director – Treasury Head PepsiCo recently discussed in her Corporate View profile.

China and India: making a move

In Asia, a large portion of fintech development is happening in two key markets: China and India. China dominates fintech investment in the region, receiving more investment than all other countries combined.

Much of this investment has come from China’s technology giants that have been revolutionising financial services for some time now. This is especially true in the payments space, where companies such as Alipay and Baidu control 80% of Chinese mobile payments.

At present, the main area of investment is in alternative lending, driven by Chinese desire for credit that is unmet by traditional financial institutions. This investment has not all been positive though and some of these platforms have conned people and businesses out of money. Beijing, as a result, is cracking down on this space.

Although China often dominates the headlines, the region’s other superpower, India, is also making great strides. Indeed, perhaps unlike any other country in the world, there is a collective drive towards digital banking.

The report cites two key government led initiatives, which are enabling this. The first is India’s digital identity system, Aadhaar, which enables quick and automated KYC checks. The second is the countries Unified Payments Interface (UPI) which makes peer to peer transactions as fast and as easy as sending a text message.

Transaction banks in the country are already leveraging the opportunities that these systems create. Citi, for instance, recently told Treasury Today how it is building solutions for India’s new payment infrastructure that will enable online marketplaces to enable marketplace companies to work with new customers through these rails.

Usage of digital payments has increased as well due to the Modi government’s demonetisation project. The report cites that since demonetisation, digital transactions have quadrupled in volume and value across various payment methods.

The road ahead

Startupbootcamp predicts that in the coming years these trends will continue. It also shines a light on a few growth areas in the report.

The biggest is financial inclusion; using mobile financial services to meet the needs of Asia’s unbanked populations. For corporates looking to expand their sales footprint in the region, tapping into this market potentially offers great opportunities.

Elsewhere, the growing complexity of regulation will drive a greater focus on regtech. Currently only 10% of the global funding into regtech lands in Asia. Startupbootcamp expects this to change in the coming years as banks and corporates look to alleviate the burden that regulation brings.

Finally, any corporation looking at how fintech might impact their businesses should look to the insurance sector. Startupbootcamp is seeing a significant amount of development in this area as insurance companies look to reach and serve clients in a targeted and user-friendly manner.

With Asia accounting for six of the ten markets that attract the highest rate of fintech financing in the world, fintech development in Asia will continue to gain pace.

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