Asia Banking Research

In the emerging world of super apps, Japan's Line is something of an anomaly. It is neither a wholly domestic phenomenon like China's WeChat nor global like the U.S.'s WhatsApp. It is not a ride-hailing app like Singapore's Grab or Indonesia's Go-Jek. Rather, Line is a quirky messaging app beloved in its home market of Japan as well as in Taiwan and Thailand, where Japanese culture has enduring appeal, and to a lesser extent in Indonesia. Outside of those markets, it is virtually unknown.

WeChat has proven that a messaging app can become a digital wallet and that the road to monetization runs through fintech. Line aims to show that such a platform is viable regionally in Asia. Because Japan remains attached to cash, Line cannot rely on its home market alone. “Fintech itself is a proven monetized model, the only problem is how fast we can secure a meaningful size of users,” Line co-CEO Shin Jung-ho told Bloomberg in a June interview.

Virtual banks are coming to Singapore, but the biggest incumbents have little to fear. Singapore's top three lenders, DBS, UOB and OCBC, have plenty of cash to invest in fintech innovation. What they cannot build independently they can access through tie-ups with startups. For smaller lenders who lack the heavyweights' resources, the virtual banks could pose a tougher challenge. The scope of the challenge will depend on how much freedom the Monetary Authority of Singapore (MAS) gives the new entrants.

Taiwan has a fairly well developed financial industry. This small island has a population of only 24 million in total, but has access to more than 5,000 physical financial institutions. Customers, therefore, are able to enjoy all the banking services provided with ease. Plus, the interest rates on loans in Taiwan are extremely low with only 2.63% APR. The application for a fiduciary loan becomes relatively easy for office workers. Thus, FinTech derivatives such as P2P lending are not previously widely considered.

In April, the Hong Kong-based fintech startup WeLab quietly won the former British colony's fourth virtual-banking license. Founded in 2013 by ex-Citibank executive Simon Loong and two other partners, the company has steadily grown over the last six years. It now has 30 million customers in Hong Kong and mainland China as well as a staff 600 strong. The company expects to launch its virtual bank - named WeLab Digital - between October and January.

Hong Kong banking giant HSBC can no longer rest on its laurels: The virtual banks are coming. With its deep local roots and wealthy customer base, HSBC has long been the dominant retail bank in the city. With the arrival of internet-only banks backed by the likes of tech giants such as Alibaba and Tencent, HSBC faces serious native digital competition for the first time.

KoinWorks, Indonesia's largest P2P lending platform, has raised US$16.5 million in its Series B funding round, signaling strong interest for alternative lending sources in Southeast Asia's largest economy. Established in 2016, KoinWorks caters to the underbanked and unbanked alike in Indonesia, whose scant credit profiles do not sit well with traditional lenders.

Korea's would-be challenger banks received a stern rebuke from the nation's Financial Supervisory Commission in May as the top financial regulator rejected applications for a virtual-banking license from Viva Republica-backed Toss Bank and Kiwoom Securities-backed Kiwoom Bank. The regulator found Toss's capital situation problematic and Kiwoom's plan unfeasible. Both Toss Bank and Kiwoom Bank could re-apply for internet-banking licenses later in the year.

Australia's banks are in for quite a fight if Morgan Stanley's new report is accurate. The U.S. investment bank estimates in its newest Australia In Transition report that digital wallets could capture US$22 billion of revenue that in a less digitized world would have gone to the banks. Morgan Stanley's advice for the banks is blunt: Up your digital game before it's too late.

With an eye on going public, Singapore's ride-hailing giant Grab needs to show profitability, or failing that, strong potential to be in the black soon. Serving as a high tech taxi or food delivery service no longer looks like it will be enough for investors. Instead, Grab wants to be a go-to digital bank. If Singapore regulators grant Grab a virtual-banking license, the company will be poised to test out its fintech hypothesis in its home market.

For the first time in over two decades, China’s central bank has taken control of a private bank. Baoshang Bank Co. which was founded in 1998 is headquartered in Baotou. With assets worth about 576 billion yuan ($83 billion) the lender is well established in the Inner-Mongolia region. Tomorrow Group, which holds around 89 percent of Baoshang Bank is claimed to have expropriated a serious amount of capital leading to major credit problems.

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