Vanguard hopes to break into the China market through its new partnership with Ant Financial. The two giants announced a joint venture on December 16, 2019, a financial roboadvisor service with an initial investment of approximately 20 million yuan (USD$2.86 million). Individuals with a minimum investment of 800 yuan (USD$115) may access the service, where they could build their investment portfolios from over 5,000 mutual funds offered by Ant Financial.
On December 3rd, Line Pay Taiwan and iPass Corporation announced a collaboration formed with partners in Japan, Thailand and Korea to expand its payment footprint. With an anticipated launch in Q1 2020, the move will open existing cashless payment ecosystems to more than 78 million users in the region and create more business opportunities for Line’s merchant partners. Additionally, Line Pay Taiwan also announced that it had renamed its joint service with iPass to “Line Pay Money” to highlight its primary usage as a digital wallet.
Cross-border transactions are often costly, incurring transfer fees, inter-bank fees and exchange rates that may add up to approximately 4-5 percent per transaction. Moreover, each country has its own set of regulations when it comes to payments. Therefore, incorporating cross-border payments onto its platform may rest in Line’s alliances in Japan, Korea and Thailand.
In 2019, Vietnam has become one of the hottest markets for fintech investment in Southeast Asia, second only to Singapore. Fintech funding in Vietnam surged to $410 million in the first nine months of the year, accounting for 36% of Asean's total, compared to just 0.4% during the same period a year earlier, according to a new report by PriceWaterHouseCoopers (PwC), the United Overseas Bank (UOB) and the Singapore Fintech Association (SFA).
Taiwan's mobile payments are growing at a steady pace and are expected to hit a record NT$100 billion this year. Mobile payments reached NT$76.1 billion through the first nine months of the year, up 160% over the same period in 2018, according to data compiled by Taiwan's Financial Supervisory Commission (FSC). Mobile payments lagged in Taiwan for years but have picked up considerably on the back of proactive government efforts to reduce the dominance of cash. Because credit card penetration is high in Taiwan, many consumers prefer to tie in their existing credit cards to payment apps (often provided by their banks) on their handsets. This differs somewhat from mainland China, where direct debit from a bank account and stored-value wallets are more prevalent. Taiwan has a more fragmented digital wallet market as well, with no single firm able to dominate to the degree Alipay and WeChat Pay do in the mainland.
Malaysia's digital payments sector is heating up as fintechs and incumbents enter into partnerships in a bid to strengthen their positions in the fast growing market. Research by Visa shows that 70% of Malaysians prefer to shop at retail outlets where merchants accept digital payments. The Malaysian market of 32 million people has plenty of room to grow, as cash still accounts for 60% of transactions. JPMorgan Chase expects that fast adoption of e-payments by Malaysians could see digital wallets surpass cash use by 2021.
Ardent fintech investors swear that in fact, there is no fintech bubble. Their reasoning is simple: Traditional financial services is ripe for disruption, perhaps a bit like physical retail in the fledgling days of e-commerce. Demand for alternative digital-first banking services is real. In some emerging markets, banking levels are so low that fintechs have a chance swoop in and gain a foothold from the ground up.
Taiwan has only recently begun to kick its cash habit. For years, small merchants on the island would only accept bills and coins. Some still don't take plastic and mobile payments. Many do, but there's a catch: They tell the customer goods are pricier if paid for with a credit card. They aren't supposed to pass on the merchant fee to the customer - it's technically illegal - but local consumers aren't likely to file a complaint with the authorities.
The contrast between WeChat's dominance in mainland China and low profile elsewhere is striking. Of all the markets where WeChat could be a success, Taiwan - with its many cultural similarities to the Chinese mainland - is perhaps the most obvious. Mainland Chinese costume dramas, known for their high production value, are a staple of Taiwanese television. Among smartphone brands, after Apple and Samsung, Oppo, Xiaomi and Huawei are among the most popular with Taiwanese consumers. In e-commerce, Taobao has carved out a strong niche for itself with young Taiwanese, especially women.
Singapore-based ride-hailing app Grab intends to become Southeast Asia's premier digital bank, with Vietnam serving as a key growth market. Flush with cash from a recent fundraising round that netted a record $4.5 billion - the most ever for a startup in the region - Grab plans to pour hundreds of billions of dollars into one of Asean's fastest growing economies.
Top fintechs all want a piece of the massive Indonesian market, Southeast Asia's largest economy and most populous country with 260 million people. Yet stringent licensing requirements hamper their ability to operate independently. Even giants like Alipay and WeChat Pay are struggling to make their services available to local users. The easiest solution is to find a local Indonesian partner. That's the path WhatsApp is taking as it moves into the Indonesian market, Reuters reported. WhatsApp will reportedly serve as a platform in Indonesia in partnership with local digital wallets.
For Thailand, at first blush going cashless seems like a long shot. Cash accounts for 90% of overall transactions in the kingdom, despite 67% of Thailand's population using mobile payments in 2018. Thailand would need to maintain its rapid growth in digital payments over the last two years to make the transition from cash reliant to predominantly digital.
China's fintech giants are best known for dominating their home market. Outside of mainland China, they have limited market share. Merchants in countries popular with Chinese tourists increasingly accept Alipay or WeChat Pay, but the primary users are not locals but Chinese visitors who want to pay by smartphone as they do at home.
In Cambodia, however, Chinese fintechs have a chance to gain a strong foothold in the local payments market. To be sure, Cambodia's efforts to boost financial inclusion are a key reason for that. The Cambodian government sees digital banking as an efficient way to bring the kingdom's large unbanked population (estimated by the World Bank at 78% of Cambodians aged 15 and up) into the formal financial system. Further, commercial ties are burgeoning between Beijing and Phnom Penh. China is Cambodia's largest investor and source of tourists. That has opened up opportunities for Alipay and WeChat Pay to partner with local firms.
When it comes to Indonesia's digital wallets, Go-Jek's Go-Pay captures many of the headlines. After all, Go-Jek is Indonesia's most prominent unicorn, valued at US$9-10 billion. It's battling Singapore's Grab across Southeast Asia, burning piles of cash as investors rush to join the next round of fundraising. Speculation about a Go-Jek IPO is mounting.
Yet Indonesian consumers prefer a different digital wallet, according to local research firm Snapcart. Data compiled by the Indonesia-based company show that Ovo, backed by Grab and the Lippo Group, is the top Indonesian mobile wallet by a wide margin. Ovo holds a 58% market share, compared to Go-Pay's 23% and Emtek Group and Ant Financial's DANA, a distant third at 6%.
The Philippines is steadily adopting digital payments as part of a state-led drive to boost financial inclusion. The number of active e-wallet accounts in the country rose 22% annually in 2018 to reach 33 million, according to data compiled by Bangko Sentral ng Pilipinas (BSP), the Philippines' Central Bank. E-wallet growth last year edged out credit card growth, which rose 18% to 9.4 million users compared to a year earlier.
The Philippines is poised to reduce its dependency on cash - which accounted for 99% of transactions in 2018 - thanks to high smartphone penetration, strong demand from a large unbanked population and consumer willingness to bank digitally. Additionally, with their low barriers to entry, digital wallets are a good way to support financial inclusion.