Asia Payments Research

We would say that the gravy train has been derailed for Australia’s cash-incinerating buy now, pay later (BNPL) firms, but they may not be exactly right. After all, “gravy train” implies making easy money and most of these companies never made money in the first place – if our key metric is profitability. The problems for these firms are manifest, from intense competition – and especially the arrival of deep-pocketed incumbents and tech firms to the market – to looming regulation and widening losses.

Home to about 70 fintech startups, Nepal is a nascent market for digital finance. That said, the pace of adoption in the Himalayan nation of 30 million is picking up amid the Covid-19 pandemic and with about 55% of the population unbanked, there is a need for fintech solutions that can boost financial inclusion. In the past few months, there have been several key developments that could speed up the digitization of Nepal’s financial sector.

The performance of Australian neobanks so far has been a bit underwhelming. Of the best known four (not to be confused with the big four), only Judo Bank has been an unequivocal success. Xinja collapsed about a year after receiving its banking license; 86 400 threw in the towel when it received an offer from National Australia Bank (NAB) it could not refuse, and Volt is pivoting to banking as a service. Given that it is targeting a similar SME customer demographic to Judo, the ascendant Aussie fintech Zeller could be more successful than the digital lenders focusing on the retail market.

What goes up must come down, right? Usually, yes, but with fintech startups the "up" can sometimes go on for so long that one wonders if the "down" is inevitable. This holds especially true for the buy now, pay later (BNPL) segment, which is now ascendant in India. The scale of BNPL’s growth in the subcontinent is something to behold. Indian research firm Redseer predicts that the market will reach US$45 billion to US$50 billion by 2026, an exponential increase from US$3 billion to US$3.5 billion now.

For an aspiring super app, PayPal’s performance over the past six months has been underwhelming. There is nothing “super” about its 59% decline in its share price to about US$110.50 during that period, nor the revelation that it had removed 4.5 million fraudulent user accounts. Though they were just a fraction of the company’s 425 million overall accounts, they represented a significant potential fraud risk.

Next to Indonesia, the Philippines is perhaps the most exciting emerging market for fintech investment in Southeast Asia right now. Like Indonesia, the Philippines is an island archipelago nation with a large unbanked population – 47% of the adult population – and geography that makes physical bank branches impractical in many cases. The Covid-19 pandemic has meanwhile accelerated digitization of financial services in the Philippines, a trend that looks to be irreversible. All these factors have converged to facilitate rising investment in the country’s fintech sector, with several key big-ticket deals already closed just a month into 2022.

Across Asia, new ground is being covered daily in product personalization by fintech disruptors. Superapps like China's Alipay and India's Paytm are delivering hyper-personalised offerings that can specifically target their customers’ ever-changing needs. Digital finance players are using data to meet unique customer challenges and create seamless, omnichannel experiences, taking a lesson from E-commerce platforms that have introduced live streaming of unique products and continued to put a heavy emphasis on personal discovery and curation. However you look at it, consumer data is on a new playing field.

The Philippines is accelerating digitization of payments, both domestically and cross-border, in line with a goal of the country’s central bank (BSP) for 50% of retail payments to be cashless by 2023. One of the most important new developments in this space is the link-up between the respective real-time and QR  payments systems of the Philippines and Singapore.

Australia's long buy now, pay later (BNPL) honeymoon is winding down at last. One of the reasons BNPL has been so lucrative in Australia is that the platforms have not yet been constrained in the way credit cards are. However, for consumers and the overall financial services market, Australia’s imminent BNPL regulation is for the best. Far from innovation killing, regulation should compel BNPL platforms to address problem areas in their business model and ultimately make it more sustainable.

The buy now, pay later (BNPL) craze is sweeping Asia Pacific, growing briskly in markets from Australia to Indonesia. Like many other segments of fintech, BNPL is present in Taiwan, but the situation is a bit different from elsewhere. Major online retailers in Taiwan have offered interest-free installment payments for years, but typically in cooperation with major banks, which are authorized lenders. Dedicated BNPL platforms are another story.

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