In every crisis, there are opportunities. While many investors are tightening their belts during the coronavirus pandemic, some are opening their wallets. Now is the time to double down on certain investments. Take Australia's Airwallex as an example. The Melbourne-based cross-border payments platform closed a mammoth US$160 million (A$250 million) funding round in April, bringing its valuation to US$1.8 billion from US$1 billion. Less than half of the capital was raised in January, according to Australian Financial Review. Airwallex managed to raise the rest amid the pandemic's surge.
Across Asia, the cashless drive had been gaining momentum long before COVID-19 broke out in late 2019. In less than a decade, China, the region's largest and the world's No. 2 economy, has transformed from a cash-dominant into a cash-light economy. Its neighbors have been following suit.
A 2019 McKinsey study found that digital payments in Asia are growing at a roughly 15% annual clip, more than 2.5 times the typical economic growth rate in the region. Overall, cashless payments have been underpinning the rise of digital banking across APAC.
Asia may be at an inflection point for cashless payments as the coronavirus rages globally and hygiene concerns about the use of physical currency are growing.
The leading enabler of digital commerce across the Middle East and Africa region, Network International, made an agreement with Tencent Holdings Limited in February 2020 that will enable millions of Chinese tourists to transact through Network International’s extensive UAE merchant network with their WeChat mobile wallets.
The largest merchant acquirer in the United Arab Emirates, Network will perform as a settlement partner or acquirer as well as solution provider in order to enable mobile-based transactions via WeChat Pay at points of sale as well as for online purchases.
Cambodian and Thai regulators recently announced the launch of an interoperable payment QR code for use between Cambodia and Thailand. Cambodian tourists who visit Thailand may now use their mobile banking app to pay in Cambodian riel when shopping at stores that display a Thai QR Payment sign, while the same functionality will be extended to Thai tourists in Cambodia by Q3 this year.
A collaboration between the Siam Commercial Bank (SCB) and five Cambodian commercial banks, the interoperable QR code was developed upon domestic electronic transfer system PromptPay which runs on Vocalink infrastructure. ACLEDA Bank PCL, Cambodia Commercial Bank (CCB) and the Foreign Trade Bank of Cambodia (FTB) are sponsoring banks of the collaboration, which mean that other banks would be required to work with the three in order to provide the service.
Japan is one of the few major economies in Asia with a strong preference for cash. About 80% of transactions in Japan are cash, compared to 40% in China and 11% in South Korea.
The Indonesian central bank has approved WeChat Pay to operate in Southeast Asia's largest economy following a lengthy review period. WeChat Pay previously had been accepted at some Indonesian points of sale, but was not considered a legal form of payment. Bank Indonesia said in a statement that it granted WeChat Pay a permit to operate in the country on January 1. WeChat arrives as Indonesia introduces a nationwide standard QR payment system, Quick Response Indonesia Standard (QRIS). WeChat Pay will be accepted as a form of payment at merchants who support QRIS.
The private-equity unit of United Overseas Bank has co-led a US$31.2 million Series A funding round for the Thai fintech start-up Lightnet along with South Korea's Hanwha Investment and Securities and Japan's Seven Bank. Other investors included Singapore's Hopeshine Ventures, Signum Capital and Du Capital as well as Taiwan-based Uni-President Asset Holdings and Zhejiang-based HashKey Capital. Lightnet was co-founded by Chatchaval Jiaravanon, a member of the family that owns Thailand's Charoen Pokphand Group, and Tridbodi Arunanondchai, a tech entrepreneur and former investment banker.
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.