South Korea only has a handful of prominent fintechs, but they are still managing to give incumbents a bank a run for their money when it comes to online banking services. Chief among them is Kakao Bank, with 14.1 million users (more than ¼ of South Korea’s population) as well as K bank and Viva Republica’s Toss, which will launch a digital bank later this year. With the rising popularity of digital banking, South Korea’s traditional lenders are mulling launching neobanks of their own.
2021 is shaping up to be a pretty good year for DBS. Southeast Asia’s largest bank posted record earnings of US$1.52 billion in the January-March period, up 72% year-on-year. DBS generated record fee income in the first quarter, with especially strong growth in wealth management and transaction services, both of which hit new highs. DBS is not resting on its laurels though and plans to boost both its digital capabilities and international footprint.
Singapore and Thailand have made cross-border payments history with the linkage of their respective real-time retail payment systems, PayNow and PromptPay. The linkage is the first of its kind in not just Asia but the world and comes after several years of close collaboration between the Monetary Authority of Singapore (MAS) and Bank of Thailand (BoT).
Indian payments unicorn Razorpay has grown exponentially during the pandemic as the subcontinent accelerates its transition to online shopping and digital finance. In the six months since it hit unicorn status, Razorpay has seen its valuation treble to US$3 billion. The Bangalore-based firm will use the US$160 million it raised in its latest fundraising round – in which Sequoia Capital India and Singapore’s sovereign fund GIC Pte participated – to fund expansion in Southeast Asia and develop new product lines. With this latest round of funding, Razorpay has raised US$366.5 million.
Citibank is calling it quits in many of Asia-Pacific’s retail banking markets, including mainland China, India, Indonesia, Thailand, Vietnam, South Korea, Taiwan and Australia. Citi’s performance across these markets varies greatly, but overall, the US banking giant feels it lacks the scale to compete in them. Citi plans to focus its Asian retail banking business in the financial centers of Hong Kong and Singapore.
The arrival of digital banks in Hong Kong and Singapore has put some pressure on incumbents to up their game. At a minimum, traditional banks in Asia’s two main financial centers have slashed some unpopular fees and invested in more digital technology. Now that Malaysia has decided to introduce digital banks, its incumbent banks face some similar challenges to their counterparts in Hong Kong and Singapore.
At long last, Line Bank has arrived in Taiwan. On April 22, the Japanese messaging app’s virtual bank went live, becoming the second digital bank in Taiwan after Rakuten Bank. Line Bank had been hampered by both pandemic and regulatory related delays. It originally planned to launch in mid-2020. Of the three virtual banks approved by the Financial Supervisory Commission (FSC), Line Bank has the strongest digital services ecosystem thanks to the popularity of its messaging app, e-wallet, entertainment and social commerce with Taiwanese consumers.
Singapore is steadily carving out a niche for itself in the emerging green finance segment. Much as it has done with fintech, the Monetary Authority of Singapore (MAS) is taking steps to make the city-state a hub for this up-and-coming area of financial services. MAS reckons that Asean will need annual green investment of US$200 billion annually. Given its role as the region’s leading financial center, Singapore is a natural choice to lead green financing efforts.
In the world of fintech unicorns, a bit of exaggeration comes with the territory. After all, we are talking about companies valued in the billions or tens of billions of US dollars, despite failing to make a profit (in most cases). This is a world where what counts is not the shaky balance sheet today, but the supposed potential to revolutionize banking tomorrow. Growth is paramount – that’s how to keep the funding spigot on. But this approach to financial services comes with manifold risks. Possible compliance deficiencies at Australia’s Airwallex illustrate this point.
The Philippines is determined to speed up financial inclusion through digitization. By 2023, the BSP aims to digitize at least 50 percent of total retail transactions and bring 70% of Filipino adults into the formal financial system. To that end, it introduced guidelines for digital banks in December 2020 and has thus far received two applications. The rules require licensees to hold at least 1 billion pesos in capitalization, operate a head office in the Philippines and offer only-only banking services. Licensees are not permitted to set up physical branches. The review process will likely carry on through 2021, with the winners being announced on a rolling basis. Yet some fintechs are determined to enter the market earlier.
Singapore’s digital banking race had far more losers than winners. Of all the failed bids, Razer’s must have been among the hardest to swallow. The gaming hardware firm was a strong contender and had Sea and Grab not both been in the running, may well have prevailed. The question now is, can Razer still become a digital bank? The answer is maybe in Malaysia and/or the Philippines.
Before Ant Group’s IPO was nixed, the Shanghai STAR board was red hot. Since then, it has cooled off considerably. Not only is Ant’s IPO in limbo, but other Chinese tech companies are scuttling their plans to go public, one after the next. Ant is the bellwether for the market, whether it is a bull or bear. Data compiled by Financial Times show that 76 firms suspended their IPO applications in March, more than twice the number in February. Overall, 168 companies have put their plans to go public on ice since November.
The buy now, pay later frenzy is moving from the advanced economies into emerging markets with Southeast Asia a hotspot. Given the rapid growth of fintech in the region and lack of credit card penetration in most countries it is relatively easy for BNPL to make inroads. In fact, BNPL is proving so popular that the segment is growing fast in Singapore too, where credit card penetration is 73%.
Thailand is one of the few major Southeast Asian economies that has not unveiled a digital banking roadmap. Singapore's digital banks will go live in 2022. Malaysia will accept applications for licenses this year and issue them by early next year. The Philippines recently announced it would issue digital bank licenses. Indonesia plans to clarify digital bank regulations by mid-2021. In contrast, Thailand's central bank has been quiet about the possibility of digital banks for more than a year.
China is leading the world in CBDC development, prompting speculation that DCEP (digital currency, electronic payment) is on its way to becoming the digital equivalent of the U.S. dollar. The reality is more nuanced. To be sure, China's digital fiat currency is at a more advanced stage than any other major country's CBDC, and China has many potential applications for it domestically. When it comes to cross-border use, however, many questions remain about the digital yuan.