American Express has been trying to enter the China market since before the 2008 Beijing Summer Olympics. As China's financial reform stalled, so did the US card giant's prospects in the world's largest consumer market. Now that Washington and Beijing have reached a phase-one trade deal, AmEx is finally poised to start doing business in China. In early January, shortly before the trade deal was signed, the People's Bank of China (PBOC) accepted AmEx's application to begin China operations.
No China fintech segment has fallen faster and harder than peer-to-peer lending. Not even cryptocurrency, which Beijing all but outlawed, has been crippled like P2P lending. The reason is simple: The scam-ridden P2P lending segment robbed hundreds of thousands of retail investors of their life savings. Some distraught victims even committed suicide. There were massive Ponzi schemes. Ezubao, a now defunct P2P lender which was based in Anhui, defrauded US$7.6 billion from 900,000 investors before it imploded. A Beijing court sentenced Ezubao's founder to life in prison in 2017. Shanlin Finance, which was based in Shanghai, swindled US$9 billion from investors before authorities broke it up in 2018.
In Beijing's view, scams of that size threaten social stability. With that in mind, the government had no choice but to crack down on the largely unregulated segment. To be sure, Beijing's dragnet has snagged some compliant lenders as well as miscreants. Yet, from the government's perspective, that's a small price to pay to assert control over the industry and reduce systemic financial risk. As of the end of 2019, just 343 P2P firms were still operating, down from 6,000 at the sector's 2015 peak. Authorities in Gansu, Hebei, Hunan and Sichuan Province as well as the municipality of Chongqing shut P2P lending down completely.
Although the U.S. and China are on the verge of signing a phase one trade deal, the trade war is far from over. Most of the hundreds of billions of dollars in tariffs the two countries have levied on each other over the past 19 months remain in place. The bilateral relationship is as fraught as at any time since the establishment of diplomatic relations in 1979. Yet, the "financial war" forecast by pundits hasn't materialized.
2020 is off to a good start for South Korean fintech unicorn Viva Republica. The PayPal-backed firm received preliminary approval from South Korea's Financial Services Commission for a license to operates its neobank Toss Bank. Toss Bank will be permitted to offer a suite a retail banking services, including current accounts, credit and loan products. Toss Bank is expected to launch in the first half of 2021.
Viva Republica can finally breathe a sigh of relief. The FSC rejected its initial digital banking license application last year on the grounds that it had a problematic ownership structure - ie: a tech company holding a large majority stake - and ability to raise funds. The FSC noted that Toss Bank lost 44.5 billion won in 2018, raising doubts about the neobank's plan to increase its capital more than fourfold in three years. The FSC's point about funding was salient, given the tendency of fintechs to burn through cash without blazing a trail to profitability. Viva Republica evidently revised its fundraising plan in a satisfactory manner on the second go.
Vietnam is ready to finalize plans for a regulatory sandbox for fintech banking and cashless payments, according to Asia financial magazine The Asset. The Vietnamese government issued Resolution 01 on January 2, which outlined significant tasks and solutions to bolster the country’s socio-economic development in 2020. The sandbox is expected to support the growing sharing economy in Vietnam as well as numerous local startups.
The State Bank of Vietnam (SBV) has been a supporter of the fintech sector since 2017. In addition to establishing a fintech-focused steering committee, the SBV created the initial proposal for a fintech sandbox in Vietnam. Deputy Director of Payments at the SBV, Ngo Van Duc, said that the Vietnamese government needed to develop new regulations and policies to ensure the continued development of the fintech sector in Vietnam and that the creation of a regulatory sandbox for fintech was an urgent need.
The former Portuguese colony of Macau, China's answer to Las Vegas, has long struggled to diversify its economy away from gaming. Efforts to promote MICE and family tourism have had limited success. After all, Macau is small and faces stiff competition in the region.
Yet, amidst relentless political turmoil in Hong Kong - China's only global financial center - Beijing has found a new opportunity for Macau: offshore finance. While Macau cannot replace Hong Kong, it might be transformed into a secondary offshore financial center for China. Macau benefits from the same one country, two systems model that governs Hong Kong, although the former's legal system is Portuguese rather than British, and doesn't enjoy the same prestige.
Singapore's ride-hailing unicorn Grab is Southeast Asia's answer to Uber. But as Uber's cash-hemorrhaging business model has come under closer scrutiny, Grab has been racing to rebrand itself: first as a digital bank, then as a "super app" that will offer users in Southeast Asia the same bevy of services as WeChat does in China.
Grab has teamed up with a number of financial-services incumbents in its bid to become a digital bank, but there's a problem with that approach: Incumbents want to co-opt Grab, not let in move in on their core revenue drivers. That's why it makes sense for Grab to apply jointly for a Singapore digital-banking license with telecoms giant Singtel. The two firms have plenty of synergies and no conflicting interests. They applied for the license as a consortium just before the December 31 deadline, with Grab holding a 60% stake and Singtel 40%.
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.
Before fintech took China by storm, visitors to the country only had to remember one simple rule for payments: Make sure to carry sufficient cash. International credit and debit cards often were not accepted outside of five-star hotels and high-end department stores. Inevitably, there was some hassle involved, especially as international bank cards didn't always work at local ATMs. Ironically, now that it's much easier to withdraw cash from local Chinese ATMs with a global bank card, Chinese merchants prefer cashless payments. The trend in China is to swipe a smartphone to pay for just about any ordinary transaction: a coffee at Starbucks, a restaurant meal, a taxi, a bottle of water from a convenience store. It's a breeze as long as you have a Chinese bank account and the requisite digital wallets from Alipay and WeChat Pay on your handset.
Therein lies the problem for visitors to China. Many of them do not have a Chinese bank account, nor do they have WeChat Pay or Alipay installed on their smartphones. With cash being increasingly unwelcome, problems can arise easily. For instance, a shop may accept cash, but because so few transactions are done in cash, not be able to give a shopper proper change. If the merchant doesn't accept international credit cards, then the shopper is out of luck.
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.
Australia is not considered a country at high risk for money laundering. When the Financial Action Task Force (FATF) grades Australia on different AML criteria, it tends to award a "compliant" or "largely compliant" grade. Only 14 of 40 criteria were graded as "non-compliant" or "partially compliant" during FATF's most recent review of Australia. The most long-running of Australia's AML weaknesses are in the property market, where some analysts say unsavory characters from overseas launder illicit cash.
That's why the the recent money-laundering scandals involving one of Australia's biggest four banks come as an unpleasant surprise. The Royal Financial Services Commission's review of misconduct in the banking sector had already cast the biggest Australian lenders in in an unflattering light. Now Australia's financial intelligence agency Austrac is proceeding with legal action against Westpac, one of the four largest Australian banks, alleging that breached AML and counter-terrorism laws more than 23 million times in $11 billion in transactions. Some of the transactions reportedly involved the exploitation of children.
The political unrest in Hong Kong has plunged the city's economy into recession for the first time since the global financial crisis of 2008-09. The retail and hospitality sectors have borne the brunt of the blow so far, but that's set to change barring a miraculous easing of tensions.
One of the most obvious impacts of the unrest on the financial sector is the delay of Hong Kong's planned launch of eight virtual banks. The neobanks, which are heavily represented by financial interests from the mainland, were set to swoop onto the scene and shake up a staid banking sector dominated by a handful of incumbents accustomed to high profits and meager competition. That would have been a boon for consumers and forced incumbents to up their game. In fact, ahead of the anticipated arrival of the neobanks, traditional banks had already started to slash some unpopular fees.
Neobanks are coming soon to Singapore, but the top incumbents appear cool as cucumbers. That's largely because the Monetary Authority of Singapore (MAS) favors a gradualist approach to fintech, rather than a disruptive one. When possible, the regulator encourages incumbents and fintechs to join hands.
Overseas Chinese Banking Corporation (OCBC), Singapore's longest established bank, is following that cooperative route favored by the MAS. Compared to its rivals UOB and DBS, OCBC "is a laggard...in the digitializing processes" according to a September research note by CGS-CIMB but is now eyeing one of Singapore's coveted digital-banking licenses.