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.
Australia's digital banking honeymoon is winding down. With Xinja and 86 400 both out of the picture - albeit in very different ways - the Australian Prudential Regulatory Authority (APRA) is moving to raise the sector's barrier to entry. It will become harder to get a banking license. Under the revised regulations, neobanks will have to be better capitalized and launch both an income-generating asset product and a deposit product in order to be approved for a full license.
Nobody can accuse Airwallex of having modest ambitions. The Australia-founded and Hong Kong-based unicorn just raised another US$100 million in an extended Series D round at a valuation of US$2.6 billion. The U.S.'s Greenoaks was the lead investor. The cross-border payments upstart plans to use the capital injection to expand across four continents - Australia, North America, Europe and Asia.
Can buy now, pay later (BNPL) get any hotter in Australia? Judging by Commonwealth Bank of Australia's (CBA) foray into the market, yes, it can. CBA's move comes less than two weeks after PayPal announced it would enter the market. CBA is the first of Australia's big four banks to roll out a BNPL product, and it likely will not be the last. The product, CommBank BNPL, will be available to four million of the bank's retail customers for transactions up to AU$1000 from mid-2021.
Hong Kong's virtual banking field is crowded with eight neobanks that have similar value propositions. In their fledging stage, the digibanks have focused on quickly bringing customers onboard, highlighting their digital agility and offering high deposit interest rates for a limited time. The unicorn WeLab, the only native Hong Kong virtual bank, is one of the first to signal it has a broader strategy. WeLab in early March received an undisclosed investment from Allianz Group's digital investment unit as part of its Series C-1 fundraising and plans to collaborate with Allianz's asset management arm to develop wealth management products.
Australia is a key market for PayPal in Asia Pacific. The U.S. payments giant has 9 million accounts Down Under - not too shabby for a country of 25 million people. It has a 17% share of what JP Morgan calls the "alternative payments market (essentially non-cards), ahead of Google Pay, Apple Pay and Samsung Pay. But there is a new payments game in town led by firms like Afterpay and Zip. To maintain its competitive edge in Australia, PayPal needs to enter the buy now, pay (BNPL) segment.
Japan's Line has super app potential. Its messaging app is popular in Japan, Taiwan and Thailand. It has content, e-commerce and a growing portfolio of fintech services, with Line Bank set to launch in Taiwan by the middle of the year. And a recent merger with SoftBank affiliate Z Holdings brings an additional US$4.7 billion in capital to the table. The new entity, which integrates Line with Yahoo in Japan, projects that it will post revenue of 2 trillion yen and operating profit of 225 billion yen by fiscal year 2023. It is the brainchild of SoftBank founder Masayoshi Son, who aims to build a Japanese tech juggernaut able to compete with Google, Amazon, Facebook and Apple in Japan.
Fintech is the magic glue that holds startup ecosystems together in Asia. One after another, the region's biggest platform companies have pivoted to fintech, and then declared themselves super apps, usually in that order. Indonesia's Traveloka is expanding its fintech offerings from Indonesia to Thailand and Vietnam as it eyes going public in the U.S. this year through a blank-check company.
When South Korea introduced a peer-to-peer (P2P) lending law last year, it seemed regulators had paved the way for the industry to grow stably. Seoul recognized that P2P lending could promote financial inclusion. The industry just needed proper supervision to minimize fraud and loan delinquency. However, the loan delinquency rate is rising, Korea's fintech giants are cutting their ties with P2P lenders and many of the firms are struggling to meet the law's requirements.
Sea Group's latest earnings report is packed with good news. Its gaming and e-commerce businesses grew expeditiously in 2020 as people stayed home, shopped online and played online games. EBITDA surged to US$107 million, compared to a loss of US$178.6 million in 2019. Gross profit doubled to US$1.3 billion from US$604 million a year earlier. Net income, however, remained negative. In fact, net losses widened to US$1.62 billion from US$1.46 billion. The question for Sea and investors is, does it matter?
Stripe may be the biggest fintech to fly under the radar in Asia Pacific. In private markets, its valuation is reportedly close to US$100 billion, up from about US$35 billion in April 2020. The San Francisco-based merchant payments provider saw its fortunes soar during the pandemic as its many North American customers moved online. It is now looking east to fuel its next stage of growth, including China, India, Southeast Asia and Australia. In 2020, Stripe increased its staff in the APAC region by 40% to more than 200.
South Africa’s TymeBank has big plans for Southeast Asia. The South African neobank plans to launch a digital bank in the Philippines and may also apply for a digital bank license in Malaysia. Measured by account numbers, Tyme is one of Africa’s most successful digibanks, claiming to have signed up almost 3 million customers since its launch two years ago. In late February, Tyme announced it had raised US$109 million from investors for expansion in Southeast Asia, one of the largest deals ever by a fintech in South Africa.
Hong Kong's status as a global financial center and lack of capital controls have long exposed it to certain financial crime risks. In 2020, the former British colony faced an unusual convergence of a recession, political tension and a once-in-a-century pandemic that upended society. Under that tough scenario, Hongkongers were scammed out of a record HK$8.33 billion, of which authorities managed to recuperate about HK$3 billion.