Ant Group's IPO is a big deal. In fact, the listing is expected to raise US$34 billion, would make it the biggest IPO of all time. Ant's valuation based on the pricing will be roughly US$313 billion, similar to Mastercard (US$319 billion) and JPMorgan Chase (US$309 billion). Can Ant justify that valuation? After all, the company derives the vast majority of its revenue from just one market: mainland China. And Ant has long benefited from a dearth of digital competition. Once the IPO is over, Ant will likely use some of the proceeds to fund its expansion in Southeast Asia. Ant has invested in a large number of e-wallets across the region and applied for a digital bank license in Singapore.
TransferWise is one of the few European fintechs making inroads in Asia. That's because the UK-based firm has a coherent Asia strategy: Enhance payments of every stripe - cross-border, domestic, real-time, credit card, e-wallet and more - and enable its partners to integrate the TransferWise open API directly into their infrastructure. TransferWise's APAC headquarters are in Singapore and it operates in Australia and New Zealand as well. The company has inked a deal with Alipay that allows it to begin serving the China market, albeit in a limited manner.
South Korea's K bank has struggled since its inception in 2017. It lacks the super-sticky ecosystem and vast resources of its competitor Kakao Bank, which was set up at roughly the same time. In April 2019, K bank suspended most of its services amid fundraising difficulties. Although it resumed some services in July, K bank is still far from full strength. It has about 900 billion won in capital, compared to Kakao Bank's 1.8 trillion won. K bank will need to secure large capital injections in order to compete on an even footing with Kakao and Viva Republica's Toss Bank.
Revolut is one of Europe's biggest neobanks, but its ambitions are global. Pre-pandemic, Revolut planned to expand to a dizzying array of countries and territories. In September 2019, Revolut announced that within Asia-Pacific it would focus first on Singapore, Australia and Japan. Given its partnership with Visa, the UK neobank said it could later expand to Hong Kong, Taiwan, Korea, Indonesia, Malaysia, the Philippines, Thailand, Vietnam and India.
Cambodia has a costly money-laundering problem, both in fiscal and reputational terms. Effective October 1, the EU's revised list of third countries at high risk of money laundering came into effect. Cambodia was one of three newly listed East Asian countries along with Myanmar and Mongolia. Cambodia is also on FATF's money-laundering gray list. Being seen as a high money-laundering risk nation could complicate Cambodia's efforts to woo foreign investment amid the prolonged pandemic-induced downturn. The Cambodian economy is set to contract 4 to 5% this year.
Australia's Afterpay is riding high on the BNPL boom sweeping its home market, the United Kingdom and United States. Afterpay is valued at US$23 billion, while its share price has risen about 960% since the ASX bottomed out in March. Both the UK and U.S. are key growth drivers for Afterpay, accounting for 41% of its revenue in FY 2020. Services like Afterpay's are gaining in popularity not only because people are shopping online more often, but also because credit is harder to come by during the pandemic-induced downturn. Some lenders are concerned about the ability of consumers to reliably make payments. As a result, consumers are more apt to be interested in installment payments.
The Malaysia digital banking race is taking shape as a growing number of non-financial firms signal their intention to apply for a digital bank license. Bank Negara Malaysia is expected to issue up to five licenses valid for conducting conventional or Islamic banking in the country. Per the Malaysian central bank's requirements, the new digital banks should focus on boosting financial inclusion primarily through digital means. Potential applicants include telecoms firms Axiata Group (which owns the e-wallet Boost) and Green Packet, ride-hailing giant Grab, gaming company Razer and conglomerate Sunway as well aas the Hong Kong-based financial group AMTD and the Malaysian bank AMMB.
Airwallex is among a handful of loss-making fintech unicorns that has continued to raise vast sums from investors amid the coronavirus pandemic. Established in Australia in 2015 and now headquartered in Hong Kong, Airwallex is set on a bold path of international expansion and plans to use the US$40 million raised in an extended Series D round that closed in September to bring its cross-border payments business to the United States, Middle East and Africa.
Cracks are gradually appearing in the armor of the duopoly Alipay and WeChat Pay have long enjoyed in China online payments. One after another, large Chinese internet companies are expanding their presence in that segment, from e-commerce giants Pinduoduo and JD.com to travel booking site Trip.com. The U.S.'s PayPal and American Express have also entered the market. The additional competition is long overdue and most welcome.
Australia is struggling to win its fight against financial crime in part because its biggest banks cannot effectively contain money laundering. The bank themselves are rarely willing participants in illicit activity. Rather, ineffective money-laundering controls foment compliance weaknesses that criminals exploit.
Kakao's fintech ecosystem is coming into its own. The key units, the Kakao Pay e-wallet and digital bank Kakao Bank, are both gearing up for IPOs in 2021. Kakao Pay is slated to list first, in what will also be the first time a Korean mobile payments firm goes public. Kakao Pay's IPO is expected raise up to 10 trillion won (US$8.5 billion).
If ride-hailing companies can aspire to be digital banks and super apps, then perhaps airlines can too. In fact, consumers probably trust airlines with their data more than they do Grab and Gojek. For Malaysia's AirAsia, which lost a record US$238 million in the second quarter, developing new revenue drivers is a necessity as the pandemic keeps international air travel grounded. That's why the company is expanding its fintech services - including possibly applying for a Malaysia digital bank license - and launching an Asean focused super app that covers entertainment, shopping and travel.
Many Asian countries struggle to contain money laundering, which is usually perpetrated by non-state actors. North Korea is different. The North Korean state itself is deeply involved in money-laundering schemes, often in cahoots with Chinese entities, to help Pyongyang evade economic sanctions, access hard currency and fund North Korea's nuclear program. Confidential bank documents first reviewed by BuzzFeed News and part of the FinCEN files show just how successful North Korea continues to be in laundering large amounts of money through the global financial system.
In mid-September, Tencent opened a Singapore office that will serve as its regional hub, reflecting the Chinese tech giant's growing focus on Southeast Asia. Tencent aims to build a digital services ecosystem in the Asean countries that replicates the success it has achieved at home. Digital banking forms one cornerstone of that strategy, although less overtly than in the case of Tencent's rival Alibaba. Rather than applying for its own digital bank license in Singapore, like Ant Group, Tencent is instead relying on strategic stakes it has taken in internet companies, such as Singapore's own Sea.
Neobanks like to talk about disruption, but in Hong Kong, they're actually putting their money where their mouth is. Five of the eight virtual banks approved to operate in the former British colony have gone live: ZA Bank, Airstar, WeLab, Fusion Bank and Livi Bank. While none of them has a game-changing value proposition yet, their low fees, digital agility and high deposit rates (at least during a promotional period) are bound to attract customer interest. Their digital acumen is taking on new importance during the pandemic, which recently flared up in Hong Kong.