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.
Demand for cross-border remittances is surging across Southeast Asia, home to a sizeable migrant worker population and many of the world's fastest growing economies. The amounts being remitted by the region's 21 million migrant workers are considerable - $68 billion annually, according to Siam Commercial Bank (SCB). Given their modest earnings, migrant workers need affordable banking services. They cannot easily absorb the high fees associated with some traditional remittance services.
If Chinese media reports are correct, Tencent's digital wallet will soon have a virtual credit card. The Chinese internet giant is reportedly developing a payment product called Fenfu for WeChat Pay, with an expected fourth quarter launch. Fenfu would allow WeChat Pay to compete directly in the virtual credit segment with its rivals' products.
Financial reform in China has been stalled for years. Foreign banks have never managed to hold more than about 2.4% of the market - and that was back in 2007. KPMG estimates their share of domestic assets actually fell to just 1.32% by the end of 2017. The renminbi internationalization process gives new meaning to the term "incremental." The exchange rate remains controlled and the capital account closed, just as they were a decade ago when Beijing began promoting the yuan's use globally.
Yet, there are signs of change. In September, Beijing granted Deutsche Bank and BNP Paribas the right to underwrite onshore debt in China, a first for foreign banks in the world's second largest economy. Later in the month, China removed limits on two institutional investment policies that allow foreigners to invest in Chinese financial markets: the QFII scheme (dollar-denominated) and RQFII (yuan-denominated). Those moves follow Beijing's decision to allow foreign banks to take majority stakes in local securities joint ventures.
Chinese payments giant UnionPay is on the road again - the Belt and Road, that is. Constrained by slowing economic growth at home, UnionPay is aligning itself with some of the key emerging markets involved in China's high-profile global infrastructure initiative. In recent months, UnionPay has boosted its presence in the United Arab Emirates, Kenya and Nepal with a focus on mobile banking, pre-paid payments and cross-border payments.
In China's peer-to-peer lending sector, there's no such thing as too big to fail. Chinese authorities have since last year been cracking down on widespread impropriety in the once ascendant segment. Even the preeminent platforms have not escaped unscathed, leaving many observers wondering if we have reached P2P's twilight in China.
The contrast between WeChat's dominance in mainland China and low profile elsewhere is striking. Of all the markets where WeChat could be a success, Taiwan - with its many cultural similarities to the Chinese mainland - is perhaps the most obvious. Mainland Chinese costume dramas, known for their high production value, are a staple of Taiwanese television. Among smartphone brands, after Apple and Samsung, Oppo, Xiaomi and Huawei are among the most popular with Taiwanese consumers. In e-commerce, Taobao has carved out a strong niche for itself with young Taiwanese, especially women.
Two years ago, Laos was removed from the Financial Action Task Force's (FATF) money-laundering grey list after the landlocked Southeast Asia country showed some improvement in its AML policies. Since then, however, progress has been limited. Laos's casinos, property market and money exchange shops remain at high risk for money laundering. No money laundering case has made it to court. The onus is on Laos to better control financial impropriety ahead of a 2020 evaluation of its AML policies. Failure to do so could result in a return to the grey list.
Singapore-based ride-hailing app Grab intends to become Southeast Asia's premier digital bank, with Vietnam serving as a key growth market. Flush with cash from a recent fundraising round that netted a record $4.5 billion - the most ever for a startup in the region - Grab plans to pour hundreds of billions of dollars into one of Asean's fastest growing economies.
Top fintechs all want a piece of the massive Indonesian market, Southeast Asia's largest economy and most populous country with 260 million people. Yet stringent licensing requirements hamper their ability to operate independently. Even giants like Alipay and WeChat Pay are struggling to make their services available to local users. The easiest solution is to find a local Indonesian partner. That's the path WhatsApp is taking as it moves into the Indonesian market, Reuters reported. WhatsApp will reportedly serve as a platform in Indonesia in partnership with local digital wallets.
For Thailand, at first blush going cashless seems like a long shot. Cash accounts for 90% of overall transactions in the kingdom, despite 67% of Thailand's population using mobile payments in 2018. Thailand would need to maintain its rapid growth in digital payments over the last two years to make the transition from cash reliant to predominantly digital.
Not even the failure to obtain a virtual-banking license can dampen investor interest in South Korea's fintech unicorn Viva Republica and its digital banking platform Toss. In mid-August, Viva Republica announced it had raised $64 million from a group of investors led by Hong Kong-based Aspex Management. The latest capital injection brings Viva Repubica's total valuation to US$2.2 billion and follows an $80 million funding round in December co-led by Korean investors, Kleiner Perkins and Ribbit Capital.
Myanmar is at risk of landing on the Financial Action Task Force's watchlist high-risk money-laundering destinations after a three-year reprieve, analysts say. In 2016, FATF removed Myanmar from the list, citing improvements in the country's efforts to combat financial crime. Since then, however, Myanamar has not taken adequate steps to implement safeguards against money laundering in both its banking system and non-financial institutions. If Myanmar appears on FATF's "grey list" again, investors could sour on the Southeast Asian nation's financial sector, which would harm fintech development as well as broader financial inclusion initiatives.
In July, Taiwan's Financial Supervisory Commission (FSC) granted three virtual-banking licenses, surprising some observers who expected the regulator would only issue two. All three teams that applied for the licenses - led respectively by Japanese super app Line, Taiwanese telecoms firm Chunghwa Telecom and Japanese e-commerce giant Rakuten - were well qualified, such that the FSC felt they all deserved to launch neobanks in Taiwan.
China's fintech giants are best known for dominating their home market. Outside of mainland China, they have limited market share. Merchants in countries popular with Chinese tourists increasingly accept Alipay or WeChat Pay, but the primary users are not locals but Chinese visitors who want to pay by smartphone as they do at home.
In Cambodia, however, Chinese fintechs have a chance to gain a strong foothold in the local payments market. To be sure, Cambodia's efforts to boost financial inclusion are a key reason for that. The Cambodian government sees digital banking as an efficient way to bring the kingdom's large unbanked population (estimated by the World Bank at 78% of Cambodians aged 15 and up) into the formal financial system. Further, commercial ties are burgeoning between Beijing and Phnom Penh. China is Cambodia's largest investor and source of tourists. That has opened up opportunities for Alipay and WeChat Pay to partner with local firms.