Among Asian countries, Pakistan is a relatively slow adopter of fintech, but it also has great need for easy-to-access digital financial services. Pakistan has a population of more than 210 million people, just 7% who have a bank account. High banking infrastructure costs have excluded most people from the formal financial system.There are several factors that make Pakistan an especially promising future fintech market. First, Pakistan's smartphone penetration is forecast to reach 50% by 2020 - that's more than 105 million potential customers. Second, Pakistan is one of the youngest countries in the world. 64% of the population is younger than 30 and 29% is aged 15-29, according to the United Nations' National Human Development Report. Young people are typically more willing to bank with their smartphones.
South Korea's challenger banks face an increasingly tough competitive and regulatory environment despite having accrued a considerable user base. Kakao Bank, operated by Korean mobile messaging giant Kakao, and K bank, led by telecommunications firm KT, aim to offer a wider array of banking services, but past missteps could prevent them from securing the approval of Korea's Financial Supervisory Commission (FSC). At the same time, several new virtual banks are expected to enter the Korean market later this year.
Foreign banks have a negligible presence in China, the world's largest consumer market. Research by KPMG has found that foreign banks hold about 1.3 % of China's domestic banking assets as of late 2017, compared to roughly 2.4% a decade earlier. Brokerages have not fared better. In 2015, UBS Securities and JPMorgan First Capital ranked 95th and 120th, respectively, among China's 125 brokerages by net income, according to the Securities Association of China.
China's Big Four state-owned banks, renowned for their massive market capitalization and close ties to the Chinese government, have long played a key role in the PRC's traditional financial system. An important challenge they - Bank of China (BOC), Industrial and Commercial Bank of China (ICBC) China Construction Bank (CCB) and Agricultural and Commercial Bank of China (ACBC) - face today is developing a digital-first strategy. Among the four, only CCB has has set up a dedicated fintech unit.
With a young population of more than 100 million, the Philippines is one of the most exciting Asean markets for fintechs. Just 34% of Filipinos have bank accounts, according to the World Bank, which means fintechs can play a leading role in the government's financial inclusion efforts. The Philippines is setting up a digital national identity system which should boost credit access for the underbanked. Once registered, residents will be given a 12-digit PhilSys Number that will be used as a digital identity across different platforms. Authorities plan to sign up 7 million Filipinos in 2019 and an additional 20 million in 2020 once the formal application process starts. By 2023, the government expects to have completed registration for all Filipino citizens and resident aliens.
Malaysia may launch virtual banks by the third quarter of 2020 in a bid to boost its fledgling fintech sector and improve banking services for its people. Observers expect that the launch is imminent now that Bank Negara Malaysia has said that virtual banking license requirements will be announced by year-end.
Vietnam is one of Southeast Asia's most dynamic markets for fintech. It has a young, connected population, a fast-growing economy and millions of unbanked people. In 2017, just 40% of Vietnam's adults (defined as 15 years or older) had a bank account, according to the World Bank. Investment in Vietnam's fintech startups reached $117 million in 2018, according to startup accelerator program Topica Founder Institute.
China may be the only country in the world able to stamp out cryptocurrency while repurposing its underlying blockchain technology. Decentralization becomes centralized under this scenario, as private enterprises implement blockchain solutions in line with central government directives. It's a bit like the "socialist market economy." The key to success here is acceptance of seemingly contradictory principles, one of Beijing's specialties.
China's UnionPay is stepping up European expansion in a bid to capture business from Chinese outbound tourism and corporate travel. The Chinese payments giant has established a partnership with Barclay's, which processes almost half of the UK's credit and debit card transactions, that will allow 110,000 UK merchants to accept UnionPay beginning from the summer of 2019.
India's fintech sector has surged over the past few years, with deal value reaching $2 billion in 2018. India now has more than 2,000 fintech startups, compared to less than 750 in 2014. Most Indian fintech startups are in the payments and lending segments, a boon for the subcontinent's under-banked population. Given the importance of fintech to financial inclusion in India, Delhi is preparing to launch a regulatory sandbox that would ensure that the industry develops stably. In late March, Reserve Bank of India (RBI) governor Shaktikanta Das said that the RBI would publish the guidelines for the creation of a fintech regulatory sandbox in the next two months.
As one of Southeast Asia's preeminent markets, Indonesia offers strong opportunities for fintechs. With a population of 265 million, it is larger than Vietnam, Thailand, Malaysia, Myanmar and Cambodia combined. In 2018, the Indonesian economy expanded 5.18%, beating economists' forecasts.
One of the great ironies about China for multinational firms is that they feel they have to be there, but the gatekeeper doesn't always let them in. This paradigm is especially evident in the financial services sector, where foreign firms control less than 2% of the market 18 years after China entered the World Trade Organization and promised to dismantle trade and investment barriers.
Thailand's Securities and Exchange Commission (SEC) has approved the kingdom's first initial coin offering portal (ICO) and is expected to issue guidelines for securities token offerings (STO) applications in the near future. ICO portals are used primarily to conduct due diligence.
In a few short years, Japan has become one of the most crypto-friendly countries in the world, pushing ahead with plans to integrate distributed ledger technology into its financial system despite rising skepticism about virtual currency's future. Even massive hacks of its crypto exchanges haven't affected Japan's determination to become a crypto nation. The Japanese government has handled the skullduggery in stride, strengthening systemic security measures rather than resorting to draconian crackdowns.
In less than a decade, Alibaba and Tencent have built the world's foremost mobile internet ecosystem in China. Their success derives from both innovative business models and unflappable determination. To be sure, they arrived at the right time - the rise of smartphones - but good timing isn't enough to prevail in a market as cutthroat as China's. Of course, Alibaba and Tencent also haven't had to contend with foreign competition. Would they have been as successful without the Great Firewall?