What is going on with Malaysia’s digibanks? All that hype about who would win the licenses, lots of anticipation, the announcement of the five winners, and a year later there seems to be little demonstrable progress. According to a recent report by The Ken, Malaysian digibanks have a human capital problem: That is, they are having a hard time finding the right talent. Without the right people, the five digital lenders will not be off to a strong start.
China is currently the world’s largest emitter of greenhouse gases, accounting for nearly 1/3 of the global total. Beijing is well aware of the effect its emissions have on climate change and has pledged to be carbon neutral by 2060, with emissions peaking in 2030.
2023 has been an eventful year for renminbi internationalization thus far with China striking deals with several different countries to increase trade settlement in the Chinese currency. The renminbi seems destined to become increasingly important in international trade. While some of the media attention given to these deals would suggest they herald a broader de-dollarization movement, the reality is more nuanced.
One would be hard pressed to find any market in East Asia except the Philippines where startups are major digital banking players. In one jurisdiction after the next, regulators have ensured that incumbent lenders and in some cases large technology companies win the requisite licenses to operate online-only banks.
In the battle of Southeast Asia’s platform companies, the one that never declared itself a super app is edging out the others in digital financial services. Despite a slowdown in its gaming arm Garena, Sea Group is growing expeditiously in the e-commerce and fintech segments, a proven synergistic combination if we ever saw one. Just look at Taobao and Alipay. It’s just a more compelling one-two punch than trying to turn a ride-hailing app into a bank like Sea’s competitors are set on doing.
Japan’s largest banks are increasingly looking to fintech opportunities in Asia’s emerging markets as an avenue for growth, as their home market is mature, a laggard in digital transformation and constrained by the world’s greyest population. In contrast, much of Southeast Asia as well as India still have plenty of low-hanging fruit, whether in the payments segment, banking, or both.
While most digital banks struggle to make money, South Korea’s are largely profitable. They have been able to scale up quickly, despite negligible financial inclusion needs. According to the World Bank, almost 99% of South Koreans have a bank account. The factors that have made Kakao Bank, K Bank and Toss Bank successful are unique to South Korea and are unlikely to be replicated elsewhere.
The largest U.S. payments firms have had their eyes on the China market for decades, in some cases since the country kicked off economic reforms in 1978. They have waited with the utmost patience to gain access to the colossal Chinese payments and cards market, valued at US$21 trillion in 2021 by research firm Global Data. In recent years, American Express and PayPal have made some incremental progress in the China market as Beijing has gradually permitted more foreign investment in its payments sector.
Defining atomic settlement
Atomic settlement refers to exchanging assets between two parties in a single transaction, typically instantaneously and often without intermediaries. This can be particularly useful in cross-border payments, as it allows for faster and cheaper transactions compared to traditional methods that rely on a more comprehensive network of correspondent banks or other financial institutions to facilitate the transfer.
Rakuten Bank is gearing up for what will likely be Japan’s largest IPO since 2018, scheduled for April 21. The country’s oldest digital bank, which was founded in 2001 back in the days of Web 1.0 and was then known as eBank, aims to raise US$800 million at a valuation of US$2.31 billion on the Tokyo Stock Exchange with the sale of 53.95 million existing shares of Rakuten Bank Ltd to both domestic and overseas investors and the issuance of 5.55 million new shares.
Slowly but surely, Thailand’s largest incumbent banks are positioning themselves to dominate the country’s nascent digital banking segment. This is no surprise. It’s how things tend to play out in East Asia – though it’s a shame for startups. The latest Thai incumbent bank to embrace digital banking is Kasikornbank, commonly known as KBank.
At the recent meetings of its National People’s Congress and Chinese People’s Political Consultative Conference, known as the two sessions, China made important changes to its financial and technology regulations to address significant challenges at home and overseas. Beijing is intent on ensuring financial stability at home and achieving breakthroughs in so-called “chokepoint technologies” as it deals with an increasingly fraught relationship with the United States.
One lingering question remains though: Will China’s dynamic private sector be sufficiently empowered by the reforms?
In December, the Philippines' House of Representatives approved a bill establishing a sovereign wealth fund. Known as the Maharlika Investment Fund (MIF), it is an initiative of President Ferdinand Marcos, Jr. aimed at raising capital for infrastructure projects, among other things. The Philippines will likely seed MIF with its central bank’s dividends and investible funds from the country’s Land Bank and Development Bank.
Asia has been fortunate thus far in that the failures of Silicon Valley Bank (SVB) and Signature Bank have not had a significant impact on its financial sector. While some financial firms in the region had limited exposure to these defunct lenders, it was not enough to pose a serious problem. Indeed, S&P Global Ratings has found that of the 380 banks and nonbank financial institutions that it rates in the region, it does not anticipate any rating actions directly related to the SVB default.
It was not so long ago that Siam Commercial Bank (SCB) was singing cryptocurrency’s praises and preparing to invest US$500 million in the Thai crypto exchange Bitkub. Alas, it was not meant to be. The crypto market cratered, and one of the kingdom’s largest lenders thought better of betting so big on a sector of financial services with so much inherent risk. SCB is now pivoting to what is turning out to be familiar territory for incumbent lenders in Asia: digital banking.