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.
Mobile payments have reached an inflection point in Taiwan, by one estimate surpassing credit cards in popularity for the first time. In a population of about 23 million, nearly 10 million are mobile payments users, according to new data compiled by Taiwan's government. A recent survey of consumer attitudes towards electronic payments by the semi-governmental Market Intelligence & Consulting Institute (MIC) found that 35% of respondents preferred mobile payments, compared to 33% for credit cards. Line Pay was the top digital wallet, followed by homegrown Jkopay and Apple Pay.
Grab isn't just Southeast Asia's most valuable startup: It's also the most ambitious. Grab aims to give digital banking pride of place in an ecosystem heretofore reliant on ride hailing and food delivery. The user base is there to make the digibanking gambit work, Grab says, pointing to its millions of passengers, drivers and food-delivery customers.
Jkopay has been one of Taiwan' top e-wallets for several years now on the back of its strength with small merchants. Many erstwhile cash-only mom-and-pop shops now accept Jkopay as well. Given Jkopay's payments success, the company naturally wants to expand into other online banking segments. Kevin Hu, Jkopay's founder and chief executive officer, recently said that he hoped to build a more complete digital financial services ecosystem that would include deposit-taking, lending and investment services. Hu likened his vision to a "version of Ant Group for Taiwan."
China's ByteDance is quietly deepening a push into fintech in Asia as the future of its U.S. operations hangs in the balance. ByteDance's popular short-form mobile video platform TikTok has become a major front in the U.S.-China technology war. Now more than ever, ByteDance needs to monetize its services. Fintech could be a way forward for the company, whose US$100 billion valuation makes it the world's most valuable startup in private markets.
Ant Group has become one of the two most dominant forces in China's online finance market. Ant started with payments and from there expanded into micro lending, wealth management, insurance and much more. But there's only so far Ant can go in its home market, where pressure has been building from regulators and disgruntled incumbents, prompting the fintech giant to rebrand itself as a technology company. With a massive IPO imminent, Ant is looking for greener pastures overseas where it can put the cash raised from the deal to good use. Fintech friendly and financial inclusion focused, Southeast Asia fits the bill.
Invest Hong Kong (InvestHK) has unveiled the Global Fast Track Programme, a business-driven programme within Hong Kong Fintech Week (HKFW), Asia's annual flagship fintech event, to help local and global fintech enterprises leverage Hong Kong's proven resilience and fintech opportunities to scale business and accelerate innovation. The Fast Track programme plugs fintech enterprises directly into Hong Kong's diverse ecosystem of world-class regulators, business leaders, corporates and investors to propel their ventures across Hong Kong and elsewhere in the Guangdong- Hong Kong-Macao Greater Bay Area and Asia where digitisation and fintech adoption are surging.
Selected fintech ventures will pitch their innovative solutions to the Hong Kong Monetary Authority (HKMA) and senior executives of Corporate Champions including Hong Kong Exchanges and Clearing (HKEX), HKFW Strategic Partner AMTD Group, Allianz Global Investors, Chow Tai Fook Jewellery Group, Eureka Nova, Mizuho Bank, Hong Kong Trade Finance Platform Company, FORMS HK, Microsoft and more. Investors such as AngelHub, Cyberport, Hong Kong Science and Technology Parks Corporation (HKSTP) Ventures, Lingfeng Capital, MindWorks, QBN Capital and Vectr Fintech Partners are also on board with up to US$1 million of investment commitment on offer per project upon further due diligence, business discussions and approval through the protocol as required by respective investors. The programme is curated by the HKFW appointed event organiser Finnovasia.
Fast Track is now inviting companies from nine key fintech verticals (trade finance, capital markets, retail banking, commercial banking, insurance, regtech, wealthtech, payments and enterprise resource planning), to submit applications from now till August 31. About 10 companies per vertical with the most outstanding ideas will showcase their solutions for an opportunity to join an extensive tailored B2B matchmaking programme with the Corporate Champions and investors to explore further deals and investment partnerships. Over 10 selected finalists will then pitch virtually at the FintechHK Global Final for extra prizes at this year's HKFW from November 2 to 6. Fast Track also features the Mainland China Track stream to help Chinese fintech enterprises scale their business overseas via Hong Kong.
"The strength of the Fast Track programme is proof of Hong Kong's resilient, diverse and growing fintech ecosystem, which provides fintech enterprises with the ideal test ground and launchpad for growth in the post-COVID era," Associate Director-General of InvestHK Mr Charles Ng said.
The Head of Fintech at InvestHK, Mr King Leung, added, "The Fast Track programme is a business outcome-driven programme designed and focused purely on accelerating new opportunities for fintech enterprises. In addition to potential deals and investment, each eligible company can also apply for Hong Kong Special Administrative Region Government landing support from US$111,000 up to US$2.6 million, regardless of the pitching outcome. InvestHK assists worldwide fintech companies to fast-track their next success from Hong Kong."
While COVID-19 continues to create challenges for the global fintech sector, Hong Kong, with its unique geographical advantage, provides direct access to both Mainland China and Southeast Asia, two of the world's largest and fastest growing fintech markets offering significant long-term opportunities. As a result, pioneers in the fintech space and relevant regulators are eager to tap into this immediate potential by working hand in hand with the world's brightest and best fintech ventures.
The Chief Fintech Officer at the HKMA, Mr Nelson Chow, said, "Collaborating with the worldwide fintech community is key to propelling growth in fintech development. The Fast Track programme provides a unique opportunity to bring together international experts from the public and private sectors who can connect and explore innovative ideas and technology to enhance different financial solutions."
The Head of the Innovation Lab at HKEX, Mr Lukas Petrikas, said, "HKEX uses world-leading technology to power our busy capital markets. To keep making these markets more efficient, and even more relevant to changing economic conditions, we embrace this opportunity with the Fast Track programme to engage with the latest fintech developments and meet rising stars from around the world. The programme will help further enhance Hong Kong's competitiveness as an international financial centre."
Representatives of fellow Fast Track Corporate Champions gave further testimony on the huge opportunity that Fast Track delivers for start-ups and to their enterprises as key market movers in the fintech sector.
"The Fast Track programme this year at HKFW creates opportunities for serious players to connect deeply into the region through joining the local ecosystem networks, such as our AMTD SpiderNet, and tap into diversified pockets of investors and collaborative partners to capture the vast opportunities in the Greater Bay Area and surrounding region," the Chairman and CEO of AMTD Group, Mr Calvin Choi, said. AMTD Group has been the HKFW Sole Strategic Partner for three consecutive years and is a Corporate Champion for the Fast Track programme. "Given Hong Kong's solid foundation as a global financial centre and the faster pace of digitalisation resulting from the global pandemic, I'm confident that Hong Kong's fintech landscape can achieve significant growth and attain new heights."
Executive Director of Chow Tai Fook Jewellery Group Mr Bobby Liu said, "Chow Tai Fook Jewellery Group constantly seeks to inject vitality in people, products and operations through our persistent investment in innovation and technology. Through the Fast Track programme, we hope to witness innovative fintech solutions that can curate remarkable customer experiences and unique and differentiated products."
The Head of Open Innovation at Eureka Nova, Mr Ben Wong, said, "Fast Track opens up commercial opportunities for start-ups and helps us identify fintech ventures to collaborate with that solve real-world problems. By collaborating with emerging fintech companies, we can leverage our partners like Mizuho Bank and Hong Kong's unique status as a global financial hub to drive regional and global exposure."
Senior Director and Financial Services Business Lead, Asia, at Microsoft Ms Connie Leung said, "Microsoft joins the Fast Track programme to elevate high-potential fintech start-ups through new technologies such as cloud, artificial intelligence and blockchain. This is a key step to further accelerate our financial sector on the digital transformation journey, in order to sustain our leadership position as a global financial hub."
The Managing Partner of Vectr Fintech Partners, Mr Mark Munoz, said, "Fast Track helps build a stronger fintech ecosystem by allowing us to better support founders on their mission, advise them of best practices, and ultimately back them on their journey to success. The fact that fintech touches our everyday lives in so many ways means that opportunities are boundless."
Learn more about the application process here:
Singapore may be the Lion City, but there's an elephant in the room when it comes to digital banking: Incumbents are readier than ever for the challengers. Singapore's Big Three of DBS, OCBC and UOB have been digitizing for years with varied degrees of success. The pandemic gave them an opportunity to fast track the process. After all, when retail branches are closed and everyone stays home, banking digitally becomes a necessity, not a convenience.
The Taiwanese government recently announced its intention to transform Taiwan into a regional finance hub. Wealth management is an area of focus. One would think that the government would see a chance to simultaneously bolster fintech development in Taiwan, which has lagged compared to the other Asian tiger economies: Singapore, Hong Kong and South Korea. Yet the Taiwan government remains wary of disruption in the financial sector. As demonstrated in the Financial Supervisory Commission's (FSC) new three-year fintech roadmap, Taiwan remains committed to a cautious, prescriptive approach to fintech that prioritizes strengthening the digital capabilities of incumbents.
Gaming firm Razer is about as far from a bank as you can get. While it has a fintech arm, Razer's bread and butter lies in gaming hardware, software and services. Fintech, which refers primarily to payments in Razer's case, is a means for gamers to make in-game purchases. Razer sees a big opportunity though: Turn its many millennial gamers into banking customers. After all, they're already spending money digitally in the Razer ecosystem.
In addition to the digital full bank (DFB) license it has applied for in Singapore, Razer is also aiming to develop a larger international digital finance network. A logical first step would be to apply for a digital bank license in neighboring Malaysia, where Razer already has a strong presence. Malaysia is the only market besides Singapore where Razer's e-wallet Razer Pay is in wide use. Malaysia also recently signaled its willingness to apply more non-financial firms to apply for digital bank licenses.
Capital requirements for a Malaysia digital bank license are fairly stringent, with an absolute minimum of RM 100 million (US$23.7 million) necessary during an initial three to five-year period and later RM 300 million. As a listed company, Razer, however, could easily meet them. It has about US$500 million in cash on hand, according to an August statement.
Razer is also reportedly considering expanding its digital finance business to other Southeast Asian markets, India and Latin America.
Razer would not be the first gaming giant to become a digital banking juggernaut. Tencent has made that transformation, although it wasn't a straight shot from gaming to fintech. The WeChat messaging app played a paramount role.
Tencent-invested Sea is also trying to make the jump from gaming to banking, but unlike Razer, Sea has a large e-commerce business. That makes Sea's bid to support SMEs more convincing than if it were a gaming company alone. Sea already has many small businesses in its ecosystem, while Razer has primarily potential retail banking customers.
Sea and Razer have one thing in common though: Both are ascendant but still loss-making. Hong Kong-listed Razer posted a net loss of US$17.7 million ($24.2 million) from January to June, a 64% improvement over the US$47.7 million it lost a year earlier. Revenue rose 25% annually to US$447.5 million on the back of strong demand for its gaming products.
Razer's fintech business recorded US$1.8 billion in total payment volume in the first half of the year, up 114.3% year-on-year. The business grew briskly thanks to rapid customer acquisition, both on the merchant and consumer sides - rising digital entertainment consumption amid the pandemic helped drive growth in the latter market segment.
"The fundamentals of our business remain as solid as ever," Min-Liang Tan, co-founder and CEO of Razer, said in a statement. That, "coupled with our strong operating cost discipline and our strong cash position of over US$500 million, put us in good stead, even during times of challenging global economic conditions."