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Insight - Kapronasia

Kakao seems to have a case of the super-app blues, notably in its two fintech units. Shares of Kakao Bank and Kakao Pay have fallen 39% and 32% since their respective August and November debuts. Between December and late January, the Kakao group lost roughly US$25 billion in market value. 

Taiwan’s first two digital banks launched last year, Rakuten Bank in January and Line Bank in April. A third digital lender, Chunghwa Telecom-backed Next Bank, should have launched much earlier but has been hamstrung by repeated regulatory travails. It will go live in in the first quarter of 2022 at the earliest.

As one of the largest Asian economies to greenlight digital banks, Indonesia is attracting a lot of interest from investors. Digital lenders in Indonesia are not competing for mostly secondary accounts as they are in markets like Hong Kong and Singapore. Instead, they are trying to get in on the ground floor. About 66% of Indonesia’s 275 million people are unbanked.

The Covid-19 pandemic has aggravated the threat digital financial crime poses to Singapore. Since the pandemic began, the city-state has experienced a surge in online loan, e-commerce and phishing scams. Since 2016, scammers have made off with S$965 million, according to a recent investigation by The Straits Times. A record high of S$268.4 billion was taken in 2020 as the pandemic forced most banking and other transactions online. The threat did not recede in 2021 as seen with the OCBC phishing incident.

Across Asia, new ground is being covered daily in product personalization by fintech disruptors. Superapps like China's Alipay and India's Paytm are delivering hyper-personalised offerings that can specifically target their customers’ ever-changing needs. Digital finance players are using data to meet unique customer challenges and create seamless, omnichannel experiences, taking a lesson from E-commerce platforms that have introduced live streaming of unique products and continued to put a heavy emphasis on personal discovery and curation. However you look at it, consumer data is on a new playing field.

Earlier this week the People’s Bank of China e-CNY digital wallet showed up on Android and Apple App stores in China in what appears to be the government’s next push to get people to use the somewhat underused digital currency. Previously, the PBOC's e-CNY digital wallet app was only available as a ‘side-loaded’ app meaning that it had to be loaded manually by the user rather than installed through one of the official stores. This is a relatively trivial task on an Android phone where you just click on a .APK file, but somewhat more difficult in the Apple ecosystem.

Over the past few years, Southeast Asia’s traditional banks, which have historically been digital laggards, have become much more relevant. Leveraging their internal fintech capabilities, as well as best of breed external solutions, across the region, traditional banks are gradually becoming much more digitally adept and able to better serve users in everything from contactless payments to wealth management. The benefits are clear - a Fitch Ratings report argues banks with stronger digital transformation are more likely to secure recurring business and hit profit and innovation targets.

Regulatory uncertainty and travel restrictions are forcing many of Hong Kong’s blockchain and crypto companies to shift their operations to more hospitable jurisdictions including finance-focused island-states Singapore, Gibraltar and Cyprus and technologically empowered innovation hubs including Israel, San Francisco and London. Crypto.com, the world’s third-largest spot exchange by 24-hour trading volume, shifted its headquarters last year from Hong Kong to Singapore.

Amid a digital banking craze that is sweeping much of the world, it has become fashionable for big incumbents to claim they are, in fact, digital banks, or at least as digitally adroit as their branchless counterparts. The truth is usually more nuanced. However, in Indonesia, Southeast Asia’s largest economy and most populous country, incumbents really can become digibanks. They just need to be acquired by tech companies or other deep-pocketed investors and rejigged.

In Asia Pacific, digital banking is a tale of two different types of markets. In advanced economies like Hong Kong, Singapore, digital banks often lack a clear value proposition and have limited disruptive capabilities. In developing countries, it is a very different story, and perhaps none more so than the Philippines. The Philippines’ geography, large unbanked population and fast-growing mobile internet connectivity make the country uniquely suited to branchless neobanks.

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