Does the Philippines need 4 more digital banks?
In 2021, Bangko Sentral ng Pilipinas (BSP) imposed a three-year moratorium on applications for digital banking licenses so that it would have enough time to monitor the performance of the new online lenders and their impact on the financial system. It will take time for Philippine online banks to get out of the red, and in March, the BSP said that just two of the official digital lenders – which it did not identify – are profitable. It may take five to seven years before the others reach that milestone. Nevertheless, the Philippine central bank is pressing ahead with its plan to allow for more digital banks. From January 1, 2025, four more licensed online lenders will be permitted.
Is Revolut doing enough to combat fraud?
UK fintech unicorn Revolut thinks big. Despite not holding a banking license in its home market until very recently, it has sought to depict itself as a global disruptor of the financial services sector. Long before it turned a profit, Revolut had set up offices across the world. Nothing has been able to slow Revolut down significantly, but the speed at which the company moves also has drawbacks. Its compliance regime has been lacking in the past, and it is now facing a growing problem with scams.
Hong Kong is learning that becoming a crypto hub is tough
It was inevitable that Hong Kong’s much-hyped cryptocurrency initiative would run into some serious challenges. We are not surprised to learn that the city’s regulators are not satisfied with the compliance level at some “deemed to be licensed” exchanges operating in the city. While demand for digital assets remains strong in many markets, and Hong Kong has a strong foundation as a financial services hub on which it can build, the crypto sector itself remains immature and prone to malfeasance while there is no global consensus on how to manage digital asset flows.
Why the digital rupee is losing momentum
2024 might be remembered as a turning point for central bank digital currencies (CBDCs) – the year when interest in them began to significantly wane. In the case of India, while the government seems determined to push forward with the digital rupee, retail users are more circumspect. The Reserve Bank of India (RBI) highlights its estimation of 5 million digital rupee users. If we stop to consider that India has more than 1.4 billion people, then less than ½ of 1% of the population is not a particularly strong adoption rate – especially for something that has such strong government backing.
Trust Bank expects to become No. 4 retail bank in Singapore
How is it that a digital bank startup expects to become the No. 4 retail lender in Singapore before long? After all, digital banks are, with the occasional exception, better known for losing money than making a profit. Of the four online lenders who received licenses in December 2020, not one is currently profitable. However, Trust Bank, which launched in September 2022, is a different story. Trust Bank is not a traditional digital banking venture but rather an entity created by large incumbent lender Standard Chartered and supermarket chain Fair Price Group.
UPI targets a bigger global presence
India’s United Payments Interface (UPI) payments rail has achieved massive success in its domestic market that will be difficult for any future competitor to surpass. According to a new report by PwC, total UPI transaction volume is expected to grow form 131 billion in the 2023-24 fiscal year to 439 billion by 2028–29. UPI now accounts for over 80% of India’s overall retail digital payments in India and is expected to surpass 90% by 2028-29. Given UPI's success, India has sought to expand its footprint internationally and in the past few years it has become available in a number of countries from the United Arab Emirates and Bhutan to the UK and France. Yet questions remain about whether UPI can serve as a foundational platform for digital payments outside of India.
Nations team up to combat crypto crime by North Korea
Cryptocurrency crime committed by the Democratic People’s Republic of Korea (DPRK) has become so pervasive that it requires a stronger international effort to bring under control. With that in mind, the U.S. Department of State and the Ministry of Foreign Affairs of the Republic of Korea (ROK) co-hosted an event about the issue in New York City on August 27.
K Bank sees new momentum for IPO
South Korea’s No. 2 digital bank K Bank had been planning to go public on the Korea Exchange (KRX) at the end of this year, but has been hesitant to make that commitment given uncertain market conditions. However, K Bank posted such a strong performance in the first half of the year that it may decide the time is right to go public irrespective of market fluctuations. South Korea’s first online lender posted a net profit of 85.4 billion won (US$64 million) in the first half of this year, the highest since its establishment and more than thrice as much as during the same period a year ago.
Will Investree endure?
It was not so long agao that Indonesia’s troubled peer-to-peer (P2P) lending company Investree was riding high. In October 2023, the company announced it had raised US$231 million in a Series D funding round led by Qatar’s JTA International Holding which also included participation from Japan’s SBI Holdings. The Series D round suggested high investor confidence in Investree, which had previously raised $23.5 million in a March 2020 Series C round led by MUFG Innovation Partners and Bank Rakyat Indonesia Ventures. Yet the company has since been flummoxed by problems with its management, bad loans and lawsuits. In late August, Investree established a caretaker team to manage its daily operations under the guidance of Indonesia’s Financial Services Authority (OJK).
Kakao Bank shows resilience amid scandal
Kakao Bank has a history of proving wrong skeptics of digital banks. It has been consistently profitable since 2019 and is now set to expand in Southeast Asia. It has managed, for the most part, to stay out of regulatory crosshairs despite disrupting South Korea’s financial services sector. It seemed Kakao Bank’s long string of good fortune might finally have come to an end with the arrest of its parent company’s founder Kim Beom-su on July 23. He has been accused of manipulating stocks during Kakao’s acquisition of the K-Pop agency SM Entertainment last year. Yet thus far, the company’s stock price has been stable, increasing 2% to 21,900 won over the past month, while its second quarter earnings were solid.
China and Russia are stepping up their financial cooperation
China has long been working on the development of an alternative payments system that would not be dependent on the U.S. dollar. It is not a single payments rail, but more a series of initiatives that collectively aim to make Beijing a stronger player in global payments infrastructure that can operate outside of the confines of the dollar-dominated system. These include a Chinese version of the Swift messaging network, the digital renminbi (e-CNY), the respective payment networks of Alipay and Tenpay, and various bilateral deals Beijing has established with countries.
Is fintech funding in Asia picking up again?
Fintech funding in Asia has been tepid due to a confluence of factors, notably high interest rates, uncertainty about the global economy – and especially that of the United States – and general investor disenchantment with growth-first business models. That said, there are signs that the drop-off in funding that began in 2022 may have finally bottomed out. A new report by DealStreetAsia suggests that a modest recovery may be underway in Southeast Asia.
Who will apply for a digital bank license in Thailand?
With the September 19 deadline for Thailand’s digital bank license applications less than a month away, it is worth taking a closer look at the prospective applicants. As expected, startups are absent. Instead, the likely applicants – and winners – are a mix of Thailand’s ultra-wealthy tycoons, prominent incumbent banks and Asian tech giants. The newest would-be applicant belongs to the latter category.
Nubank is both big and profitable
Brazil’s Nubank is continuing to prove the naysayers wrong. In the second quarter, the massive digital lender nearly doubled its net income from a year earlier to US$487 million. Revenue reached a record US$2.8 billion. It now has 104.5 million customers, including about 60% of Brazil’s adult population. The bank is also Latin America’s most valuable publicly-traded financial institution with a market capitalization of nearly $66 billion.
How successful is Airwallex?
Airwallex, a plucky Tencent-backed B2B payments company founded in Australia, said on Aug. 15 that it has surpassed US$100 billion in annual processing volume, a 73% annual increase. The company, which has moved its corporate headquarters several times since its 2015 founding and is now based in Singapore, said it has seen growing volumes across all products and an annual run rate revenue of almost $500 million. While these numbers suggest that Airwallex continues to experience robust growth amid a broader fintech slowdown, it remains unprofitable.
Mynt is on a roll
Ant Group and Globe-backed Mynt, which operates the e-wallet GCash, is on a roll. Long one of the most valuable startups in the Philippines, it this month saw its valuation increase to US$5 billion – more than doubling its previous valuation of US$2 billion that it reached in 2021 – following a combined US$800 million capital injection from Japan’s MUFG and the Philippine conglomerate Ayala. The new funding for Mynt comes at a time when large fintech investments are hard to come by given high interest rates and more-stringent investor expectations.
Grab loses US$53 million in Q2
Grab lost US$53 million in the second quarter in the latest sign that its super app business model continues to face serious challenges. To be sure, Grab’s fintech business performed well, but because of the way the Singaporean firm has constructed its business, there is no separating that unit from its ride-hailing and food-delivery arms.
It may only get harder for digital banks in Hong Kong
There is a fundamental problem with digital banks in Hong Kong. Not only are they non-essential because the city’s population is so well banked, they also are almost all the offshoots of large incumbent lenders and/or tech companies. What that means is that most of them lack a startup ethos. While a startup mentality can result in massive cash burn – as seen with Revolut in the UK or N26 in Germany – it also can lead to genuine product innovation. In the absence of such innovation, online lenders resort to gimmicks like high deposit interest rates to attract customers. It is thus no surprise that the eight licensees together owned HK$49.9 billion (US$6.4 billion) in assets last year. That is just 0.3% of the assets owned by all the city's retail banks, according to the Hong Kong Monetary Authority’s data.
APAC fintech funding falls to US$3.7 billion in H1 2024
Fintech funding in the Asia-Pacific (APAC) region is continuing a steady deceleration. A new report by KPMG shows that fintech investment in APAC decreased 21.7% year-on-year in the first half of the year to US$3.7 billion from US$4.6 billion during the same period in 2023. While the total number of deals in APAC rose to 438 from 406, not one of the 10 largest deals globally occurred in the region.
The K Bank IPO could be delayed again
South Korea’s No. 2 digital bank K Bank had been planning to go public on the Korea Exchange (KRX) at the end of this year, but unfavorable market conditions could force the company to delay the listing. There are three main issues that could adversely impact the IPO: the softening of the U.S. economy, the legal troubles of the founder of rival internet bank Kakao Bank and the souring of regulators’ views on digital lenders.
Is Revolut worth US$45 billion?
In its nine years of operation, UK fintech unicorn Revolut has always had outsize ambitions, depicting itself as a game-changing disruptor in the financial services sector. In some respects, the company has been successful. It is one of the most valuable startups in Europe and swung to a pre-tax profit of US$554 million in 2023. Its ability to reach profitability in less than a decade compares favorably with other prominent fintechs and platform companies leaning heavily into digital financial services. However, it is questionable whether Revolut is worth the US$45 billion valuation it is reportedly seeking.
Assessing the changing investment strategy of Temasek
The Singaporean sovereign wealth fund Temasek has long been one of the largest institutional investors in China, reflecting the close economic ties between the city-state and the world’s second largest economy. As recently as 2020, China accounted for 29% of Temasek’s portfolio. However, today Temasek’s investments in China have fallen to just 19% of its portfolio, below the U.S. at 22% and Singapore at 27%.
Why China will keep its strict crypto controls
Every few months, it seems that rumors start circulating in the cryptocurrency community about a possible liberalization of China’s strict digital asset controls. The rumors rarely have any basis in reality, and this time is no different. A number of cryptocurrency news sites have published stories over the past few weeks suggesting change could be afoot, citing a legal victory for Tron blockchain founder Justin Sun in Chinese court.
GoTo lost US$174 million in H1 2024
In the first half of 2024 Indonesian super app GoTo lost US$174 million. While such a figure would barely have raised eyebrows back when interest rates were low and VC funding flowed freely, these days investors are more discerning – especially since GoTo is a public company listed on the Indonesian Stock Exchange (IDX). Like its counterpart Grab, GoTo has found it challenging to adjust to being a public company after being able to shrug off massive losses for years in private markets.
Will GXS Bank reach its profitability target?
Looking at the stock price of Singaporean platform company Grab, one wonders what investors truly think about this company’s prospects. Since its Dec. 2021 Nasdaq debut in a SPAC merger, Grab has lost 74% of its market value. The stock’s 52-week high is just US$3.88. We suspect that investors are concerned about the viability of Grab’s super app business strategy – which may struggle to pivot away from a focus on growth – even if individual units of the company are doing well. Grab does seem confident about its fintech business though and foresees profitability for its Singaporean digital bank before too long.
Who needs more digital banks in Southeast Asia? If you asked us, we would say not too many countries do. Certainly not Singapore, probably not Malaysia or Thailand, and even though Indonesia is a huge market, it already has a lot of online lenders.
Hong Kong is hedging its bets on stablecoins
Hong Kong seems determined to become a major hub for digital assets and adopting a stablecoin regime is a key part of that policy. However, crypto bros hoping for a highly permissive regime appear to be out of luck. The city’s stablecoin regulations have changed very little from the ones proposed in December 2023. They require issuers of fiat currency-backed tokens to obtain a license from the Hong Kong Monetary Authority (HKMA), that stablecoins be fully backed by reserve assets “at any given point in time” and that issuers publish monthly confirmation of those assets from an independent auditor.
ANEXT Bank makes modest progress
What to make of ANEXT Bank? On the one hand, Ant Group has been focused for years now on expanding its presence in Southeast Asia. Its Singapore digital bank, which provides multi-currency business accounts, unsecured financing with flexible repayment options, and fixed deposit accounts to SMEs, is a key part of that expansion effort. And Ant has continuously injected large amounts of capital into ANEXT. On the other, from a financial standpoint, ANEXT’s performance remains underwhelming, and it is unclear how large the company’s addressable market is in Singapore.
Kakao’s fintech business may be in trouble
Kakao Bank has long proven skeptics of digital banks wrong. It has been profitable since 2019 and is now set to expand in Southeast Asia. There is just one problem: Its parent company’s founder Kim Beom-su was arrested on July 23. He has been accused of manipulating stocks during Kakao’s acquisition of the K-Pop agency SM Entertainment last year.
Retail CBDCs are off to a slow start in Asia
The hype is being separated from the reality when it comes to retail central bank digital currencies (CBDCs) in Asia, and adoption is underwhelming. Nearly five years after China launched its first digital renminbi (e-CNY) trials, only two other Asian countries actually have a functional retail CBDC: India (though it remains in a pilot stage) and Cambodia.
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Partior raises US$60 million in Series B round
JPMorgan estimates that global corporates move nearly US$23.5 trillion across countries each year, equivalent to roughly 25% of global GDP. Since they rely on what the bank calls “sub-optimal wholesale cross-border payment processes,” annual transaction costs for the companies have reached US$120 billion. This is where atomic settlement comes in – and where the ambitious blockchain firm Partior – which was founded by JPMorgan, DBS and Temasek sees a large market opportunity.
MariBank just lost US$38.6 million
Singapore’s digital banks have been underwhelming in their first few years of operation, though the likely raising of a deposit cap in July 2023 has benefited Sea’s MariBank and Grab-Singtel’s GXS Bank. It was always a risky endeavor to bet on the retail segment given how well served it already is in the city-state, but there is no turning back now for Singapore’s preeminent platform companies. The question is whether MariBank’s big loss in 2023 should be viewed as a glass half empty or half full.
Can Australia revive its open banking initiative?
We remember when Australia first kicked off its open banking initiative, known as the “consumer data right,” with much fanfare five years ago. The program was supposed to increase the quality of banking services to consumers by giving them access – in theory – to more of a customized experience in which they could pick and choose which services they wanted from which providers. They only had to agree to let their data be shared with different banks. However, a recent report by the Australia Banking Association (ABA) found that just 0.3% of bank customers are using the program, suggesting that it has been a failure and that Australia needs to reimagine its approach to open banking.
Cross-border CBDC project mBridge moves forward
For more than three years, the Bank of International Settlements (BIS) and the central banks of China, Hong Kong, Thailand and the United Arab Emirates (UAE) have been working on a cross-border central bank digital currency (CBDC) project known as mBridge. In a nutshell, the project aims to improve efficiency, speed and transparency in cross-border payments.