On April 29, Bank Negara Malaysia (BNM) awarded digital banking licenses to five consortia primarily led by large tech firms and incumbent financial institutions. The one exception was a consortium that includes Grab and Singtel and is co-led by Kuok Brothers, a massive conglomerate that focuses on real estate, shipping and agribusiness, among other things.
Indonesia’s digibanking sector continues to be among the busiest in Asia Pacific with a flurry of deals in recent weeks. Key deals include buy now pay later (BNPL) firm FinAccel’s purchase of a majority stake in PT Bank Bisnis Internasional and SME financing platform Funding Societies and used car marketplace Carro investing an undisclosed amount in Bank Index Selindo (Bank Index). Indonesian peer-to-peer lender Amartha is also reportedly in talks to acquire 70% of local bank PT Bank Victoria Syariah.
The Philippines is taking a different approach to crypto than many other Asian countries, most notably in a tentative acceptance of the use of decentralized digital currencies for payments. Thailand, Vietnam and Indonesia have all banned crypto for payments outright, while Singapore has licensed just a handful of companies to use digital assets for payments.
We would say that the gravy train has been derailed for Australia’s cash-incinerating buy now, pay later (BNPL) firms, but they may not be exactly right. After all, “gravy train” implies making easy money and most of these companies never made money in the first place – if our key metric is profitability. The problems for these firms are manifest, from intense competition – and especially the arrival of deep-pocketed incumbents and tech firms to the market – to looming regulation and widening losses.
India’s United Payments Interface (UPI) is a bit of an anomaly in the world of fintech, which is typically dominated by high-flying startups and deep-pocketed venture capitalists. UPI was launched in 2016 by a specialized division of the Reserve Bank of India, the National Payments Corporation of India (NPCI), to create a unified real-time payments platform for the subcontinent’s retail payments. Governments are usually not seen as leading fintech innovators, but in this case, UPI has been so successful that other countries are keen to learn from its success; it is expanding internationally and India’s leading e-wallets compete for the largest share of UPI payments.
China’s fintech crackdown has slowed the domestic growth of the country’s biggest platform companies, but they remain committed to international expansion through strategic investments. Tencent has a number of key investments in Southeast Asia, Australia and UK that are worth watching, including its stakes in Sea Group, Voyager Innovations, Airwallex, Afterpay and most recently the UK fintech Previse.
It is important to take what Paytm founder Vijay Shekhar Sharma says with a grain of salt. For many years, he has talked up Paytm’s potential and deep-pocketed backers like SoftBank and Alibaba have bought it. Yet Sharma’s bullishness has not been borne out by Paytm’s stock performance. Though Paytm’s IPO was India’s largest of all time, it nonetheless plummeted on the first day of trading in November 2021 and has since lost about 60% of its value.
North Korea’s resilience is often surprising to outside observers. After all, Pyongyang is the only communist East Asian country to not formally launch economic reforms. It is impoverished and isolated. Further, U.S.-led sanctions imposed from the mid-2000s have made it harder for North Korea to conduct international trade. However, North Korea has developed a formidable cybercrime capability in order to evade the sanctions, and it is increasingly targeting digital assets whose decentralized nature make them vulnerable to determined hackers.
Pakistan’s fintech sector has long been a sleeper. Investors are now awaking to the significant opportunities in a country with 100 million unbanked people (the third largest unbanked population in the world), growing smartphone penetration and internet connectivity, incumbents with a weak digital game, and government policies aimed at using digital financial technology to boost financial inclusion. With just 1% of Pakistan’s US$4 trillion in annual payments currently made digitally, the sky is the limit.
The use of decentralized virtual currencies is growing expeditiously in Indonesia and Southeast Asia’s largest economy has the highest crypto adoption rate in the world along with Brazil, according to a new study by crypto exchange Gemini published in early April. The report found that 41% of Indonesians aged between 18 and 75 years old with an income of more than $14,000 per year own crypto assets.
In December 2021, Razorpay became India’s most valuable private fintech as it reached a valuation of US$7.5 billion, more than double the US$3 billion milestone it hit last April. Razorpay’s US$375 million Series F financing round raised more than all of its previous rounds combined. By eschewing India’s hyper-competitive retail payments market – dominated by the likes of Google Pay and PhonePe, with Paytm a distant third – Razorpay can best capitalize on opportunities in the fast-growing merchant payments segment.
Digital banks tend to lose money in their early years of operation. It is usually not a question of if, but how much. In the case of Taiwan’s banks, the losses are sufficient to potentially require an increase in capitalization. Line Bank lost almost NT$2.3 billion (US$78.7 million) in about one year of operation while Rakuten Bank lost NT$705 million (US$24.1 million).
One good unicorn deserves another. Just five months after the Philippines minted its first fintech unicorn – and indeed first private company to hit a US$1 billion valuation – it has produced another. While the first unicorn was Alibaba-backed Mynt, operator of the GCash e-wallet, the latest one is Tencent-backed Voyager Innovations, which operates the digital wallet PayMaya.
The need for comprehensive regulation of decentralized virtual currencies in Australia is greater than ever as crypto ownership in the country steadily rises. New research by Roy Morgan shows that 1 million Australians aged 18 and up own at least one cryptocurrency with the average crypto investment in the country roughly AU$20,000. Unsurprisingly, Bitcoin and Ethereum are the most popular cryptocurrencies with investors, though some also hold Ripple, Cardano, Dogecoin, Shiba Inu, Solana, Binance Coin, Litecoin, Cronos and others.
Ant Group and Globe Telecom-backed Mynt was the Philippines' one and only unicorn until April 12 when Voyager hit the milestone. Mynt reached the status last November after raising US$300 million from global investors including Warburg Pincus and Insight Partners. Mynt made good on its promise to become a “double unicorn” by reaching a US$2 billion valuation. While its long-term prospects in the vastly underbanked Philippines look good, questions remain about Mynt’s business model and the timing of an eventual IPO.
Heading into GoTo’s IPO Monday, one could be forgiven for being a bit skeptical. Here was another loss-making platform company with a sky-high valuation and a lot of subsidy-driven digital services. If you’ve seen one, you’ve seen them all, right? Not necessarily, say investors. GoTo raised US$1.1 billion in a triumphant IPO on the Indonesia Stock Exchange. Shares rose up to 23% and closed the day 13% higher at 382 rupiah, valuing the firm at about US$31.5 billion.
Hong Kong’s IPO market has likely hit a nadir, with funds raised from new share listings plummeting 90% year-on-year in the first quarter. Just 11 companies went public on the Hong Kong Stock Exchange in the January-March period, raising a total of US$1.72 billion. It was HKEX’s worst performance since the first quarter of 2013.
Australia’s casino gaming sector has long had lax money laundering controls. However, historically, Australian banks have borne the brunt of regulatory ire for money laundering breaches. Both Commonwealth Bank of Australia and Westpac have paid massive fines for such violations in recent years. However, with AUSTRAC launching a probe into Crown Melbourne and Crown Perth on March 1 and allegations emerging later in the month that the Star Entertainment Group laundered money in Macau, the casino gaming sector is likely to come under much greater scrutiny.
There is a growing list of Chinese companies that could be forced to exit U.S. stock exchanges under legislation passed in 2020. The legislation requires all public companies in the U.S. to comply with auditing requirements that Chinese companies have resisted due to Beijing’s own state secrecy laws. On March 30, the Securities and Exchange Commission (SEC) added Baidu to the list. A total of 11 Chinese companies facing delisting have been named so far.
Southeast Asia is the most dynamic market for the digital economy in the world, especially e-commerce and fintech. It has a population of 655.3 million, which ought to be big enough for most young tech companies. Not Sea Group though. Sea has done well in the region, but like many platform companies, it is getting overly ambitious, overextending itself, and making costly mistakes.
There is more than one way to drastically curtail crypto activity in a country. China’s approach has been largely effective, but is generally not applicable elsewhere. In the case of India, which has a very different political system than China, blanket bans could face legal challenges while being difficult to enforce. A better approach is to tax the heck out of crypto transactions, which regulators and some politicians almost certainly hope will reduce the attractiveness of the asset class.
We had thought Bank Negara Malaysia (BNM) would have announced the winners of Malaysia’s five digital banking licenses by now, as the deadline was originally set for the end of March. The BNM has been mum about any reasons for a delay, though the longer deadline could give Capital A (the erstwhile AirAsia), one of the more enthusiastic applicants for a digital banking license, more time to improve its financial condition. With 29 applicants, there will be many more losers than winners in this race.
Remember that SPAC boom in the U.S.? To be sure, it has slowed in recent months, but the Nasdaq and NYSE continue to attract some high-profile listings by special purpose acquisition companies, such as Grab’s December debut. It is a different story in Asia. Though Asian exchanges amended regulations last year to wave the way for SPACs, there have not been any blockbusters yet.
When it comes to the cryptocurrency policies of Asia’s regulators, it pays to not be overly sanguine. While most regulators in Asia are happy to let crypto evolve as a regulated asset class, payments are another story. Thailand is the latest Asian country to crack down on using crypto for payments.
On March 23, Thailand’s Securities and Exchange Commission on Wednesday banned the use of cryptocurrency for payments, effective April 1. That means no bitcoin or any other crypto can be used to purchase goods and services. Digital assets payment operators will be given a grace period through the end of April to cease providing payment services. Trading of digital assets for investment purposes will be not affected by the SEC’s ban on payments.
Why now? That is the question many analysts and investors are pondering as Indonesian platform company GoTo is pushing ahead with an IPO that seeks to raise up to US$1 billion at a US$30 billion valuation despite the poor performance of loss-making companies' shares in recent months. Like its Singaporean counterpart Grab, GoTo began as an Asian answer to Uber but has morphed into a super app leaning heavily on digital financial services to secure its future. And like Grab, GoTo has yet to turn a profit, spends heavily subsidizing users, and made investors wait a long time for an exit.
The honeymoon period is over for Southeast Asia’s platform companies, even the venerable Sea Group. While boasting a strong ecosystem Sea is still consistently losing money in two of its three divisions. Being bullish on Sea means believing that the profitable gaming arm Garena can carry Shopee and Sea Money indefinitely. Investors appear to be having their doubts, especially as Garena’s growth has slowed recently. Sea’s share price has fallen 63% in the past six months and 43% over the past year and is now trading at about US$127.
When it rains it pours, at least for super apps. Throughout Asia, platform companies are struggling as their capabilities often cannot match overly lofty investor expectations. The problem is especially acute for India’s Paytm, whose record-breaking IPO – it is India’s largest to date – nevertheless turned out to be a sign of worse things to come. Paytm’s stock fell 27% on its first day of trading and has fallen about 65% since the November IPO to 543.5 Indian rupees.
Home to about 70 fintech startups, Nepal is a nascent market for digital finance. That said, the pace of adoption in the Himalayan nation of 30 million is picking up amid the Covid-19 pandemic and with about 55% of the population unbanked, there is a need for fintech solutions that can boost financial inclusion. In the past few months, there have been several key developments that could speed up the digitization of Nepal’s financial sector.
South Korea’s people have long been more enthusiastic about crypto than the country’s regulators and politicians. By one estimate, in 2021 one in three South Koreans either invested in crypto or was paid in digital assets. A study by the Korean government’s Financial Intelligence Unit (FIU) found that South Korea’s cryptocurrency market value was estimated at 55 trillion won (US$45.6 billion) as of the end of last year, that 15.2 million Koreans have accounts and 5.6 million registered users of crypto actually trade. Yet heading into Korea’s recent presidential election, the country was tightening oversight of cryptocurrencies in a manner detrimental to market growth.
Amid a general digital finance boom in Indonesia, the nascent retail investing segment is growing fast. A proliferation of investment apps, usually with low minimum investments, is allowing a much greater proportion of the population to invest. Historically, the wealthy have dominated the country’s stock market. Indonesia’s newbie investors are not only interested in equities though; they are also increasingly keen on crypto. Many of Indonesia’ new retail investors are young people, with about 70% between the ages of 17 and 30, according to Indonesia’s central securities depository.
Could Malaysia become a crypto hub in Asia? A recent CoinDesk article made that case, pointing out that some of the necessary ingredients are already there, such as a common law system and institutional use of English. Further, Malaysia's crypto ownership rate of 19.9% is above the global average of 15.5%, according to Finder’s latest Cryptocurrency Adoption Index.
The performance of Australian neobanks so far has been a bit underwhelming. Of the best known four (not to be confused with the big four), only Judo Bank has been an unequivocal success. Xinja collapsed about a year after receiving its banking license; 86 400 threw in the towel when it received an offer from National Australia Bank (NAB) it could not refuse, and Volt is pivoting to banking as a service. Given that it is targeting a similar SME customer demographic to Judo, the ascendant Aussie fintech Zeller could be more successful than the digital lenders focusing on the retail market.
While Kakao’s fundamentals remain strong, the Korean super app has been struggling of late amid a perfect storm of regulatory travails, investor disappointment and awkward leadership changes. In the past six months, Kakao Bank and Kakao Pay’s shares have both fallen about 29%.