Japan is one of the top contenders for the Asia crypto crown. The only other jurisdiction that can challenge it is Singapore. Hong Kong is no longer in the running given the city's close links with mainland China and Beijing's tough approach to decentralized digital currencies. But before Japan can solidify its status as an Asian crypto hub, it first needs to figure out how to better regulate crypto to protect investors and safeguard against malfeasance.
Australia has yet to make up its mind about crypto. On the one hand, it allows crypto exchanges. It has dozens of them. Finder estimated that 17% of Australians own cryptocurrency in a June survey. There are no regulations banning the holding or trading of cryptocurrencies. However, Australia’s incumbent financial institutions are ambivalent about decentralized digital currencies and generally stay away from them.
Compared to many of its neighbors, Thailand has been digitizing its financial sector at a slower pace. Southeast Asia's second-largest economy has no digital banks – not even any framework for digital lenders – and until recently, no fintech unicorns. Ant Group-backed Ascend Money is Thailand’s first.
The race is on to attract SPAC mergers in Asia. Having already rejigged regulations to facilitate SPACs, Singapore has a head start on its competitors. That said, the Hong Kong Stock Exchange (HKEX) will be aiming to attract very different companies than Singapore Exchange (SGX). SGX’s focus will be Southeast Asia tech, while Hong Kong will lean heavily towards mainland China biotech and perhaps tech firms in sectors with strong government support. What remains to be seen is if Hong Kong is willing to adjust regulations to create a more favorable environment for SPAC listings.
South Korea’s fintech crackdown has delayed Kakao Pay’s IPO and likely will force the company to do some restructuring to meet regulatory requirements. Kakao Pay’s parent company has also felt regulatory ire. Yet Kakao Bank, the digital bank unit of the platform company, has continued to perform well, as have its competitors K bank and Toss.
It was only a matter of time before buy, now pay later (BNPL) caught fire in India. All of the necessary elements are in place, from high internet connectivity and low credit card penetration to booming fintech investment and strong demand for alternative digital-first credit. A flurry of deals in recent months signify BNPL’s ascendancy on the subcontinent.
Given that Indonesia is Southeast Asia’s largest economy, the decisions it makes about digital banking will have a large effect on fintech development in the region. To date, Jakarta has moved cautiously, despite the pandemic-driven transition to online banking that has swept the region. There are signs, however, that Indonesian regulators are keen to get the ball rolling. They will take a somewhat different approach than their counterparts in Singapore, the Philippines and Malaysia though.
All good things come to an end, and sometimes the end is long and drawn out. Such is the state of the latest fintech crackdown in China, which has evolved into an all-out effort to reign in Big Tech/platform companies. The tightening of supervision over firms like Ant Group and Tencent represents a major escalation over prior regulatory campaigns, which focused on cryptocurrency and peer-to-peer (P2P) lending. This time, Beijing is keen to clip the wings of the firms that have come to dominate its once-booming fintech sector. Not all of them are equally affected though.
The delay of Kakao Pay’s US$1.3 billion IPO signifies a toughening regulatory landscape for the company and fintech overall in South Korea. For years, Kakao's fintech business in South Korea grew largely unfettered. Neither incumbents nor digital competitors – there were very few – posed a serious challenge to the firm, while regulators seemed content to take a relatively hands-off approach to its digital finance business. That’s all over now. What remains to be seen is whether this is a bump in the road or a harbinger of a rough ride to come.
Hong Kong’s IPO market appears to have found its niche, acting as an offshore – but not in the same sense as New York – hub for up-and-coming Chinese companies to raise capital. Despite Beijing’s renewed emphasis on nurturing mainland capital markets, in the short run it will be hard for any of the mainland exchanges to compete with Hong Kong.
Just a few months into its digital bank fast-tracking experiment, the Philippines decided to slow things down by limiting the number of digital bank licenses to seven for the next three years, effective September 1. Interest in the digibanking licenses has been strong among both digital upstarts and incumbent lenders, perhaps even stronger than the Philippine central bank (BSP) had expected. The newest winner – and perhaps the last for some time – in the country’s digibanking race is Voyager Innovations’ PayMaya, one of the Philippines’ leading e-wallets.
In recent years, Asian countries have begun experimenting with instant cross-border payments on alternate payment rails, as covered in depth in a recent white paper by Kapronasia and ACI Worldwide. The idea is to enable instant, affordable and transparent payment flows using state-of-the-art digital technology. While much of the activity has been in Southeast Asia, India is an important player in this space as well given the prominence of its United Payments Interface (UPI) platform. The advent of the link-up between Singapore’s PayNow and UPI – slated to go live by July 2022 – marks an important step forward for real-time cross-border payments in the region.
Jakarta-based Xendit is Southeast Asia’s latest fintech unicorn, hitting a US$1 billion valuation after a Series C fundraising round that raised US$150 million led by Tiger Capital Management with participation from returning investors Accel, Amasia and Goat Capital. It has now raised a total of US$238 million. Xendit is best known for its digital payments infrastructure.
It has been a banner year for firms going public in Asia, with the IPO market booming from Hong Kong to Seoul to Mumbai. The same cannot be said for SGX, which has been much quieter. Thus far this year, the exchange has seen just three IPOs. As always, limited liquidity and sub-par valuations are problems. Something needs to be done to turn things around.
Singapore-based Nium became Southeast Asia’s first B2B payments unicorn in late July following a series D funding round that raised more than US$200 million. Nium is using that substantial capital injection to support an ambitious international expansion plan that includes the United States, Europe and India.
PayPal has long been one of the world’s preeminent online payment companies, but to stay at the forefront of the industry it needs to capture new market segments and build a larger presence in Asia Pacific, the fastest-growing region for digital finance. Targeted acquisitions will be integral to PayPal’s strategy, hence the recent purchase of the Japanese buy now, pay later (BNPL) platform Paidy for US$2.7 billion.
It is hard to believe that during the first half of 2021 Chinese IPOs in the United States raised a record US$12.4 billion, per Dealogic’s estimates. That was the boom before the bust, which had been brewing for a long time but came to the fore with the disastrous debut of Didi Chuxing on the NYSE. Like Alibaba’s nixed IPO heralded a widespread regulatory crackdown on fintech, Didi’s is doing the same for Chinese IPOs overseas.
Ant Group-backed Mynt has grown expeditiously thanks to the success of its e-wallet GCash in the Philippines. In January, Mynt closed a funding round that raised US$175 million and brought the company close to unicorn status. In late July, Mynt’s chief commercial officer Frederic Levy told Nikkei Asia that the company was aiming to become a “double unicorn” – with a valuation of US$2 billion. But it is unclear if Mynt can maintain the same level of growth now that the Philippines has five genuine digital banks.
It seems that just about every major Asian economy is warming to the idea of a CBDC now, and India is no exception. Shaktikanta Das, governor of the Reserve Bank of India (RBI), said recently New Delhi may be ready for digital rupee trials by year-end.
Never short of ambition, Revolut is aiming for an Australia banking license roughly a year after formally launching its app Down Under. The UK neobank unicorn is in discussions with the Australia Prudential Regulation Authority (APRA) as it seeks approval to take customer deposits and provide lending services.
With the Australian buy now, pay later (BNPL) segment increasingly crowded, some of the biggest players are searching for greener pastures overseas. While Afterpay has been the most aggressive in terms of global expansion, its rival Zip (Australia’s No. 2 pure-play BNPL firm) is catching up. Having already expanded to New Zealand, the U.S., Canada, Mexico and the UK, Zip is now foraying into Africa with the acquisition of South African payments startup Payflex.
Digital banks are fast becoming a fixture of the Asia-Pacific fintech boom, in many ways a manifestation of Big Tech’s desire to become Big Fintech. In contrast to the United States and Europe, where ascendant digital lenders are usually pure-play operations that began as humble startups, APAC has an increasing number of so-called digibank startups backed by the region’s largest tech companies and some major incumbent financial services firms.
India’s tech sector has been booming for years, but it is only now that the growth is coming to fruition in the subcontinent’s capital markets. Many of the country’s most successful platform companies, like Zomato and Flipkart, and fintechs, like Paytm, are choosing to go public in 2021 and they are listing at home rather than on the NYSE or Nasdaq.
The Philippines has returned to an unenviable position: It is once again one of the only East Asian countries on the Financial Action Task Force’s (FATF) Grey list, alongside Cambodia. Countries on the grey list have been flagged by FATF for insufficient anti-money laundering and/or counterterrorism financing controls. Being on the list creates regulatory headaches for financial institutions – such as higher interest rates and processing fees – and can be detrimental to a country’s business environment.
Sea Group just can’t lose when it comes to investor sentiment, even though the company’s losses widened on an annual basis to US$433.7 million in the second quarter from US$393.5 million a year earlier. The day before it reported Q2 earnings, Sea’s share price was about US$291 and as of August 23 it had reached US$315. Over the past year, the stock has risen more than 105% while Sea’s market cap now stands at US$168 billion.
With 37 retail banks for a population of 23.5 million, Taiwan is not the easiest market for digital banks to crack. Just about every Taiwanese adult has a bank account; in fact, many have more than one because of the tendency of companies in Taiwan to require employees to open a bank account with the company bank. Nevertheless, near ubiquitous smartphone penetration and the popularity of certain platform companies’ ecosystems offer digital banks an opening in Taiwan, especially given the effect of the pandemic on people’s banking habits.
The super app trio of Grab, GoTo and Sea is growing increasingly dominant in Southeast Asia, but not yet in Vietnam. In fact, it is the homegrown MoMo which leads Vietnam’s e-payments market. MoMo says it has a 60% market share and processes US$14 million annually for 25 million users.
Southeast Asia is home to some of the world’s fastest growing economies and is rapidly adopting digital financial technology, including blockchain-based solutions. Thus, it is only natural that central banks in the region are starting to think about a possible role for digital fiat currencies. The first country to make the jump to a CBDC is Cambodia, and it will definitely not be the last.
We have to hand it to AirAsia: They tell the super app story well, probably better than some of the others whose task is less daunting than the beleaguered airline’s. Indeed, AirAsia is not a high-flying tech company aiming to use fintech to take its valuation and exit to the next level, but an airline facing an existential crisis wrought by the never-ending coronavirus pandemic. If AirAsia pulls off its transformation, it will stand as one of the great turnarounds in recent Asian corporate history, and perhaps pave the way for a new breed of platform company.
Not every tech company is cut out to be a fintech. Even the super apps that have bet everything on a fintech transformation will agree with that statement: They just will insist their particular business model is a winner. Not gaming hardware maker Razer though. The Hong Kong-listed firm is the latest non-financial company to have second thoughts about a fintech foray, pulling the plug on its Razer Pay e-wallet and card after failing to win a digital bank license in Singapore.
Revolut is the biggest neobank most of Asia has never heard of. Try as it might, Revolut just has not been able to make much of an impact in any APAC market yet, which is not a huge surprise given the amount of competition it faces and its distant home base in the UK. Revolut needs something to make it stand out from the crowd in APAC. Its new travel app Stays might be just what the doctor ordered.
Try as it might, the cryptocurrency industry has not yet been able to shake its reputation for being not quite above board. The rebellious, underground side of crypto has won it many devoted fans – just not usually among financial regulators. But what if crypto – like many segments of Asia’s fintech industry – found a home in Singapore?