Will Revolut be successful in Asia Pacific?
Forgive us for being a bit skeptical about Revolut’s swing to profitability. It took an awful long time for the company to release its 2021 financial report (we’re now in 2023), and when it finally did, the £26.3m profit the company reported was less remarkable than the fact the company’s auditor could not verify £477 million in revenue from subscriptions, cards, foreign exchange and wealth activities.
Japan’s affinity for cash has made it a relative laggard in adopting digital payments, especially compared to neighbors like Korea and China. Japan only broke the 30% milestone for cashless payments in 2021, partially due to the pandemic. In contrast, Korea was almost 94% cashless in 2020, while China was not far behind at 83%, according to the World Economic Forum.
2022 was a year characterized by slower fintech funding in most parts of the world, especially East Asia, where it had previously been growing expeditiously. East Asia’s premier fintech hub of Singapore, however, managed to buck the trend with funding hitting a three-year high of US$4.1 billion, up from US$3.4 billion the previous year, according to a new report by KPMG.
Laos moves forward with CBDC pilot
Most Asian countries are mulling the creation of a central bank digital currency (CBDC), but only China and Cambodia have launched one. We think that CBDCs make the most sense for countries with pressing financial inclusion needs, and with that in mind, the launch of Laos’s first CBDC pilot led by the same Japanese blockchain company that developed Cambodia’s Project Bakong can be viewed as a positive development.
A commentary in collaboration with Banking Circle.
Large banks have long dominated cross-border payments in Asia Pacific thanks to their control of traditional correspondent banking networks and until recently, the lack of viable competitors. Banks have been particularly dominant in B2B payments as the barrier to entry is higher than in the retail segment.
Assessing the prospects of Green Link Digital Bank
When Singapore announced the winners of four digital banking licenses in December 2020, one name stood out because most of us did not recognize it: Greenland Financial Holdings. To say the Shanghai-based real estate company Greenland was a “dark horse” candidate for a license would be an understatement. It was not even widely known that the company and its blockchain trade finance partner Linklogis had thrown their hats in the ring. Since winning the license, the two companies have named their digital bank “Green Link Digital Bank.”
Why Meta is missing the boat on Asia’s fintech boom
Meta makes almost all of its revenue from advertising. The company has long known it needs a new engine of revenue growth, but it waited too long to introduce payments and explore fintech in general.
In Asia, where fintech growth has generally been much faster than in Meta’s home market of the United States, the company has faced market barriers in some cases and intense competition overall. At this point, it may be able to gain some payments market share in certain Asian countries with WhatsApp Pay, but it will be an uphill climb.
How proxy addressing is reshaping real-time payments in Asia Pacific
A commentary in collaboration with Banking Circle.
The advent of proxy-enabled national real-time payment (RTP) systems has become an integral part of Asia Pacific’s digital financial services market landscape in recent years, driven by central bankers’ determination to make financial flows faster, more efficient and more widely accessible. Southeast Asian countries have been among the most proactive in the development of such real-time payment systems, which have been rolled out domestically first and then gradually expanded into the cross-border space.
Are Chinese IPOs back in the U.S.?
To answer the question posed in the title, yes and no. Yes, Chinese sensor maker Hesai Group recently raised US$190 million in the largest U.S. IPO by a Chinese firm in 15 months, but it may have been a one-off event given investors are especially eager for exposure to the red-hot electric vehicle (EV) market. No, we do not think this yet portends a reversal of the slow deal pipeline for Chinese companies in U.S. capital markets. The underlying U.S.-China relationship remains too troubled for that kind of dramatic shift.
Why the UAE is sanguine about both crypto and a CBDC
The United Arab Emirates (UAE) has emerged as a leading fintech hub of the Middle East, with one of the region’s most dynamic startup ecosystems. From a regulatory standpoint, it is also taking a leading role, with big plans for both cryptocurrency and a central bank digital currency (CBDC). While many countries have adopted one or the other, the UAE is one of the few that seems open to both.
Digital banking makes inroads in Japan
As the most cash-loving advanced economy in Asia, Japan has not historically been eager to digitize its financial services sector – with a few exceptions. One of those is Rakuten Bank, which launched in the twilight of Web 1.0 back in the year 2000. At 23 years of age, Rakuten Bank must be one of the oldest digital lenders in Asia, if not the oldest. Gradually, other online banks are entering the Japanese market to compete with Rakuten.
The epochal e-wallet evolution in Asia Pacific
A commentary in collaboration with Banking Circle.
Mobile wallets are increasingly a preferred payment method across Asia Pacific, from China to Southeast Asia to Australia. Though e-wallet use in the region was growing steadily prior to the pandemic, the abrupt shift to online and contactless commerce in early 2020 supercharged mobile wallet adoption. This has important implications for Southeast Asia – where many people remain unbanked or underbanked and credit cards have yet to gain a strong foothold outside of Singapore and Malaysia.
Why Northeast Asia is ambivalent about CBDCs
China’s launch of the digital yuan has prompted a scramble in Northeast Asia among central banks to assess the merits of CBDCs. Japan, South Korea and Taiwan are all at different stages of CBDC testing that they likely never would have begun if it were not for Beijing’s determination to develop a digital fiat currency. That begs an important question: Does the rest of Northeast Asia need CBDCs? After all, the respective initiatives of Japan, South Korea and Taiwan are inherently reactive, in contrast to Beijing’s proactive approach.
MUFG sees big opportunities for growth in Southeast Asia
Japan’s largest bank is increasingly looking to digital finance in Southeast Asia as an avenue for growth, as its home market is mature, slow to digitally transform and constrained to some degree by an ageing population. In contrast, Southeast Asia’s largest countries still have ample low-hanging fruit, especially Indonesia, a key area of focus for MUFG.
North Korea stole more crypto than ever in 2022
What crypto bear market? North Korea stole a record amount of digital assets in 2022 despite the industry facing unprecedented difficulties. Perhaps the Hermit Kingdom knows something others do not and is betting all that purloined crypto will appreciate handsomely in the years to come. Or maybe it’s just easier for the country’s formidable cybercriminals to pilfer digital assets than other types of money given that the crypto industry continues to operate in the shadows. Whatever the reason, Pyongyang made off with a quite haul last year.
How are Standard Chartered’s Asia digibanking projects going?
One of our favorite ironies about digital banking in Asia Pacific is that incumbent banks have a growing role in the segment, from Hong Kong to Singapore to Taiwan to Australia. It wasn’t supposed to be this way – at least not to our knowledge. What ever happened to good old-fashioned scrappy startup-driven disruption? With that in mind, we turn our attention to two digital lenders that can technically be classified as startups, but are backed by Standard Chartered, a huge incumbent lender operating in 59 countries that earns most of its revenue in Asia.
Singapore is not exactly the Switzerland of Asia when it comes to financial services
Singapore has long been seen as the Switzerland of Asia, a pro-business, largely neutral state with a huge financial services sector catering to an international clientele. Like Switzerland, Singapore is an integral part of the surrounding region yet also has a strong independent streak and never leans too far to one geopolitical side.
Hong Kong should capitalize on sustainable finance opportunities
Hong Kong has been busy preparing to roll out the red carpet for digital assets, but there are other emerging areas of financial services that are less volatile and trouble prone, and well, more sustainable. To that end, Hong Kong way want to focus more attention on green/sustainable finance given the reality of climate change and the significant opportunities the segment is expected to provide. Bloomberg Intelligence estimates that combined ESG assets could surge to US$53 trillion by 2025, with the Asia-Pacific region driving “the next leg of growth.”
Could China reconsider its crypto ban?
The whispers about China potentially reconsidering its ban on cryptocurrency are growing. In fact, some credible (not crypto bros) people are starting to openly moot the possibility, albeit in the most cautious way possible. If asked a year or even six months ago, we would have said that it was highly unlikely given the concerns the central government has about the use of decentralized digital currencies to evade capital controls and how they may foment systemic financial risk. Now we would say that there is a real debate occurring, but that the ban will not be reversed unless the Chinese authorities see compelling economic benefits.
Pakistan’s fintech industry continues its brisk growth
With the world’s third-largest unbanked population, Pakistan is one of the last major nascent markets for fintech. In the past few years, fintech investment has picked up in the country thanks to rising investor interest, supportive government policies and a need for effective digital financial services solutions. Though the deal pipeline started to taper off towards the end of 2022, the long-term outlook remains bright.
Baby steps for Tencent’s global fintech business
Like its rival Alibaba, Tencent has developed a large portfolio of overseas fintech investments. Some of these are strategic bets on rising Big Tech companies with fintech arms, like Voyager Innovations in the Philippines and Sea Group in Singapore, which Tencent believes will eventually be dominant players. Other investments are more focused on facilitating access to the mainland China market for fintechs that have a niche there, such as Australia-founded but Hong Kong-headquartered Airwallex.
Viva Republica is defying the tech slump
South Korea’s Viva Republica is defying the tech slump that has frozen funding for many fintech unicorns, both real and aspiring. In late December, it finalized a US$405 million Series G funding and it says it is now valued at 9.1 trillion won ($7 billion), up from 8.5 trillion won in June 2021, when it raised $410 million in pre-Series G funding at a $7.4 billion (8.5 trillion won) valuation.
How did PhonePe achieve a US$12 billion valuation?
Walmart-backed PhonePe, one of the biggest players in India’s payments market, is now one of the subcontinent’s most valuable private fintech firms with a valuation of US$12 billion following a mammoth US$350 million capital injection. PhonePe’s valuation more than doubled from US$5.5 billion at the end of its previous funding round in December 2020.
Cambodia’s quasi-CBDC is making headway
We have published a few commentaries over the past year noting how central bank digital currency (CBDC) adoption in Southeast Asia is pretty slow. Cambodia is an exception, but its digital fiat currency is not exactly a CBDC in the traditional sense – an important distinction to make. Bakong is probably best described as a blockchain-powered retail payments system managed by the Cambodian central bank that allows interoperability among the different players in the country’s payments landscape.
China is developing a Web3 ecosystem of its own
The Chinese government views cryptocurrency as a serious systemic financial risk and has taken strong measures to minimize its usage in the world’s second largest economy. Though China retains a thriving underground crypto ecosystem, Beijing’s different bans on digital assets ensure that the average Chinese citizen will not be exposed to them.That said, Beijing has not expressed any opposition to blockchain/DLT technology; on the contrary, the Chinese government believes that it can use blockchain for a wide variety of applications, from trade finance to improving supply chain safety.
Why Australia’s Judo Bank may go the distance
Australia’s neobank experiment has largely gone awry, with three of the four original online lenders defunct or now part of an incumbent bank. To be sure, startups fail or get bought all the time – more often than they thrive as independent companies – but we dare say that was not the expectation of the neobanks’ founders, nor Australian regulators who sought to introduce greater competition into the financial services sector dominated by four incumbent juggernauts. The one neobank that remains from that first cohort is Judo, which has carved out a niche lending to SMEs, listed successfully on the ASX and seems poised to reach profitability before long.
Will Japan achieve its ‘cashless vision’ target?
Japan is a well-established laggard when it comes to cashless payments in East Asia. South Korea’s cashless payments ratio is an astonishing 94%; China’s is only a slightly less astonishing 83%; Singapore’s is 60% and Japan’s is much lower at 32.5%, according to data compiled by the Payments Japan Association and the Japan Consumer Credit Association. That said, Japan is still on target to reach its modest target of 40% cashless payments by 2025, and could gradually increase the ratio in the following years.
Taiwan faces a growing crypto headache
Taiwan’s government has historically had an amicable relationship with the cryptocurrency industry because it functions for the most part outside of the Taiwanese banking system and has not caused them many problems. Further, Taiwan’s conservative retail investors have generally been less eager than most of their counterparts in East Asia to jump into crypto investing, which has made digital assets a niche market on the island. However, the latest crypto bear market, and especially the collapse of FTX, have highlighted why the hands-off approach may need to be adjusted.
The Hong Kong IPO market is poised for a revival
After a bleak first half of 2022, Hong Kong’s IPO market regained momentum in the second half of the year. Refinitiv data show that 75 listings raised US$12.69 billion.To be sure, it was a weaker performance than 2021, as the number of deals and total proceeds fell 25% and 70% respectively through early December. Yet ironically, Hong Kong’s IPO market ended up No. 3 globally in terms of funds raised in 2022 after Shanghai and Shenzhen thanks to the rebound in deals in the second half of the year.
Indonesia continues its measured embrace of crypto
Crypto bear market be darned: Indonesia plans to set up a cryptocurrency exchange later this year ahead of a shift of regulatory powers over digital assets to the Financial Services Authority from the Commodity Futures Trading Regulatory Agency, known as Bappebti. The move is part of a broader financial reform push.
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Better late than never? That was our first reaction to the news that at long last, Thailand has reached a decision on digital banks: It will allow them by 2025, and start accepting applications later this year. By 2024, Thailand will issue three digital banking licenses. And of course, online lenders will have to satisfy certain requirements, which we expect to be stringent and effectively eliminate any scrappy startups from even bothering to throw their hats in the ring.
Ant Group is nearly out of the woods
Two years and 2.5 months after its IPO was shelved at the 11th hour, Ant Group appears to be nearly out of the woods. Ant has jumped through countless hoops for regulators over the past few years, from creating a dedicated consumer finance unit to raising its capitalization to agreeing to share consumer data with the People’s Bank of China (PBoC) to having Jack Ma give up control of the company – more on that later. So it is no surprise that with the Chinese economy faltering, battered by zero Covid and then the abrupt shift to living with the virus, that regulators are ready to put China’s tech crackdown in the rearview mirror.
India launched its long-awaited CBDC pilot in early November – wholesale – and early December – retail – with much fanfare. Nine banks are participating in the wholesale pilot and four in the retail pilot, which is focusing on the cities of Mumbai, New Delhi, Bengaluru and Bhubaneswar.