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 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.

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.

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.

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.

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.

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 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.

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.

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.