Asia Financial Industry Blog

At first blush, Taiwan has taken a major step forward in its acceptance of virtual currency by issuing regulations specifically for security token offerings (STOs), rather than requiring them to abide by existing securities laws. Taiwan's Financial Supervisory Commission (FSC) announced the new regulations in late June and expects to implement them as early as October. The FSC says that the new regulations will benefit startups seeking non-traditional fundraising sources.

WhatsApp has moved one step closer to launching its payment business in India by setting up local data storage facilities, according to India's The Economic Times. As a condition of market entry, the Reserve Bank of India (RBI) requires digital payment providers to first set up local data storage facilities and then submit an audit report to the central bank. Market insiders say that WhatsApp Payments is expected to go live with its Unified Payments Interface-based service with ICICI Bank. Services through Axis Bank, HDFC Bank and SBI are likely to follow, they say.

In April, the Hong Kong-based fintech startup WeLab quietly won the former British colony's fourth virtual-banking license. Founded in 2013 by ex-Citibank executive Simon Loong and two other partners, the company has steadily grown over the last six years. It now has 30 million customers in Hong Kong and mainland China as well as a staff 600 strong. The company expects to launch its virtual bank - named WeLab Digital - between October and January.

With the launch of its cryptocurrency Libra, Facebook is diving headfirst into digital banking. The U.S. social-media giant can draw on its massive global network of 2.3 billion users as it forays into finance. Yet Facebook will not be introducing Libra to China, which has the world's largest number of internet users. China blocked Facebook a decade ago and has moved to cripple crypto to control systemic financial risk and discourage capital flight. If Libra is a success, being excluded from it could have major ramifications for China's fintech development. At the very least, Beijing's own fintech system would be further isolated from the rest of the world.

Hong Kong banking giant HSBC can no longer rest on its laurels: The virtual banks are coming. With its deep local roots and wealthy customer base, HSBC has long been the dominant retail bank in the city. With the arrival of internet-only banks backed by the likes of tech giants such as Alibaba and Tencent, HSBC faces serious native digital competition for the first time.

KoinWorks, Indonesia's largest P2P lending platform, has raised US$16.5 million in its Series B funding round, signaling strong interest for alternative lending sources in Southeast Asia's largest economy. Established in 2016, KoinWorks caters to the underbanked and unbanked alike in Indonesia, whose scant credit profiles do not sit well with traditional lenders.

The government of Indian Prime Minister Narendra Modi is not known as a friend of the crypto community. With his recent reelection, virtual currency's future in India, the world's second most populous country and its soon-to-be No. 3 consumer market after the U.S. and China, looks uncertain at best. At worst, India could flat out crypto and criminalize its possession and use.

The Vietnamese mobile wallet Vimo and point-of-sale provider mPOS are merging to form a new entity called NextPay, which will seek to raise US$30 million to expand domestically and elsewhere in Southeast Asia. NextPay's objective is to combine online and offline solutions into one with Vimo as the online channel and mPOS as the offline one.

With an eye on going public, Singapore's ride-hailing giant Grab needs to show profitability, or failing that, strong potential to be in the black soon. Serving as a high tech taxi or food delivery service no longer looks like it will be enough for investors. Instead, Grab wants to be a go-to digital bank. If Singapore regulators grant Grab a virtual-banking license, the company will be poised to test out its fintech hypothesis in its home market.

Indian fintech giant Paytm is reportedly in talks to acquire the Mumbai-based insurtech firm Coverfox for $100-$120 million in cash. If the acquisition is a success, it will be the largest by Paytm and mark the firm's arrival to India's insurtech segment with a bang, posing a direct challenge to market leader Policybazaar.

Australia's banks are in for quite a fight if Morgan Stanley's new report is accurate. The U.S. investment bank estimates in its newest Australia In Transition report that digital wallets could capture US$22 billion of revenue that in a less digitized world would have gone to the banks. Morgan Stanley's advice for the banks is blunt: Up your digital game before it's too late.

Korea's would-be challenger banks received a stern rebuke from the nation's Financial Supervisory Commission in May as the top financial regulator rejected applications for a virtual-banking license from Viva Republica-backed Toss Bank and Kiwoom Securities-backed Kiwoom Bank. The regulator found Toss's capital situation problematic and Kiwoom's plan unfeasible. Both Toss Bank and Kiwoom Bank could re-apply for internet-banking licenses later in the year.

Chinese peer-to-peer lending firms, reeling from the crackdown on P2P business at home, are starting to look for new business overseas. The fledgling India market is of great interest to several Chinese P2P companies, including 9F Group, CashBUS, and WeShare, according to reports in India's English-language media. The Chinese firms are attracted by India's huge size, steady economic growth and relative easy of market entry.

There must be room in Asia for one more super app. Ride-hailing giants Grab and Go-Jek are going that route, determined to show investors that they're more than glorified high-tech taxi services. The Philippines' Yuchengco Group, a family-owned conglomerate with businesses ranging from banking and insurance to travel, healthcare and funeral services, is now throwing its hat into the super app ring, with a very different approach. Yuchengco intends to replicate its offline services online within a single app: It sounds like reverse O2O, in the sense that services which were once offline are about to go online.

Paytm’s payments bank (PPB) has become India's first profitable business of its kind, posting a net profit of Rs19 crore ($2.7 million) in fiscal year 2018-19. PPB says that it accounts for nearly a third of all mobile banking transactions in India and processes over Rs3 lakh crore worth of digital transactions per year, second only to India's top lender State Bank of India. With over Rs 500 crore deposits in its savings account, PPB is the top payments bank in India in terms of deposits.

China's UnionPay can't beat them, so it might as well join them: The payments giant is entering a partnership with UK-based fintech Tribe Payments that will allow banks and fintechs to issue its credit cards in Europe from July. Facing intense competition from internet finance titans Alipay and WeChat Pay at home, UnionPay is keen to drum up new business abroad. What better way than to cooperate with a rising British fintech?

Uber's recent initial public offering underwhelmed investors, as the ride-hailing juggernaut raised $76 billion instead of the $120 billion that had been once expected. Since the IPO, Uber has lost about $5 billion in market capitalization. Analysts say that it could lose another $1 billion before the year ends.

The main problem for Uber is simple: Its core ride-hailing business isn't profitable. For an early-stage startup, profitability isn't essential. But Uber has been around for a decade, and it's still in the red. In 2018, it posted a net loss of $1.8 billion. Chances are high that the company will not make a profit this year either.

For the first time in over two decades, China’s central bank has taken control of a private bank. Baoshang Bank Co. which was founded in 1998 is headquartered in Baotou. With assets worth about 576 billion yuan ($83 billion) the lender is well established in the Inner-Mongolia region. Tomorrow Group, which holds around 89 percent of Baoshang Bank is claimed to have expropriated a serious amount of capital leading to major credit problems.

South Korean regulators have dealt a blow to the ambitions of Kiwoom Securities and Viva Republica by rejecting their respective applications for a banking license. Both of those firms had sought to launch a challenger bank that would have competed with K bank and Kakao bank, who have operating for several years in Korea.

South Korea's Financial Supervisory Commission (FSC) said that it rejected Kiwoom Bank because it was not sufficiently innovative, while the regulator saw governance and financing problems in Viva's Toss Bank.

In Taiwan, Japanese messaging app Line has led the ascendant mobile payments market on the back of its strong brand cachet. Among Taiwan's population of 23 million, there are 20 million Line users. More than 6 million Taiwanese have its payment app Line Pay on their handsets. Line is probably the only app with a shot at becoming the WeChat of Taiwan.

UK-based fintech Revolut has done well in Europe, where it is among the region's most prominent challenger banks. Before it acquired a banking license, Revolut built up a large customer base by offering a Visa or Mastercard-branded card tied in with a multi-currency account that allows users to transact in foreign currency on their smartphones at the interbank rate. Revolut has gradually added more services for users, such as no-fee ATM withdrawals overseas, pay-per-day insurance and the option to purchase cryptocurrency.

Pi Pay is the largest digital wallet in Cambodia's nascent fintech space, having processed 7.5 million transactions of $170 million as of March. The company has 250,000 users and 3,500 merchant partners.

Founded in mid-2017, Pi Pay is unique among Cambodia's fintechs for its strategic partnerships with traditional financial institutions and internet financiers alike. Among its key partners are Alipay, WeChat Pay and Korea's KB Kookmin Bank. The tie-ups with Alipay and WeChat Pay allow Pi Pay to tap the sizable Chinese tourist market in Cambodia. By 2020, Cambodia expects roughly 2 million Chinese visitors per year. Partnering with Kookmin Bank gives Pi Pay access to the 76,000 users of the banks' digital platform Liiv in Cambodia. Last year, Liiv processed overseas wire transfers of $17 million and extended $19 million in loans.

Alipay and WeChat Pay have been on a torrid expansion streak, setting up shop everywhere from Southeast Asia to Middle America. The digital wallets of Alibaba and Tencent seem intent on taking their battle for the wallet share of Chinese consumers global.

In Nepal, which is popular with Chinese visitors, the fintech giants got a little ahead of themselves. By facilitating payments by Chinese tourists in renminbi at Alipay and WeChat points of sale, the companies allowed the transactions to bypass the Nepalese banking system in violation of local law and prompted a stern rebuke from Nepalese regulators.

China has a complicated relationship with blockchain technology. Until the fall of 2017, China was the largest market for Bitcoin. But Beijing ultimately couldn't tolerate the decentralized nature of virtual currency and its utility in allowing Chinese citizens to evade capital controls, or in some cases, launder money. The ensuing crypto crackdown may turn out to be much like President Xi Jinping's anti-corruption campaign: never-ending.It's now clear that China will not allow decentralized digital currency in its financial system.

Taiwan may be the only market in Asia that can be called overbanked, making it a true regional outlier. In these commentaries, we usually discuss Asia's unbanked or underbanked populations. In Pakistan, for instance, 100 million people - almost half of the population - do not have a bank account. They are unbanked. The country as a whole is underbanked. In Taiwan, however, nearly every adult has several bank accounts. Taiwanese firms often ask workers to open a bank account at the company's preferred bank. Many people open new accounts each time they change jobs.

India's fintech giants Paytm and Ola are both entering the credit-card business, a move that should boost cashless transactions in an ascendant payments market estimated to reach $1 trillion by 2023. Digital wallet Paytm is cooperating with Citibank while ride-hailing juggernaut Ola is working with State Bank of India and Visa. Credit cards could offer Paytm a way to better compete with the U.S. tech giants who recently entered India's payments segment. For Ola, credit cards are a new way to generate revenue from its huge userbase. Visa and SBI hope to tap Ola's massive userbase to grow their own customer pool.

Ironically, both fintech giants are turning to a traditional financial platform to grow their businesses. Perhaps there is some truth after all to bromides about how financial incumbents and upstarts have more reasons to work together than compete with each other.

Chinese internet giant Alibaba has been trying to go global for years. Yet its core e-commerce business - made in and for China - remains dependent on its home market. The key revenue generators, the online shopping platforms Taobao and Tmall, barely have a footprint outside of Greater China.

Rather than take those platforms overseas, Alibaba hopes to become dominant in China's near abroad by acquiring stakes in local e-commerce champions, like Singapore's Lazada and Indonesia's Tokopedia. Alibaba wants to replicate the ecosystem that has worked so well in its home market of an e-commerce platform, logistics and of course, digital banking.

Ping An is a Chinese holding conglomerate with one of the largest market values in the country. Founded in 1988, it is valued at over $125 billion and is the largest insurer in the world to this date. Ping An is known for its fintech subsidiary, OneConnect which is a cloud-based technology service designed for small to medium-sized financial companies. OneConnect is the largest financial cloud platform across all of China and stretches all the way to Singapore.

Singapore's race with Hong Kong to become Asia's fintech hub is heating up as the city-state mulls issuing licenses for virtual banks. Both cities have long been major regional banking centers. With Hong Kong increasingly reliant on business from mainland China, Singapore has a chance to capture more regional business, especially from Asean.

Less than two years ago, China was the world's virtual-currency capital by trading volume. On the eve of the great crypto crackdown in September 2017, China accounted for 90% of the world's Bitcoin trading. Miners capitalized on cheap electricity rates in far-flung provinces to churn out as many digital coins as their power supplies permitted. Crypto bulls lauded Beijing's apparent embrace of distributed ledger technology and decentralization.

As it turns out, the celebration was premature. In a move to control what it perceives as systemic financial risk, Beijing has been gradually squeezing the life out of the China crypto market. The Chinese government has banned ICOs and the use of fiat currency in virtual-currency purchases as well as blocked related websites. Recently, it began working to eliminate crypto mining. At the same time, the WeChat super app banned crypto trading effective May 31.

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