Malaysia is set to introduce digital banking following the passage of a new regulatory framework by its central bank in December. The central bank said it would issue up to five licenses to qualified applicants to set up digital banks. The licenses will allow the holders to conduct either conventional or Islamic banking business in Malaysia. Capital requirements are not low, with an absolute minimum of RM 100 million (US$23.7 million) necessary during a three to five year foundational phase and thereafter RM 300 million.

The Trump administration has not shown much enthusiasm for a sovereign digital currency so far. With China's advances in the area, however, Washington's stance could be set to change. In early February, a member of the United States Federal Reserve Bank board of governors said the Fed is researching and experimenting with distributed ledger technologies and their virtual-currency applications. Among the applications being explored is a central bank digital currency (CBDC).

Lael Brainard, who chairs multiple Fed committees, made the remarks at a speech during an event on payments held at Stanford University. Brainard noted that 80% of central banks globally are researching CBDCs. However, she stopped well short of endorsing a full-throated campaign to create a digital dollar, devoting considerable attention to the challenges and risks posed by digital fiat currencies.

China's fintech giants have been quietly expanding in emerging markets that are participating in China's Belt and Road Initiative (BRI), which seeks to deepen Beijing's economic ties with the world. South Asia has become a geographic area of focus for Ant Financial's Alipay and Tencent's WeChat Pay. Aside from India, major South Asian nations have few domestic digital payments options, and limited foreign fintech investment. They offer Alipay and WeChat Pay a chance to gain a first mover's advantage.

That's why WeChat Pay has been determined to enter Nepal. Of course, Chinese tourists do visit Nepal, which is known for its resplendent scenery, but in the long run that market is not as crucial as local consumers and small businesses. In early February, Nepal Rastra Bank (NRB) approved WeChat Pay to operate in the South Asian country.

Some analysts are adamant that Singapore needs digital banks to boost financial inclusion. That's an interesting argument, given that 98% of Singaporeans over 25 have a bank account, according to research by Allianz Global Wealth. By Allianz's estimates, globally only Israel has a higher rate of financial inclusion than the Lion City.

In Singapore's case, this type of hard data is more instructive than a nebulous concept such as being "underbanked." A report published in October 2019 by Bain & Co., Google and Temaek Holdings found that 4 in 10 Singaporeans were underbanked, implying they don't have access to all the essential financial services they need. The findings might be more convincing if the same report had not also found that 40% of Thais and 45% of Malaysians were underbanked. The latter two countries are middle income, with per-capita GDP levels far below Singapore's.

China has demonstrated a willingness to innovate in the financial services technology sector. For example, the Chinese government has announced accelerated plans for a Central Bank Digital Currency (CBDC), the People's Bank of China (PBOC) has filed scores of CBDC patents and fintech initiatives like Baidu’s Xuperchain network have been introduced to great fanfare. What's more, the PBOC's Fintech Development Plan (2019 – 2021) expresses support for technological innovation, including the use of public cloud. 

However, the Chinese government is also traditionally cautious in regard to security and control. Thus, financial services companies in China who are contemplating the migration of critical business applications to the cloud would be well-advised to plan carefully. To that end, Chinese regulators have reportedly engaged in private conversations with information security representatives from several foreign banks, advising them that critical hosting engagements in the cloud will need to be handled exclusively by specialised "Financial Community Cloud" providers who have been certified by the government. 

The Vietnam fintech market was Southeast Asia's hottest in 2019 after Singapore, an impressive feat given that the Lion City is a hub for the entire region. From Jan. to Sept. 2019, Vietnam accounted for 36% of Southeast Asia's venture-capital fintech investment compared to 51% for Singapore, according to a December report from the United Overseas Bank (UOB),  PricewaterhouseCoopers (PwC) and the Singapore Fintech Association (SFA). Vietnam was far ahead of other Asean economies, including Indonesia (12%) as well as the Philippines, Thailand and Malaysia (2% each).

Vietnam's Banking Strategy Institute reckons that the nation's fintech market will reach US$9 billion in value this year, which will make it the region's fourth largest. Fast growth in the fintech sector and the potential for the industry to boost financial inclusion probably explain why Hanoi nixed a plan to cap foreign ownership in payment service intermediaries at 49%, which was proposed by the State Bank of Vietnam (SBV) in November.

India fintech unicorn Paytm is shifting its focus to merchants in a bid to better compete with rivals Google Pay and Walmart-backed PhonePe. Paytm lags those two firms in its share of the transactions on India's state-backed real-time UPI payments system. As of October, UPI handled more than 50% of India's digital transactions, according to research firm Razorpay.

Credit Suisse reckons that India’s payments market could reach $1 trillion by 2023. Four or five major firms are likely to vie in India's payments market after consolidation, analysts say. A duopoly like Ant Financial-WeChat Pay in China is unlikely in the India market.

Australian neobanks are tapping strong demand for digital banking services to swiftly build up their deposit bases. Among the virtual banks reporting expeditious deposit growth are Xinja, Up!, Judo, 86 400 and Volt Bank. Xinja's growth has been especially impressive: It reports amassing $115 million in deposits in just 20 days. That would put Xinja on track to reach its goal of $120 million in deposits for the year by the end of February.

Reform is coming to China's US$27 trillion payments market belatedly. Very belatedly. U.S. credit-card giants have been trying to crack the market for years, to no avail. The market should have been open to them by 2006, per China's WTO commitments. But Beijing has hesitated to open its financial industry to foreign investment. It is finally signaling greater openness amidst the toughest business conditions China has faced in decades, perhaps since the beginning of economic reforms in 1978.

In mid-February, Mastercard announced it had received approval from the People's Bank of China (PBOC) to formally establish a bank-card clearing business in China. The green light for Mastercard comes three weeks after Beijing and Washington signed a phase-one trade deal to ease tensions in their strained economic relationship. American Express has also recently been granted approval to set up a bank-card clearing business in China. Both Mastercard and Amex are working with local Chinese partners in joint ventures. 

The Monetary Authority of Singapore (MAS) announced on 28 January of the enforcement of a new Payment Services Act, the first comprehensive legislation of its kind that regulates distinct activities in payment services ranging from digital payments to the trading of cryptocurrency such as Bitcoin and Ether.

The Payment Services Act comes at a well-coordinated time before the MAS awards a total of five digital bank licenses to a select few of its 21 reported applicants. While that may be the case, some have begun to speculate on the effects and ramifications the Act will have on fintechs that are hoping to or have already begun operations in Singapore.