Digital banking efforts accelerate in the Philippines

Written by Kapronasia || April 15 2021

The Philippines is determined to speed up financial inclusion through digitization. By 2023, the BSP aims to digitize at least 50 percent of total retail transactions and bring 70% of Filipino adults into the formal financial system. To that end, it introduced guidelines for digital banks in December 2020 and has thus far received two applications. The rules require licensees to hold at least 1 billion pesos in capitalization, operate a head office in the Philippines and offer only-only banking services. Licensees are not permitted to set up physical branches. The review process will likely carry on through 2021, with the winners being announced on a rolling basis. Yet some fintechs are determined to enter the market earlier.

Can Razer still become a digital bank?

Written by Kapronasia || April 14 2021

Singapore’s digital banking race had far more losers than winners. Of all the failed bids, Razer’s must have been among the hardest to swallow. The gaming hardware firm was a strong contender and had Sea and Grab not both been in the running, may well have prevailed. The question now is, can Razer still become a digital bank? The answer is maybe in Malaysia and/or the Philippines.

Will Thailand issue digital bank licenses?

Written by Kapronasia || April 07 2021

Thailand is one of the few major Southeast Asian economies that has not unveiled a digital banking roadmap. Singapore's digital banks will go live in 2022. Malaysia will accept applications for licenses this year and issue them by early next year. The Philippines recently announced it would issue digital bank licenses. Indonesia plans to clarify digital bank regulations by mid-2021. In contrast, Thailand's central bank has been quiet about the possibility of digital banks for more than a year.

Will Australia's neobanks endure?

Written by Kapronasia || March 30 2021

Australia's digital banking honeymoon is winding down. With Xinja and 86 400 both out of the picture - albeit in very different ways - the Australian Prudential Regulatory Authority (APRA) is moving to raise the sector's barrier to entry. It will become harder to get a banking license. Under the revised regulations, neobanks will have to be better capitalized and launch both an income-generating asset product and a deposit product in order to be approved for a full license. 

WeLab teams up with Allianz Group

Written by Kapronasia || March 18 2021

Hong Kong's virtual banking field is crowded with eight neobanks that have similar value propositions. In their fledging stage, the digibanks have focused on quickly bringing customers onboard, highlighting their digital agility and offering high deposit interest rates for a limited time. The unicorn WeLab, the only native Hong Kong virtual bank, is one of the first to signal it has a broader strategy. WeLab in early March received an undisclosed investment from Allianz Group's digital investment unit as part of its Series C-1 fundraising and plans to collaborate with Allianz's asset management arm to develop wealth management products.

Japan's Line has super app potential. Its messaging app is popular in Japan, Taiwan and Thailand. It has content, e-commerce and a growing portfolio of fintech services, with Line Bank set to launch in Taiwan by the middle of the year. And a recent merger with SoftBank affiliate Z Holdings brings an additional US$4.7 billion in capital to the table. The new entity, which integrates Line with Yahoo in Japan, projects that it will post revenue of 2 trillion yen and operating profit of 225 billion yen by fiscal year 2023. It is the brainchild of SoftBank founder Masayoshi Son, who aims to build a Japanese tech juggernaut able to compete with Google, Amazon, Facebook and Apple in Japan.

Fintech is the magic glue that holds startup ecosystems together in Asia. One after another, the region's biggest platform companies have pivoted to fintech, and then declared themselves super apps, usually in that order. Indonesia's Traveloka is expanding its fintech offerings from Indonesia to Thailand and Vietnam as it eyes going public in the U.S. this year through a blank-check company.

Sea Group shrugs off US$1.62 billion loss

Written by Kapronasia || March 09 2021

Sea Group's latest earnings report is packed with good news. Its gaming and e-commerce businesses grew expeditiously in 2020 as people stayed home, shopped online and played online games. EBITDA surged to US$107 million, compared to a loss of US$178.6 million in 2019. Gross profit doubled to US$1.3 billion from US$604 million a year earlier. Net income, however, remained negative. In fact, net losses widened to US$1.62 billion from US$1.46 billion. The question for Sea and investors is, does it matter?

P2P lending's future in South Korea looks shaky

Written by Kapronasia || March 08 2021

When South Korea introduced a peer-to-peer (P2P) lending law last year, it seemed regulators had paved the way for the industry to grow stably. Seoul recognized that P2P lending could promote financial inclusion. The industry just needed proper supervision to minimize fraud and loan delinquency. However, the loan delinquency rate is rising, Korea's fintech giants are cutting their ties with P2P lenders and many of the firms are struggling to meet the law's requirements.

Why is TymeBank expanding to Southeast Asia?

Written by Kapronasia || March 02 2021

South Africa’s TymeBank has big plans for Southeast Asia. The South African neobank plans to launch a digital bank in the Philippines and may also apply for a digital bank license in Malaysia. Measured by account numbers, Tyme is one of Africa’s most successful digibanks, claiming to have signed up almost 3 million customers since its launch two years ago. In late February, Tyme announced it had raised US$109 million from investors for expansion in Southeast Asia, one of the largest deals ever by a fintech in South Africa.

Hong Kong faces rising fraud and money laundering

Written by Kapronasia || March 01 2021

Hong Kong's status as a global financial center and lack of capital controls have long exposed it to certain financial crime risks. In 2020, the former British colony faced an unusual convergence of a recession, political tension and a once-in-a-century pandemic that upended society. Under that tough scenario, Hongkongers were scammed out of a record HK$8.33 billion, of which authorities managed to recuperate about HK$3 billion.

Digibanking key to Gojek-Tokopedia deal

Written by Kapronasia || February 24 2021

Gojek and Tokopedia are Indonesia's two most valuable startups and preeminent tech firms. Merging the two unicorns, with their mostly complementary services, makes a lot more sense that combining Gojek with its arch-rival Grab. While Grab-Gojek talks dragged on for months, Gojek and Tokopedia will not waste any time. They do not want to fall farther behind high-flying Sea Group, which is outperforming the Indonesian companies on their home turf.

Will AirAsia's super app gambit take flight?

Written by Kapronasia || February 22 2021

Once upon a time, super apps began as e-commerce platforms or free messaging services. They tapped the network effect to build giant user bases. Because their overhead was low, they could afford to be patient about monetization. Transportation companies do not have the same luxury, especially airlines reeling from the pandemic's effect on air travel. Yet Malaysia-based AirAsia is doubling down on its super app strategy first announced last year. In March, AirAsia will expand its food delivery service airasia food from Malaysia to Singapore.

Asia's super apps will aim to cash in on fintech in 2021

Written by Kapronasia || February 18 2021

Since the advent of the internet, technology startups have disrupted one industry after another. It was only a matter of time before they set their sights on financial services.

As it turns out, banking is harder to disrupt than retail, transportation, entertainment or almost anything else. The reason is simple: Trust is paramount in banking and takes time to build, while most digital banks have yet to develop compelling value propositions.

A few of Asia's platform companies have defied this conventional wisdom. The most notable is WeChat, the Tencent-owned app that bundles messaging, digibanking, e-commerce and entertainment under the same umbrella. WeChat was not the first platform company to thrive as a fintech - Alipay was - but it was the first to harness messaging's network effect for that purpose.

Can P2P lending thrive in Indonesia?

Written by Kapronasia || February 10 2021

P2P lending is one of the fastest growing fintech segments in Indonesia. Demand for credit in Southeast Asia's largest economy is strong while its availability to most Indonesians through the traditional banking system is limited. Indonesia has tens of millions of people who are either underbanked or unbanked. Either way, they cannot easily get a bank loan. P2P platforms offer a convenient alternative. As of October 2020, Indonesia's online lenders had disbursed Rp 56.16 trillion in new loans, up 24% year-on-year, while the NPL ratio was 7.58%, according to data compiled by the country's Financial Services Authority. 

Hong Kong's virtual banks have their work cut out for them

Written by Kapronasia || February 09 2021

Two years ago, Hong Kong made fintech history in Asia as the region's first major economy to greenlight digital banks. As of the end of 2020, all eight of the banks were finally live. Political and covid-related disruptions had delayed their launch. Judging by the digibanks' marketing literature, they are poised to redefine banking in Hong Kong as we know it. The reality is more nuanced.

Fintech firms face an uncertain future in China

Written by Kapronasia || February 03 2021

Fintech crackdowns in China tend to snowball. That was the lesson learned when Beijing began culling crypto and P2P lending firms. At first, it seemed those industry segments might survive if they could assuage regulators. It later became clear that the only way to satisfy regulators was to shut down or move into another line of business, as erstwhile P2P juggernaut Lufax did. China's fintech giants, once seemingly unassailable, now face their own day of reckoning with regulators. Ant Group and its counterparts are probably too big to fail. But they are not too big to be cut down to size.

Why did NAB buy out 86 400?

Written by Kapronasia || February 01 2021

Barely a month after Xinja's abrupt demise, another Australian neobank is exiting the market. This time though, the said bank is being bought out, not folding like an accordion. It would seem that National Australia Bank (NAB) made 86 400 an offer the neobank could not refuse to the tune of AU$220 million. Shareholders cannot complain. Australia's third-largest lender had already purchased an 18.3% stake during 86 400's Series B fundraising round and says it is paying a premium to the price investors had paid when they invested in the neobank.

Rakuten launches Taiwan's first virtual bank

Written by Kapronasia || January 27 2021

Taiwan finally has an operational digital bank. Rakuten International Commercial Bank (RICB), backed by the Japanese e-commerce giant, recently became the first of three digibanks approved by Taiwan's Financial Supervisory Commission (FSC) to go live. RICB will initially offer deposits, fund transfer, small loan and debit card services and later expand into mortgages and corporate loans. Rakuten has had an internet bank in Japan (Rakuten Bank) for more than a decade. 

Kakao Bank set for a blockbuster year

Written by Kapronasia || January 26 2021

Digital banking is a perilous pursuit. Just look at Xinja's sudden collapse or Monzo teetering on the brink. But that has not stopped cash-flush platform companies from trying to ride the digibanking wave to a blockbuster exit. So far, the results are mixed. One of the success stories is Korea's Kakao Bank, which borrowed a page out of WeChat's book and turned a ubiquitous messaging app into a money-making digibank. Kakao Bank is everything most digital banks are not: focused, profitable, and probably sustainable.

Sea doesn't need to be a super app to thrive

Written by Kapronasia || January 25 2021

Platform companies counting on digibanking to lift their fortunes now routinely refer to themselves as "super apps" in the vein of China's WeChat. The two most prominent of them are Grab and Gojek, Southeast Asia's two most valuable startups. But being super and profitable are not one and the same. Under pressure from investors to reduce their cash burn and produce a viable exit strategy, both companies have sought a game-changing merger that could help them establish market dominance in digital banking. The M&A activity is accelerating pace as Grab and Gojek lose ground to Sea Group in Indonesia, Southeast Asia's largest economy.

Will Gojek merge with Tokopedia?

Written by Kapronasia || January 21 2021

Rumors of an impending Grab-Gojek merger are looking more like smoke and mirrors by the day. After all, combine two similar questionable business models and and what do you get? Here is what you do not get: a company capable of slowing Sea Group's momentum in Indonesia. With gaming and e-commerce in the same ecosystem, Sea has stickiness that Gojek and Grab lack. With that in mind, perhaps Gojek could merge with a company able to complement its core services of ride hailing, food delivery and payments. One possibility is Indonesian e-commerce giant Tokopedia.

China's money-laundering travails are growing

Written by Kapronasia || January 19 2021

China has a fast growing money-laundering problem. Beijing issued a record RMB 628 million (US$97 million) in fines for money laundering violations in 2020, up nearly 300% over a year earlier, according to a new report by PriceWaterHouseCoopers. Since payment firms accounted for 42% of all fines issued, it is no surprise that Chinese regulators are enhancing oversight of fintechs.

Grab is going all in on digital banking. In the period of less than a month, Southeast Asia's most valuable unicorn has won a Singapore digital bank license and raised US$300 million in a funding round led by South Korea's Hanhwa Asset Management. That was the first external funding for its fintech arm. Other participating investors included long-time Grab backers GGV Capital and K3 Ventures as well as eBay founder Pierre Omidyar's Flourish Ventures.

The Philippines must act swiftly to implement tougher anti-money laundering (AML) legislation or it will likely be placed on the Financial Action Task Force's (FATF) gray list alongside failed states such as Syria, Yemen and Zimbabwe. Countries on the gray list, which is updated annually in February, are identified as having strategic deficiencies in their anti-money laundering /counterterrorism financing (CFT) regime that pose a risk to the global financial system. Enhanced compliance procedures required for transactions with financial institutions located in gray-list countries could make it harder for the Philippines' many migrant workers to remit money home and reduce the country's attractiveness to investors.

Malaysia moves ahead on digital banks

Written by Kapronasia || January 12 2021

Malaysia's digital banking race will be the one to watch now that Singapore's has finally ended. On January 1, Bank Negara Malaysia (BNM) formally invited applications for digital banking licenses. The deadline for submission will be June 30 and BNM will announce up to five winners by the first quarter of 2022. Compared to Singapore's, this should be more of a wide open race. Fewer tech giants will be in the running, although Grab will likely throw its hat into the ring.

Not all Aussie neobanks are birds of a feather

Written by Kapronasia || January 04 2021

December was an eventful month for Australia's neobanks. Xinja's demise made waves, showing that it does not pay to keep building atop a flimsy foundation. Castles in the air must come down. And yet, some Aussie neobanks are thriving. Shortly after Xinja said it would turn in its banking license, Australian Financial Review reported that Judo Bank was set to raise up to AU$200 million from investors, bringing its valuation to AU$1.65 billion.

Why did Gojek invest US$160 million in Bank Jago?

Written by Kapronasia || December 23 2020

The Grab-Gojek rivalry is fast becoming the stuff of legend. Barring a merger, those two Southeast Asian decacorns are determined to one-up each other for evermore. The rivalry began with ride hailing and food delivery and has intensified in the fintech sector, the best hope for both firms to reach profitability and provide their deep-pocketed investors with an attractive exit. Following Grab leading a US$100 million funding round in Indonesian e-wallet LinkAja, Gojek spent US$160 million to increase its stake in PT Bank Jago to 22% from 4%. It is Gojek's largest investment yet in financial services.

Xinja reaches the end of the line

Written by Kapronasia || December 22 2020

In the twilight of 2020, warnings about shaky neobank business models often fall on deaf ears. For most neobanks and their investors, the prevailing business model remains growth first, ask questions later. Perhaps the abrupt collapse of Xinja, an erstwhile high-flying Australian neobank, will give others in the sector pause about their approach. Like most of its peers, Xinja telegraphed extreme confidence about its prospects. Right up until the end, Xinja was cool as a cucumber, assuring the public that a huge investment from Dubai-based investors was on the way. As it turns out, the cash is missing in action. And it is quite a sum.

Taiwan wants to regulate finance more than grow the industry

Written by Kapronasia || December 21 2020

Taiwan has had no shortage of opportunities to become a regional financial center. Most recently, Hong Kong's business environment declined markedly, prompting calls in Taipei to attract financial business from the former British colony. That will not happen though. Taiwan's regulatory environment is too restrictive. The business that leaves Hong Kong will instead go to Singapore and Tokyo.

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