Fintech Research
The role of fintech in growth markets
Despite Covid-19’s impact on the global economy, the steady pivot to digital financial services has helped fintech and the overall financial services industry emerge from the pandemic relatively unscathed. Indeed, during the low-interest rate environment of the past few years, fintech valuations increased dramatically across nearly every market segment, especially in certain areas like crypto.
Fintech sector in Indonesia is down but not out
What goes up, most come down, even in a huge country with significant financial inclusion needs. In recent years, Indonesia has been a hotspot for fintech investment, and that remains true, relatively speaking, but Southeast Asia’s largest economy is seeing a slowdown as investors tighten their belts and it begins to sink in that the digital banking sector may be overly crowded.
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.
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.
SoftBank's Asia fintech investments could still pay off big
2022 was a tough year for Japan’s SoftBank and its CEO Masayoshi Son. Neither the company nor Son is weathering the global tech slump and general rising investor skepticism towards growth-first, cash-burning startups especially well. In the third quarter, SoftBank’s Vision Fund arm lost a whopping US$7.2 billion, which only looks acceptable when compared with its record US$23 billion loss in the April-June period.
MUFG bets big on fintech
Japan’s largest bank is betting big on fintech. In recent months, Mitsubishi UFJ Financial Group (MUFG) has invested in several ascendant Asian fintech firms, including Indonesia’s Akulaku (also backed by Ant Group) and the consumer finance businesses of Netherlands-based Home Credit NV in Indonesia and the Philippines. MUFG may also acquire Japanese buy now, pay later (BNPL) firm Kanmu for roughly 20 billion yen (US$150.56 million).
Tencent rejigs global fintech business
Like its rival Alibaba, Tencent has developed a large portfolio of overseas fintech investments. Many of these are strategic bets on rising Big Fintech players, like Voyager Innovations in the Philippines, Sea Group in Singapore and Airwallex in Hong Kong via Australia. However, until recently, there has been nothing that clearly links these different companies in Tencent’s fintech ecosystem. The Shenzhen-based company intends to change that with the launch of Tenpay Global and Tenpay Global Remittances.
Will the global tech slump affect Revolut’s prospects in APAC?
Usually in fintech only the strongest survive and the prolonged global tech slump is testing the war chests and business models alike of even the heaviest of heavyweights. Having raised so much cash in the erstwhile go-go, low-interest rate environment that prevailed from the mid-2010s until about 2021, UK “financial services super app” Revolut looks poised to weather this storm reasonably well.
It's crunch time for Southeast Asian platform companies
Southeast Asia’s preeminent platform companies are adjusting to a painful new reality: More is not always better. Sea Group, Grab and GoTo have all expanded at a torrid pace amid a free flow of venture capital funding that only recently started to dry up with the end of ultra-low interest rates and the arrival of greater economic uncertainty. The tougher business environment will put to the test their shaky super app value proposition, especially the idea that fintech works best as part of a broader digital services ecosystem rather than as a pure-play business model.
In Q3 Kakao Bank shines, Kakao Pay lags
Kakao’s fintech results continue to be mixed – a tale of two platforms in some respects. Much like its strategic investor and perhaps spiritual guide Alipay, Kakao has developed a digital bank and payments app as two separate units. Thus far, the online lender Kakao Bank has consistently outperformed the e-wallet Kakao Pay, and that held true once again in the third quarter of the year.We have lauded Kakao many times for developing a profitable financial services super app. It is the only company outside of China to achieve such a feat. However, it might be worth considering at this point if the two separate units are sufficiently complementary.
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Fintech may not work out for Xiaomi
Xiaomi is one of China’s and the world’s largest smartphone makers. But the company is not content with that position – given low margins and extreme competition in the sector – and has long been searching for new avenues of growth. That’s how Xiaomi began to move into fintech several years ago. As it turns out, transitioning from technology hardware into digital financial services is much more challenging than Xiaomi likely imagined.
The evolution of P2P lending in Indonesia
Indonesia is gradually turning into a success story for peer-to-peer (P2P) lending, which is able to meet demand for credit that traditional lenders cannot. In the past few years overall lending by fintechs has been growing much faster than that of banks in Southeast Asia’s largest economy, according to the Indonesian Joint Funding Fintech Association (AFPI).
Assessing Bukalapak's fintech forays
You can’t be a big platform company in Indonesia these days and not foray into fintech, not with 181 million unbanked people and many others who are underbanked. Compared to most of its competitors, Bukalapak has been more deliberate about its entry into digital financial services, but it benefits from having fewer costly business units: no ride hailing or food delivery, for instance.
Will Sea’s austerity measures right the ship?
The wheels are coming off the bus of Sea Group’s cash-burning tripartite digital services ecosystem of gaming, e-commerce and fintech amid jitters in the global economy and investor skepticism of the company’s growth-first model. If you thought that even as it hemorrhaged cash by the hundreds of millions of dollars, Sea’s expansion to places like Poland, India and Colombia did not make a lot of sense, you are not alone. The question now is if the company’s austerity measures can both stop the bleeding and reassure investors that its fundamental business model is sound.