Fintech Research
Back in 2016, when the European Union (EU) released its General Data Protection Regulation (GDPR), lawmakers from the rest of the world welcomed it as a pioneering model to study and cite. So, when European Commission President Ursula von der Leyen announced in 2019 that her organisation had ambitions to take GDPR-like leadership in regulating Artificial Intelligence (AI), technologists and governance professionals across the globe took note. Ms. von der Leyen stated in a speech before the European Parliament last November, "With the General Data Protection Regulation we set the pattern for the world. We have to do the same with artificial intelligence."
Roughly 100 days later, in February 2020, the EU published the strategy paper, "White Paper on Artificial Intelligence - A European approach to excellence and trust." Disappointingly, an initial reading of the document suggests that regulators in Asia and the rest of the world should not expect GDPR-like leadership from Europe on the responsible use of AI. The authors of the EU white paper were certainly limited by the tight, 100-day deadline that was imposed upon them. Nevertheless, from an AI governance perspective, their report and its proposals seem timid, rather than bold. There is little that compares it to the ambitions that the GDPR showed for protecting data privacy. Consequently, the direction of AI governance may continue to be driven by countries like China, whose 2017 Artificial Intelligence Development Plan (新一代人工智能发展规划) highlighted their focus on quietly influencing international standards.
2020 Top Ten Asia Fintech Trends #9: Hong Kong's fintech future faces unprecedented challenge
Hong Kong entered 2020 in recession and wracked by political unrest. It remains Asia's paramount financial center for now, but its future looks uncertain. Holding onto incumbents is less of a problem than persuading tomorrow's rising stars to base themselves in the city.
2020 Top Ten Asia Fintech Trends #7: Growth and growing pains in Indonesia's P2P lending sector
P2P lending grew steadily in Indonesia last year on the back of robust demand from both SMEs and the consumer market.From January to May, the Indonesia P2P sector grew 44% to reach IDR 41 trillion (US$2.92 billion), according to Indonesia's Financial Services Authority (OJK).
Australia has been among the most proactive APAC countries in its approach to open banking, dovetailing with a broader focus on boosting consumer choice and protecting consumers. While not exactly unhappy with incumbents, Australian consumers would like better native digital options. Regulators, meanwhile, want to see improved compliance. The findings of the Financial Services Royal Commission exposed widespread wrongdoing in the Australian banking sector. More recently, several of the country's largest banks were heavily fined for lax anti-money laundering policies.
Revolut is still swinging for the fences
UK challenger bank Revolut has managed an impressive feat. Despite racking up huge losses, the company has convinced investors to support a costly global expansion campaign that will eventually give it a presence in every continent but Antarctica. Revolut's losses doubled to £32.8 million in 2018 even as revenue grew more than 350%. In 2019, Revolut expanded to Singapore and Australia and increased its user base to 8 million.
Monzo set to raise another £50-100 million
If there is indeed a fintech bubble, it shows no signs of deflating. Uber's underwhelming IPO, WeWork's fall, SoftBank's related painful write-down, a jittery global economy - none of these factors is deterring the deep-pocketed backers of the world's foremost fintech startups. The mantra of customer numbers and global expansion over profits remains the rule, not the exception.
And so Monzo, the UK-based virtual bank whose losses rose more than 54% to reach £47.2 million in the fiscal year ended February 2019, is set to raise another £50-100 million within weeks from investors, Reuters reported in late December. Monzo needs the cash to support "rapid growth," according to the report. Monzo launched in the U.S. in June.
Is challenger bank Chime overvalued at US$5.8 billion?
Another day, another sky-high fintech unicorn valuation. The prevailing sentiment among venture-capital firms investing in fintechs is more often than not "more is better." And so following a record-setting Series E funding round of US$500 million, San Francisco-based Chime has jumped in value from US$1.5 billion in March to US$5.8 billion, according to a December CNBC report. The best part about the 400% increase is that it's happening in private markets, where just about anything is possible. DST Global led the fundraising round, which also included participation from General Atlantic, Iconiq, Coatue, Dragoneer, and Menlo Ventures.
How did Brazil's Nubank become Latin America's largest fintech?
Brazil's Nubank has 15 million customers, making it the largest fintech in Latin America. Backed by heavyweight investors like Sequoia Capital and Tencent, Nubank has been using its sizable war chest - it raised $400 million in July - to embark on a rapid expansion spree in Latin America's largest country and economy. Analysts say that Nubank is valued at about US$10 billion.
Even seasoned fintech observers are sometimes surprised to learn that the world's largest independent virtual bank by customers is not in China, India or anywhere in Asia-Pacific for that matter. Rather, it's in Russia, which despite being the world's largest nation by landmass is one of its least populous with just 145 million people. Founded in 2006 as a branchless credit card issuer, Russia's Tinkoff Bank has 8-10 million customers (depending whom you ask), which even at the lower end is more than any other independent digital bank.
How has Transferwise managed to become profitable?
Many of the most prominent fintechs are known for sky-high valuations and red ink on their balance sheets. There's a disconnect between what private investors deem the companies are worth and their actual financial performance. The biggest challenger banks in Europe, such as N26, Revolut and Monzo, are unprofitable. The same goes for Paytm, a payments bank that is India's most valuable tech startup. Ditto for Grab and Go-Jek, the Southeast Asian Uber clones which are trying to reinvent themselves as digital banks.
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How will open banking change Australia's financial sector?
The arrival of open banking in Australia comes at an opportune time. Virtual banks are fast setting up shop amidst widespread demand for more choices in consumer banking. Consumers, while not dissatisfied with existing banks, would like better digital-first options. For their part, regulators are keen to boost compliance across the industry. The findings of the Financial Services Royal Commission did not cast Australia's traditional banks in a flattering light. That's one reason Australia has not hesitated to issue full banking licenses to several fintechs.
Revolut partners with Visa in global expansion effort
UK-based Revolut is the one of the world's most valuable challenger banks with a valuation of US$1.7 billion. With seemingly unlimited coffers of venture capital to draw upon, the company is targeting a $10 billion valuation in the next few years. Its executives say that the company would need to be valued at US$20 billion or more before it would consider going public.
Revolut's backers are pouring money into the company because they believe it is pioneering banking of the future: digitally native, frictionless, having a minimal branch network (and thus a more competitive cost structure than traditional retail banks) and a stronger focus on niche customer segments underserved by incumbents. Currently, Revolut offers foreign exchange, stock and crypto brokerage services, plus peer-to-peer payments.
How Estonia discovered its digital identity
Estonia is perhaps the most connected nation on earth. Wired magazine describes the small Eastern European country as "the most advanced digital society in the world." Data compiled by the Estonian government show that 99% of Estonia's services are online, 98% of Estonians have a digital ID card and about 47% of Estonians vote online.
Why does the U.S. trail Asia in mobile payments adoption?
Americans are fond of their smartphones. They use them for voice communication, texting, internet browsing, photo sharing and of course streaming videos. Yet, unlike citizens across Asia, Americans rarely use their phones for banking purposes.
Data compiled by consultancy Bain & Co. show that mobile payment adoption rates in the U.S. last year were below 10%, compared to above 80% in China. The U.S.'s mobile payments usage seems especially low given the country's high level of smartphone penetration. About 81% of the U.S.'s 327 million people own a smartphone, according to Pew Research.