Buy now, pay later (BNPL) is taking the payments world by storm, from the advanced economies to emerging markets. There seems to be a universal appeal for consumers - whether they are accustomed to using credit cards or not - to interest-free installment payments. That holds particularly true during the pandemic, when lenders control credit tightly. In India, some of the largest BNPL players include the unicorn Pine Labs, Vivifi (which operates Flexpay), Simpl and ZestMoney. All of these firms saw growth in their BNPL products in 2020.
Not so long ago, Ant Group looked set to build a digital finance empire in Asia. Ant has a foothold, in one form or another, in every major Asian economy. The company has invested in e-wallets across Southeast Asia. It operates fledgling digital banks in Hong Kong and Singapore, the region's two key financial hubs. It is a major backer of India's largest fintech unicorn, Paytm. Ant even has fintech investments in Bangladesh and Pakistan. Yet in retrospect Ant may have overextended itself internationally, confident that its ascent was insuperable even as regulatory problems mounted at home.
WhatsApp has something most other would-be super apps do not: the stickiness of an immensely popular messaging service. And unlike China's WeChat, WhatsApp is a global phenomenon, with large user bases in a diverse array of countries: India, Indonesia, Brazil, South Africa and the United States to name a few. Having eschewed advertising, WhatsApp hopes to monetize all those users with digibanking and e-commerce services. If WhatsApp becomes a global one-stop shop for communication, shopping and banking it will be the only app of its kind.
Afterpay has to be feeling pretty good heading into 2021. It has become one of the largest buy now, pay later (BNPL) firms in the world and is growing fast just as the sector hits its stride. BNPL is not a new idea, but Afterpay has repackaged it neatly: four interest-free installments with no fees at all for customers as long as they pay on time. Retailers are willing to take on the risk of late or missed payments because Afterpay is bringing in more business for them. The company's sales grew 112% year-on-year in November to a record US$2.1 billion. Its share prices have risen roughly 270% to A$113.29 from A$30.63 when the year began.
South Korea's digital payments market has grown at a brisk clip amid the pandemic. From January to November, contactless payments rose 17% as businesses and consumers shifted to online transactions, according to the Bank of Korea. E-commerce transactions rose 26% during that period. It is against this backdrop that the Korean startup CHAI sees an opportunity for an API that allows online merchants to accept more than 20 payment systems.
E-commerce is an ideal platform from which to launch a digital payments business. Alibaba figured that out early on, launching Alipay back in 2004. Today, it is hard for any e-wallet to become as dominant as Alipay, especially in a market as competitive as Indonesia. Yet Sea Group's ShopeePay is fast becoming one of Indonesia's most popular e-wallets on the back of Shopee's ascension. Shopee was Indonesia's top e-commerce platform by site visits in 2019 and looks set to repeat that feat this year.
Gojek began more than a decade ago as Indonesia's answer to Uber. It since has evolved into a large platform company with super app ambitions. For Gojek, the key to becoming Indonesia's dominant app lies in mass monetization of its e-wallet services. The trouble is, that's easier said than done. Indonesia has a surplus of e-wallets all trying to cash in on the booming segment. User loyalty is shaky.
China is strict about gambling, only permitting it in the special administrative region of Macau. Elsewhere in the country, gambling is illegal. China's restrictions on gambling cover cyberspace too. Yet that ban is hard to enforce, especially as the pandemic has pushed so much economic activity online. According to a recent Caixin report, some of China's largest internet companies have become party to the illegal online gambling ecosystem. The internet giants may not be privy to the illicit transactions, in some cases because of inadequate due diligence.
Grab has long had its eye on Indonesia, the home turf of its rival Gojek and Southeast Asia's largest economy. If Grab is going to be region's dominant super app, it needs to have a strong foothold in Indonesia, which by population is nearly as large as the Philippines, Vietnam, and Thailand combined. By leading a US$100 million Series B funding round in Indonesia's homegrown e-wallet LinkAja, Grab is signaling its intention to challenge Gojek more forcefully in the country's burgeoning digital finance segment.
After years of solid growth, global remittance flows are set to shrink in both 2020 and 2021, weighed down by the pandemic and its associated economic fallout. Asia, one of the fastest growing regions for remittances in recent years, will be one of the hardest hit regions, the World Bank estimates. Remittances in East Asia and the Pacific are projected to fall by 11% in 2020 and 4% in 2021. In South Asia, remittance flows are predicted to fall 4% this year and 11% the following year.
WhatsApp Pay just launched in India for 20 million users. That is big news, given the long and drawn-out waiting period. Indian regulators, however, made a more consequential decision than giving WhatsApp Pay a belated green light, which is overshadowing the app's rollout. The National Payments Corporation of India will restrict the market share of third-party payment applications by capping at 30% the total transaction volume any single digital wallet can process on the preeminent Unified Payments Interface (UPI) platform.
By at least a few metrics, Ant Group-backed GCash is the Philippines' top e-wallet. GCash, a subsidiary of the Globe Telecom-owned fintech startup Mynt, recorded 10 million downloads in the first nine months of the year, more than any other finance app, according to analytics firm AppAnnie. User growth rose 130% over that period. GCash expects transaction volume to reach P1 trillion this year, an amount that it took the company the three previous years combined to reach.
Buy now, pay later is taking the payments world by storm in Europe, the United States and Australia. Firms like Klarna, Afterpay, Sezzle and PayPal (with its "Pay in 4" product) are tapping strong consumer demand for interest-free installment payments. In Southeast Asia, however, BNPL remains at a nascent stage. None of the big BNPL players have launched their services in the region yet. There are some promising local startups though.Singapore-based hoolah is one of Southeast Asia's ascendant BNPL startups. In March, Hoolah raised an undisclosed eight-figure sum in its Series A round. Hoolah will use the cash to expand regionally. Investors participating in the round included venture-capital firm Allectus, iGlobe Ventures, Genting Ventures, former Lazada group CEO Max Bittner, and FNZ CEO Tim Neville.
Hoolah has been in Singapore since 2018 and works with merchants including HipVan, Castlery, Sennheiser and Skin Inc. The firm charges merchant-partners a fee for every successful transaction. Hoolah's BNPL service lets shoppers make purchases in three interest-free monthly installments. The company's key customer segments are youngsters (aged 18-26) who are not yet able to qualify for a credit card, some 26 to 35-year-olds and gig-economy workers. The latter segment likes using hoolah because the workers do not receive fixed salaries.
Hoolah enjoys a first-mover's advantage in Singapore. In an interview with Vulcan Post last year, co-founder and COO Arvin Singh explained why BNPL has been slow to arrive in Southeasts Asia. “There’s a high degree of complexity of achieving a seamless checkout experience while managing a flexible payment solution that includes risk management, consumer payback, direct merchant integration, merchant side funding and the commercials," he said.
In September, hoolah launched its BNPL service in Singapore's physical retail stores, where it sees an opportunity to grow sales as the pandemic eases in the city-state. To use the service, customers scan a QR code at the point of sale with hoolah's app. They then enter the total order amount, which is divided into three monthly payments.
Hoolah launched in Malaysia earlier this year and plans to expand to Hong and Thailand before the end of 2020.
Meanwhile, of the major global BNPL players, Afterpay is likely to be the first to expand to Southeast Asia. The Australian firm is reportedly mulling the acquisition of EmpatKali, which like hoolah is based in Singapore, but is focused on the Indonesia market. EmpatKali has "an established, albeit, very early stage position in Indonesia,” Afterpay's CEO Anthony Eisen told Reuters.
Ant Group's IPO is a big deal. In fact, the listing is expected to raise US$34 billion, would make it the biggest IPO of all time. Ant's valuation based on the pricing will be roughly US$313 billion, similar to Mastercard (US$319 billion) and JPMorgan Chase (US$309 billion). Can Ant justify that valuation? After all, the company derives the vast majority of its revenue from just one market: mainland China. And Ant has long benefited from a dearth of digital competition. Once the IPO is over, Ant will likely use some of the proceeds to fund its expansion in Southeast Asia. Ant has invested in a large number of e-wallets across the region and applied for a digital bank license in Singapore.
TransferWise is one of the few European fintechs making inroads in Asia. That's because the UK-based firm has a coherent Asia strategy: Enhance payments of every stripe - cross-border, domestic, real-time, credit card, e-wallet and more - and enable its partners to integrate the TransferWise open API directly into their infrastructure. TransferWise's APAC headquarters are in Singapore and it operates in Australia and New Zealand as well. The company has inked a deal with Alipay that allows it to begin serving the China market, albeit in a limited manner.
The Facebook-Jio deal appeared to pave the way for the long-awaited launch of WhatsApp Pay in India. Thanks to its US$5.7 billion investment in Reliance's Jio Platforms, Facebook finally had a heavyweight local partner in the subcontinent. Political pressure is mounting on New Delhi to prevent foreign tech giants from dominating the digital economy. The Facebook-Jio deal directly addresses those concerns. Yet, more than four months after India's Competition Commission approved the deal, WhatsApp Pay remains in beta launch.
The fintech narrative has adapted swiftly to the worst public health crisis in a century. Digital banking is now depicted as an epochal shift, driven by drastic pandemic-induced changes in human behavior. In many cases, this is an exaggeration. But some fintech startups, like the newly minted Indian unicorn Razorpay, have turned this crisis into a genuine opportunity. The Bengaluru-based firm raised $100 million in a series D financing round that closed in October, co-led by Singapore’s sovereign wealth fund GIC and Sequoia India, and is now valued at roughly US$1 billion.
Australia's Afterpay is riding high on the BNPL boom sweeping its home market, the United Kingdom and United States. Afterpay is valued at US$23 billion, while its share price has risen about 960% since the ASX bottomed out in March. Both the UK and U.S. are key growth drivers for Afterpay, accounting for 41% of its revenue in FY 2020. Services like Afterpay's are gaining in popularity not only because people are shopping online more often, but also because credit is harder to come by during the pandemic-induced downturn. Some lenders are concerned about the ability of consumers to reliably make payments. As a result, consumers are more apt to be interested in installment payments.
Airwallex is among a handful of loss-making fintech unicorns that has continued to raise vast sums from investors amid the coronavirus pandemic. Established in Australia in 2015 and now headquartered in Hong Kong, Airwallex is set on a bold path of international expansion and plans to use the US$40 million raised in an extended Series D round that closed in September to bring its cross-border payments business to the United States, Middle East and Africa.
Kakao's fintech ecosystem is coming into its own. The key units, the Kakao Pay e-wallet and digital bank Kakao Bank, are both gearing up for IPOs in 2021. Kakao Pay is slated to list first, in what will also be the first time a Korean mobile payments firm goes public. Kakao Pay's IPO is expected raise up to 10 trillion won (US$8.5 billion).
Cracks are gradually appearing in the armor of the duopoly Alipay and WeChat Pay have long enjoyed in China online payments. One after another, large Chinese internet companies are expanding their presence in that segment, from e-commerce giants Pinduoduo and JD.com to travel booking site Trip.com. The U.S.'s PayPal and American Express have also entered the market. The additional competition is long overdue and most welcome.
If ride-hailing companies can aspire to be digital banks and super apps, then perhaps airlines can too. In fact, consumers probably trust airlines with their data more than they do Grab and Gojek. For Malaysia's AirAsia, which lost a record US$238 million in the second quarter, developing new revenue drivers is a necessity as the pandemic keeps international air travel grounded. That's why the company is expanding its fintech services - including possibly applying for a Malaysia digital bank license - and launching an Asean focused super app that covers entertainment, shopping and travel.
Amazon wants to make fintech a key part of its burgeoning digital services ecosystem in India, which is expected to become one of the e-commerce giant's largest markets over the next few years. With 100 million users in India, Amazon already sells lots of goods online to Indians, including content streaming services. A digital banking ecosystem could help it sell more, including more memberships in its Prime loyalty program and of course, various financial services themselves.
Mobile payments have reached an inflection point in Taiwan, by one estimate surpassing credit cards in popularity for the first time. In a population of about 23 million, nearly 10 million are mobile payments users, according to new data compiled by Taiwan's government. A recent survey of consumer attitudes towards electronic payments by the semi-governmental Market Intelligence & Consulting Institute (MIC) found that 35% of respondents preferred mobile payments, compared to 33% for credit cards. Line Pay was the top digital wallet, followed by homegrown Jkopay and Apple Pay.
Jkopay has been one of Taiwan' top e-wallets for several years now on the back of its strength with small merchants. Many erstwhile cash-only mom-and-pop shops now accept Jkopay as well. Given Jkopay's payments success, the company naturally wants to expand into other online banking segments. Kevin Hu, Jkopay's founder and chief executive officer, recently said that he hoped to build a more complete digital financial services ecosystem that would include deposit-taking, lending and investment services. Hu likened his vision to a "version of Ant Group for Taiwan."
Ant Group has become one of the two most dominant forces in China's online finance market. Ant started with payments and from there expanded into micro lending, wealth management, insurance and much more. But there's only so far Ant can go in its home market, where pressure has been building from regulators and disgruntled incumbents, prompting the fintech giant to rebrand itself as a technology company. With a massive IPO imminent, Ant is looking for greener pastures overseas where it can put the cash raised from the deal to good use. Fintech friendly and financial inclusion focused, Southeast Asia fits the bill.
Invest Hong Kong (InvestHK) has unveiled the Global Fast Track Programme, a business-driven programme within Hong Kong Fintech Week (HKFW), Asia's annual flagship fintech event, to help local and global fintech enterprises leverage Hong Kong's proven resilience and fintech opportunities to scale business and accelerate innovation. The Fast Track programme plugs fintech enterprises directly into Hong Kong's diverse ecosystem of world-class regulators, business leaders, corporates and investors to propel their ventures across Hong Kong and elsewhere in the Guangdong- Hong Kong-Macao Greater Bay Area and Asia where digitisation and fintech adoption are surging.
Selected fintech ventures will pitch their innovative solutions to the Hong Kong Monetary Authority (HKMA) and senior executives of Corporate Champions including Hong Kong Exchanges and Clearing (HKEX), HKFW Strategic Partner AMTD Group, Allianz Global Investors, Chow Tai Fook Jewellery Group, Eureka Nova, Mizuho Bank, Hong Kong Trade Finance Platform Company, FORMS HK, Microsoft and more. Investors such as AngelHub, Cyberport, Hong Kong Science and Technology Parks Corporation (HKSTP) Ventures, Lingfeng Capital, MindWorks, QBN Capital and Vectr Fintech Partners are also on board with up to US$1 million of investment commitment on offer per project upon further due diligence, business discussions and approval through the protocol as required by respective investors. The programme is curated by the HKFW appointed event organiser Finnovasia.
Fast Track is now inviting companies from nine key fintech verticals (trade finance, capital markets, retail banking, commercial banking, insurance, regtech, wealthtech, payments and enterprise resource planning), to submit applications from now till August 31. About 10 companies per vertical with the most outstanding ideas will showcase their solutions for an opportunity to join an extensive tailored B2B matchmaking programme with the Corporate Champions and investors to explore further deals and investment partnerships. Over 10 selected finalists will then pitch virtually at the FintechHK Global Final for extra prizes at this year's HKFW from November 2 to 6. Fast Track also features the Mainland China Track stream to help Chinese fintech enterprises scale their business overseas via Hong Kong.
"The strength of the Fast Track programme is proof of Hong Kong's resilient, diverse and growing fintech ecosystem, which provides fintech enterprises with the ideal test ground and launchpad for growth in the post-COVID era," Associate Director-General of InvestHK Mr Charles Ng said.
The Head of Fintech at InvestHK, Mr King Leung, added, "The Fast Track programme is a business outcome-driven programme designed and focused purely on accelerating new opportunities for fintech enterprises. In addition to potential deals and investment, each eligible company can also apply for Hong Kong Special Administrative Region Government landing support from US$111,000 up to US$2.6 million, regardless of the pitching outcome. InvestHK assists worldwide fintech companies to fast-track their next success from Hong Kong."
While COVID-19 continues to create challenges for the global fintech sector, Hong Kong, with its unique geographical advantage, provides direct access to both Mainland China and Southeast Asia, two of the world's largest and fastest growing fintech markets offering significant long-term opportunities. As a result, pioneers in the fintech space and relevant regulators are eager to tap into this immediate potential by working hand in hand with the world's brightest and best fintech ventures.
The Chief Fintech Officer at the HKMA, Mr Nelson Chow, said, "Collaborating with the worldwide fintech community is key to propelling growth in fintech development. The Fast Track programme provides a unique opportunity to bring together international experts from the public and private sectors who can connect and explore innovative ideas and technology to enhance different financial solutions."
The Head of the Innovation Lab at HKEX, Mr Lukas Petrikas, said, "HKEX uses world-leading technology to power our busy capital markets. To keep making these markets more efficient, and even more relevant to changing economic conditions, we embrace this opportunity with the Fast Track programme to engage with the latest fintech developments and meet rising stars from around the world. The programme will help further enhance Hong Kong's competitiveness as an international financial centre."
Representatives of fellow Fast Track Corporate Champions gave further testimony on the huge opportunity that Fast Track delivers for start-ups and to their enterprises as key market movers in the fintech sector.
"The Fast Track programme this year at HKFW creates opportunities for serious players to connect deeply into the region through joining the local ecosystem networks, such as our AMTD SpiderNet, and tap into diversified pockets of investors and collaborative partners to capture the vast opportunities in the Greater Bay Area and surrounding region," the Chairman and CEO of AMTD Group, Mr Calvin Choi, said. AMTD Group has been the HKFW Sole Strategic Partner for three consecutive years and is a Corporate Champion for the Fast Track programme. "Given Hong Kong's solid foundation as a global financial centre and the faster pace of digitalisation resulting from the global pandemic, I'm confident that Hong Kong's fintech landscape can achieve significant growth and attain new heights."
Executive Director of Chow Tai Fook Jewellery Group Mr Bobby Liu said, "Chow Tai Fook Jewellery Group constantly seeks to inject vitality in people, products and operations through our persistent investment in innovation and technology. Through the Fast Track programme, we hope to witness innovative fintech solutions that can curate remarkable customer experiences and unique and differentiated products."
The Head of Open Innovation at Eureka Nova, Mr Ben Wong, said, "Fast Track opens up commercial opportunities for start-ups and helps us identify fintech ventures to collaborate with that solve real-world problems. By collaborating with emerging fintech companies, we can leverage our partners like Mizuho Bank and Hong Kong's unique status as a global financial hub to drive regional and global exposure."
Senior Director and Financial Services Business Lead, Asia, at Microsoft Ms Connie Leung said, "Microsoft joins the Fast Track programme to elevate high-potential fintech start-ups through new technologies such as cloud, artificial intelligence and blockchain. This is a key step to further accelerate our financial sector on the digital transformation journey, in order to sustain our leadership position as a global financial hub."
The Managing Partner of Vectr Fintech Partners, Mr Mark Munoz, said, "Fast Track helps build a stronger fintech ecosystem by allowing us to better support founders on their mission, advise them of best practices, and ultimately back them on their journey to success. The fact that fintech touches our everyday lives in so many ways means that opportunities are boundless."
Learn more about the application process here:
Internationalization of the yuan began in earnest more than a decade ago, with the goal of eventually establishing it as a global reserve currency. At the time, Chinese policymakers sought a larger role for China's currency on the global stage in line with broader financial reform. Today, Beijing worries about the possibility of a full-blow financial war with the United States. In this case, dependency on the dollar for international payments is a vulnerability that China must address.
In the foreseeable future, India's payments market has nowhere to go but up, analysts say. In a new report, RedSeer Consultancy estimates that India's unique mobile payment users will grow fivefold to 800 million in 2025 from the current 160 million, while transaction volume will grow to Rs 7,092 lakh crore from 2,162 lakh crore. Rising mobile internet connectivity, increased availability of mobile point-of-sale devices and the advent of real-time payments are key drivers of the shift to digital payments in India.
South Korea is going cashless. Again. This time it's e-wallets and digital banks driving the trend, not credit cards. South Korea is already one of the world's most credit-card friendly countries. By some estimates, it has the world's highest credit card penetration rate. South Korea also has the world's highest internet connection speeds. These factors are much more integral to South Korea's Cashless 2.0 movement than covid-19, even if the pandemic is pushing more of the economy online.
Indonesia's e-commerce market is surging amid the pandemic, giving a big boost to digital wallets. Transactions at the four largest e-commerce sites in the country will double to US$29 billion from US$14 billion in 2019, according to a study by the Bank of Indonesia published in July. Digital wallets accounted for 90% of cashless payments in the first five months of the year, while bank cards handled the rest.
While Alipay and WeChat Pay maintain a duopoly over China's mobile payments market, that duopoly does not warrant the antitrust investigation reportedly in the works. To be sure, no competitor has emerged able to pose a credible challenge to the duopoly, but primarily for reasons out of the companies' control. Beijing's market barriers have been key enablers of Alipay and WeChat Pay's ability to dominate mobile payments. Together they control 94% of China's mobile payments market, Alipay 55% and WeChat Pay 39%, according to research firm Analysys.
The Philippines has not raced to go cashless. Efforts to digitize the financial system got underway nearly two decades ago, but have made limited inroads. Cash still accounts for 90% of transactions, according to the Better than Cash Alliance, and looked like it was going to remain dominant - until the pandemic. Within a few months, the payments landscape has changed dramatically in the Philippines, with digital payments emerging as a must-have.
It is not easy to stand out in India's crowded payments segment. Users are spoiled for choice. There's Google Pay, Walmart-backed PhonePe, Alibaba-backed Paytm, or Amazon Pay, and perhaps one day WhatsApp Pay - if Indian regulators ever let it operate in the subcontinent. In theory, the first payment provider that can build a super app that bundles together all the services users want in one place will be the biggest winner. But that has proven elusive. It might be enough to build the best digital financial services platform - and forget about the rest. Paytm's entry into the insurance sector follows this line of thought.