The advent of electronic trading in the 1980s in the United States introduced a new era of algorithmic or high frequency trading (HFT) whereby firms tried to get their trading applications as close as possible to an exchange’s matching engine to lower latency and speed up trade execution. By the 2000s, the exchanges were moving their matching engines into colocation data centres, where they were joined by the HFTs that would find no better substitute to being colocated in the same building as the matching engine itself. Today, it is no longer all about speed, and the belief that it is only HFTs that are in exchange colos could not be further from the truth.
Asia, with its gleaming skyscrapers dotting some of the world's major financial centers and home to more than half the world's population, is at an inflection point. Facing spiralling compliance costs and a dynamic regulatory environment, financial institutions have turned to regulatory technology (regtech) to help acheive compliance while minimising risk from misconduct and regulatory investigations.
Automation, cloud, and artificial intelligence technologies are enabling financial institutions (FIs) to reduce overhead, touchpoint, and risk of human error around middle- and back-office operations. The use of these technologies has taken on new relevance amid the coronavirus pandemic and accompanying shift to working online as FIs needed to completely re-think how to run their businesses. Now more than ever, the financial industry must use innovative solutions to enhance operational efficiency and competitiveness, while striving to enhance service levels offered to their customers and remain compliant.
Both regulatory and competitive forces have been making Open Banking a new reality across the region. Banks are now realizing that if they want to keep their existing customers, acquire new ones, and play a greater role in their customers’ lives then they must become more customer focused, while offering a broader range of digital products and services. To do this effectively, banks will no longer be able to be vertically integrated institutions and will be required to shift to a distributed Open Banking model to collaborate with third parties. Such a model requires APIs, the digital ports that enable communication between services.
With the rise of digital banks and fintechs across the region, the race is on to acquire new customers. Customer experience built on new, innovative product offerings will become a key differentiator. On the other hand, the growing financial crime threats means that regulators will continue to tighten their AML/KYC requirements. It is imperative for financial institutions (FIs) to take into consideration the diverse operational and regulatory landscape designing their eKYC processes to offer better remote onboarding experience while ensuring AML/KYC compliance.
2021 marks the tenth year that Kapronasia has produced our fintech trends report. In 2011, our focus was completely on the mainland China market, but as our business expanded, today we are present in Shanghai, Singapore, Taipei, Seoul, and Tokyo and our trends report has grown to match our footprint.
The digitization of the Asia-Pacific financial sector has accelerated amid the coronavirus pandemic as individuals and businesses move online. While this presents new opportunities, it also poses new risks as financial criminals follow the money online. With face-to-face contact reduced for safety and hygiene reasons, it is more challenging than ever for financial institutions to stay ahead of fraudsters and money launderers.
Singapore will become one of the focal points of Asia’s digital banking evolution when the city-state awards digital banking licenses later this year. As a key fintech hub in Southeast Asia, Singapore is a natural starting point for digital banks in the region and was an early adopter of digital financial technology, which laid the groundwork for a dynamic fintech startup scene.
In recent years, the financial services industry has digitized rapidly, with transactions becoming speedier and more efficient. This transformation has mostly been a positive development for financial services providers and their customers. However, as the industry landscape has changed, illicit activity has moved in tandem. Put simply, just as it is much easier to complete certain legitimate financial transactions online than at the retail outlet of a bank, financial crime now happens just as quickly.
The gig economy is roughly defined as a prevalence of short-term contracts or freelance work as opposed to permanent jobs. As the global economy changes, the gig economy has been growing rapidly. According to a recent Mastercard report, the digital gig-economy generated ~USD 204 billion in revenue in 2018, or, for comparison, just over half (56%) of Malaysia’s economy in 2019. The size of gig-economy transactions is projected to grow by a 17 percent compound annual growth rate with a Gross Volume of ~USD 455 billion by 2023, or just over four-fifths (86%) of Thailand’s GDP in 2019.
Asia Pacific (APAC) is the fastest-growing region in the world, but also one of the most challenging. A melange of countries with different languages, cultures, economies, and political priorities has made regional, cross-border cooperation, financial or otherwise, difficult.
One of the paramount challenges for banks in the 21st century is ensuring that their technology infrastructure is optimized to support their core business. For Chinese policy banks, which are venturing into different kinds of sovereign lending, and syndicated loans in particular, certain bottlenecks exist that can be more effectively surmounted by adopting distributed ledger technology (DLT) and artificial intelligence (AI).
The global economy is growing more interconnected and digitized. As such, there is an industry-wide consensus that revenues from cross-border payments will rise from US$144 billion in 2014 to roughly US$280 billion in 2024, driven by a surge in payment volumes.
Today’s financial industry is going through rapid change. Fintech companies are combining finance and technology in new and innovative ways to completely redefine existing value chains. These fintechs are launching innovative products and services that promise to disrupt one of the oldest industries in the world, shake up norms that have been in place for decades, and change the business models of everything from payments to lending.
The Asia-Pacific region is set to be the primary engine of global economic growth in the 21st century. It is home to two of the world’s three largest economies, the two largest countries by population and more fast-growing emerging markets than any other region globally.