Asian FinTech is a success story of 2016. The region attracted the largest share of global investment estimated at 44%, $11.7bn with the USA second place with 40%, $10.7bn out of total global investment of £27bn compared to 2015 of £25.6bn. China received the largest investment c$10bn, with a number of single investments over a $1bn. Its financial services industry is moving directly to fintech models at a scale outpacing Western markets. India, with investment of $1bn in 2016 is at an earlier stage in the cycle of investment. The rest of Asia, including the financial centres of Hong Kong and Singapore, are developing fintech ecosystems and business models.
Is the largest fintech ecosystem in Asia with an estimated $10bn investment in 2016 from 2015’s $2.9bn. Investment categories in 2016 were payments ($4.6bn), loans ($4.6bn) with other categories at $800m. China’s mobile payments volume is the largest in the world transacting an estimated $5.39 trillion in 2016.
Ant Financial/Alipay, raised a $4.5bn B Round to fund internal and external growth. The Alipay payments system has c450m users, its portfolio includes Yu’e Bao – an overnight money market deposit account with $115bn deposited, Sesame Credit – a credit scoring system and MyBank – an online bank launched in 2015. Other large internet companies invest in Chinese digital Banks: Baidu is a shareholder in Baixin Bank CITIC, and TenCent is a shareholder in WeBank.
TenCent owns China’s largest social media site WeChat/Weixin (889m monthly active users) its payment gateways “Weixin Pay” and “TenPay” processed 600m daily transactions during December 2016. The scale of China is re-emphasised by Ant/ Alipay processing 120,000 transactions per second and 1.04 billion transactions on 11th November 2016 the Singles Day (Guanggun Jie) shopping festival.
Large investments made during 2016, Lufax a P2P (Peer to peer) lender raised £1.2b, JD Finance the finance arm of JD.com ecommerce marketplace raised $1.1bn including Sequoia Capital China as an investor, MyCredit (U51Credit) a credit card management app raised $394m.
Chinese fintech ambitions are not limited to mainland China, Ant/Alipay is internationalising, investing over $600m in One 97-PayTM India , taking a stake in Ascend payments Thailand, a $200m investment in KaKao Pay South Korea, investment into the Mynt payments wallet Philippines with 3m users as well as making an initial $880m bid, subsequently increased to $1.2bn, for US based MoneyGram International Inc still in progress.
Chinese fintech has greater scale than Western fintech, its processing volumes are larger than Western fintech’s, its home market of China still offers opportunities and it has been building up a global presence, it is a force to be reckoned with.
In 2016 had $1.1bn Fintech investment, loans $463m, payments $386m, and Banks $189m, notable investments, Citrus Pay $130m, Equitas $100m, MobiKwik $90m. The FinTech market was electrified by the India Government plan to demonetise by removing large denomination notes and by the granting of 11 Payment bank licences . The largest single investment has been in One97 Communications PayTM circa $1bn, 88m wallets it has been preparing the launch of a RuCard (Indian equivalent VISA/ MasterCard) with an aim to issue 100m cards.
Vizag, Andhra Pradesh is building a Fintech Hub Lattice80, a Singaporean Incubator supported by Marvelstone Group is opening its first overseas base that following on from a cooperation agreement signed with the Monetary Authority of Singapore . Technical infrastructure in India is strong to support fintech, it has excellent bank clearing systems, a global leading identity scheme Aadhaar Card it has one of the largest software developer communities in the world and a number of world class ICT companies such as Tata and Infosys. India has the human capital, entrepreneurs, State, National government policy development and the infrastructure amongst its banking and computing industries to achieve a high level of fintech transformation.
Asia – Rising Fintech Countries
Too often Asia is viewed as India and China with the other countries in the region mentioned as an afterthought. These countries Bangladesh, Thailand, Myanmar, Cambodia, Laos, Vietnam, Malaysia, Indonesia and Philippines have a combined population of nearly 700m are at the beginning of fintech development, Japan, Taiwan and South Korea, 200m population developed economies are at a similar stage. The region had $217m investment in 2016, no one sector dominates with P2P loans, process and payments each at c$30m investment. Larger investments made in 2016, Freee online software Japan $29m, Momo payment wallet Vietnam $28m, BitFlyer Bitcoin Japan $27m and Viva Republica P2P money transfer South Korea $23m.
Singapore and Hong Kong
Singapore and Hong Kong vie for the position of being the region’s major fintech hub outside of China and India. Total FinTech investment into both centres approaches c$800m with each being around $400m, In 2016 Hong Kong investment was ahead of Singapore, lending being the largest category in Hong Kong, and payments in Singapore. Both have good government support programmes and a flexible fintech regulatory approach that has developed links with other global regulatory bodies and a number of fintech accelerators with Singapore also having a number of specialist Insurance innovation centres. Singapore and Hong Kong will continue to be strong fintech hub contenders as the digital transformation of financial markets and financial services continue.
Asia has some of the world’s largest fintech companies. China is most developed and is internationalising, its home market still has immense potential. India is at an earlier stage of fintech development, has the technologies, human capital and Government policy interventions to transform its financial services industry. The other countries in the region are starting to develop with a c900m population base offers many opportunities. In many respects, Asia leads global FinTech development and its fintech ecosystem can only get stronger.
IAN DOWSON, CEO,
William Garrity Associates Ltd – boutique consultancy – Corporate Development and FinTech Research. Contact: 0208 203 1551, 07815 732637