This month, The Fintech Times puts the focus on neobanks and challenger banks, including their evolution and their successes. With digital banks thriving across the globe, we hear from some of the major players in Asia, including Revolut, Wise, WeLab Bank, Zaggle, Aspire and Tonik.
Neobanks – entirely digital banks without any physical bank branches; operating through a platform or a smartphone application – are growing at a rapid pace.
Despite the region’s heterogeneous monetary policies and economic landscape, Asia is expected to see aggressive growth from neobanks and fintechs over the coming years. Banking competition is predicted to intensify as regulators in the region accept applications for digital bank frameworks.
In this first of a two-part feature, The Fintech Times hears from Revolut, Wise and WeLab Bank.
Having expanded its presence into the APAC region by launching in Singapore in 2019, and Australia and Japan in 2020, Revolut is planning to enter more Asian countries over the next 18 months, starting with India.
According to Revolut, with its huge unbanked population, Asia holds a massive potential for fintechs seeking to go truly global. In Asia, it is easier to obtain an internet connection than it is to get a bank account and it is this phenomenon that many tech startups have utilised to their advantage.
It points to a study which projects that by 2025, around 51.4 million Filipinos will have internet access, a figure that’s very close to the 51.2 million who are currently unbanked. About 66 per cent of Indonesia’s population are unbanked and fewer than 40 per cent of smartphone users have used a financial services app. Even though India reports to have 190 million unbanked adults, it is believed that digital payments could hit US$1trillion by 2025.
James Shanahan, CEO of Revolut Singapore, joined the firm in March 2020. Previously chief of staff for Railsbank Technologies in South East Asia and chief operating officer for Singlife, he has more than 25 years experience with large banks, insurers and third parties, predominantly in Asia.
He tells The Fintech Times: “So, as smartphone adoption in Asia sets to increase further, neobanks are looking at an immense pool of potential customers that are searching for innovative solutions to plug into the financial systems. On the other end of the spectrum, customers in more developed economies will continue to look for better tools to help manage their personal finances and businesses. The race is on for fintechs and neobanks to continuously innovate and design financial solutions that are fast, simple, and convenient.
“While financial inclusion of the unbanked is a key agenda, the customer profile is not just limited to the low-income segment who needs an account because they can’t travel to their nearest big-city branch to bank. Digital nomads who conduct their careers and businesses anywhere in the world may find a neobank account handier – especially such as one from Revolut that provides customers with multi-currency accounts, currency exchange at interbank rates, and superior speeds for international transfers.
“With a presence in over 40 markets, Revolut is building the world’s first financial super app where our proprietary tech stack can be easily applied in one market and to the next. Our app will help customers manage all aspects of their financial lives – from budgeting and online shopping to trading and buying cryptocurrency. The experience of sending money anywhere in the world using Revolut remains superior and customers will find that our fees continue to be one of the most competitive in the market.”
WeLab Bank, a virtual bank licensed by the Hong Kong Monetary Authority (HKMA), became one of the first licensed digital banks in Asia in early 2019. It’s a wholly owned subsidiary of WeLab, which has close to 50 million individual users and more than 700 enterprise customers in Hong Kong, Mainland China and Indonesia, raising more than US$600million of strategic financing since 2013.
According to Simon Loong, founder and group CEO at WeLab, digital banks will become the norm in the next two years with accelerated digital adoption one of the outcomes of the Covid era.
“Customers’ financial needs and mindset are evolving, in addition to convenience, customers are seeing the benefits brought by tech-enabled features such as big data analytics to deliver customer-centric digital banking services, and they will not return to the brick-and-mortar habits.
“This is precisely why we decided it was the best time to launch WeLab Bank during the third wave of pandemic in Hong Kong. WeLab Bank garnered strong traction during its first six months of operations, at a time where traditional branch operating hours and business models were severely hampered.”
WeLab says technology has enabled it to give control back to the customers – designed for 24/7 access, anytime, anywhere and customers have taken advantage of this, with 43 per cent of WeLab Bank customers opening accounts during non-office hours (6pm to 9am) benefitting from the account onboarding process which can be completed in around five minutes, fully remote.
“WeLab is ahead of the curve, spearheading the new age of banking operating WeLab Bank in Hong Kong — one of the first licensed digital banks in Asia since obtaining the license in early 2019,” adds Loong. “With these two to three years of experiences in preparing for the launch and operating WeLab Bank, in additional to the recent strategic partnership with Allianz, WeLab is well-positioned to apply the advanced digital banking technology capabilities and market know-how with Allianz’s expertise in insurance and asset management to other Asian markets.”
Last month, WeLab Bank and Allianz Global Investors (AllianzGI) unveiled plans to forge a strategic cooperation in digital wealth management and financial services, looking into developing and distributing digital wealth management solutions.
According to WeLab Bank, these would aim to bridge the significant unmet investment needs in Asia, a region where only 27 per cent of the population use financial advisors, resulting in a sizable under-advised population of more than 3.4 billion.
Loong says: “Once implemented, WeLab Bank will be the first digital bank to deploy this wealthtech advisory technology in Asia. The plan is to roll this out to new digital customers in Hong Kong and later to the Guangdong-Hong Kong-Macau Greater Bay Area (GBA), through Wealth Management Connect, reaching the 72 million population in one of the world’s wealthiest megalopolis.”
Global technology firm Wise, co-founded by Taavet Hinrikus and Kristo Käärmann, launched in 2011 under its original name TransferWise. It has raised more than $1billion in primary and secondary transactions from world leading investors. And more than 10 million people and businesses use Wise, processing more than £4.5billion in cross-border transactions every month, saving customers over £1billion a year.
Samarth Bansal, APAC business development lead at Wise, believes successful firms will be determined through collaborations built with the customer at the centre.
“The banking sector has experienced a radical change with neobanks and fintechs surging into the scene to challenge the dominance of incumbent banks. Today’s challengers are purpose-built to provide personalised services and experience. However, much of the focus has largely been on domestic banking.
“When it comes to meeting customers’ international needs, neobanks are still reliant on the same old-world system as incumbents where sending money to another country involves moving funds through intermediary banks across countries. This results in delays, inefficiency and expensive fees.
“As growth in trade, e-commerce and digital connectivity drives increases in international payment flows , solving cross-border issues has never been more critical. To truly scale and sustain a genuine competitive advantage, industry players need to start considering customers’ international banking needs as part of their product stack.
“The good news is that this doesn’t have to be difficult. Industry players are looking towards technology like APIs to seamlessly integrate features into their existing infrastructure. Rather than build the entire functionality from scratch, an integration is simpler, saving time, money and resources, allowing players to quickly go to market with services that customers are looking for.”
Wise has seen financial institutions, including Monzo, Up and Aspire, join its Wise Platform to provide cross-border payments and international banking features.
“Ultimately, customers are driving demand for fast, cheap and frictionless experience and players who can listen, learn and act decisively to meet current and future needs will win.”
In the second part of this two-part feature, we will hear
from leaders at Zaggle, Aspire and Tonik.