Having begun in Europe and the US, fintech has emerged as a major disruptor of the traditional banking institutions the financial crash of 2008 proved to be untrustworthy, as the consumer had long believed.
Despite its foundation laying in the West, the fintech sector’s future innovations will largely occur in Asia, specifically in the area of consumer services.
The reasons for this are many, not the least of which is the huge population into which fintech can tap in Asia. But more importantly, Asia’s history of banking, finance and infrastructure (or lack thereof), results in a huge opportunities for fintech to take hold quickly and grow exponentially.
Fulgani Desai, Managing Director of Future Asia Ventures, recently stated in a contributing article to Forbes Magazine,
“In the case of fintech, particularly consumer focused services, Asia’s market dynamics and diverse population create a different set of opportunities and challenges than those faced by US fintech entrepreneurs.“
Here are just a few factors that make Asia’s landscape ripe for exponential fintech growth.
Millennial population and the growth of the middle class
These are populations that have huge buying power but who have not grown up with the samef financial infrastructure of the Western world.
They have skipped the entire land-line phone era, for example, going to straight to iPhones to conduct business. Coupled with the low credit card penetration in Asia, online retailers have to come up with innovative payment tools.
Fintech will provide the ability for consumers to use computer coding to move money, never needing a banking middleman, as money travels directly from a handheld device to a vendor.
Such fintech innovations are attracting lots of local investors, such as Tryb Asia, an investment firm that looks specifically for fintech opportunities.
Its founder, Markus Gnirck recently said, “Fintech is many times enabled by e-commerce in emerging markets…consumer finance will be dominated by e-commerce platforms that already have distribution channels.”
In Asia, then, fintech is skipping right over any traditional credit/debit card payment solutions and moving forward, while the West is still slowed by a hesitance to embrace new and innovative payment solutions.
An UnBanked Population
As reported by the World Bank, about 2 billion people in the world have no relationship with a bank. Over 50 per cent of these are in India, due to the factors such as personal poverty, living in rural areas with limited access, and a general lack of trust in banks.
These individuals rely on cash.
Fintech is now bringing banking to these populations via their phones — even if they are the old flip-phone variety — by establishing the means by which customers can deposit, make payments, invest, and carry out other transactions without ever entering a physical banking branch.
Innovations in fintech will continue to emerge, as entrepreneurs develop new digital banking products and attract the attention of venture capitalists.
There is a huge environment for startup enterprises that will foster rural population inclusion.
This is the newest player in the fintech industry, and Asia is ripe for innovations in this niche.
Simply stated, Blockchain is not just a technology for Bitcoin or other cryptocurrencies. It is a permanent, very public, online ledger that tracks every single transaction of, for example, investors or banking activity.
It is updated only by consent of the chain’s users and is therefore essentially tamper-proof.
Given shaky political environments and a general mistrust of banks and investment firms, Blockchain technology relies on math and algorithms, not humans, who can make mistakes, be unreliable, and are open to corruption.
Just one opportunity for Blockchain tech is in the area of global trade. Asia has at least nine of the busiest ports in the world, and fintech startups that can develop Blockchain systems that will prevent illegalities in money flow, laundering and fraud will be widely appealing to traders and to investors.
Fintech is one of the most important tech trends going in Asia today, and it is driven by shifting demographics, a need to reach the unbanked and blockchain technology developments.