The Rise of FINTECH in Asia

In recent times, Fintech has been gaining popularity and traction in the global arena. Incumbent firms and start-ups are entering the industry to garner a share of the pie. They are challenging traditional concepts of banking services. At the same time, they provide greater convenience to customers.

Asia is at the centre of these developments. It has two of the biggest and fastest growing economies(China and India) as well as some ‘tiger economies’.  It has a young population which is more familiar with digital technology than the rest of the world. It is willing promote new areas to bring to its fold, the vast under-banked population.

The race is on- Australia, Singapore and Hong Kong are all vying to be the Fintech hubs of the region (Asia and Oceania). The Fintech industry has gained legitimacy and all stakeholders, from govt. to banks are beginning to pay attention to its progress. Asian Fintech companies have been encouraged because of strong start-up culture, availability of venture capital and need for alternative instruments of finance.

The word ‘Fintech’ means financial technology or technology used for the financial sector. It comprises of multiple concepts like cloud based software, machine learning, virtual reality, block chain and artificial intelligence. These are proving to be key concepts for financial institutions as they provide limitless reach. Firms are able to expand their reach without needing to incur substantial costs. But this is just the tip of the iceberg.

Thankfully, regulators around the region are aware of the potential of Fintech and are encouraging the growth of this sector. Shortly after its birth, Singapore has climbed on to the bandwagon. As a financial hub in Asia, it has adopted friendly policies towards the new financial technology. For example, MAS or Monetary Authority of Singapore has not banned Bitcoin technology. This adoption of a non-restrictive approach provides Fintech with room for growth.

This is encouraging economies like Indonesia and Malaysia to adopt regulations to help the Fintech industry and also protect consumers. Malaysia was the first ASEAN country to issue a regulatory framework for the sake of equity crowd funding to be followed by marketplace lending. Thailand is also creating its regulatory sandbox. But for expansion of Fintech in the ASEAN region, there is need for extensive broadband revolution and faster growth in e-commerce, mobile financial services andsmart phones to overcome competition in digital identity, micro-lending and mobile and digital payments.

Fintech has been embraced also by China, one among the fastest growing economies of the world. By late 2015, the market size of internet finance in China amounted to $1.8 trillion driven by hottest Asian Fintech companies. Leading Fintech companies in China are dominated by micro-lending and payment services as well as e-commerce sector. China also has potential for great opportunities in cloud and data analytics to support these companies.

Fintech has been transformed by the outlook of banks. Earlier, banks regarded Fintech companies as upstarts who were attempting to rob their customers with the promise of technology and convenience. This is no longer the case. The technology function has emerged at the forefront of operations, progressing from just an “enabler’ to be a key driver of strategy. It has grown from facilitator to disruptor, with capacity to revolutionize banking.

Technology may be driving the change in Asia but financial businesses need to rethink broadly about how to create revolutionary technology solutions.

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