By Claire Heffron
The emerging and expanding financial technology (fintech) industry is bustling in Asia. While the market initially started in the US and Europe; Asia is quickly catching up.
According to the management consultancy company Accenture, fintech investment in the Asia-Pacific region increased $4.3 billion last year versus the one before. In particular, funding has increased by over 300% over the same period; reaching an all-time record of US$6.5 billion.
Among the region’s commercial centres Singapore and Hong Kong are battling it out to become the leading focal point for innovation. With Singapore ahead of the industry – and government support and financial backing from the Monetary Authority of Singapore – the financial hub is being labelled as a “safe bet”to win out. The city-nation is already a profitable location for investments and funding for creative applications.
Singapore based CEO and co-founder of InsurTechAsia, George Kesselman explains, “Singapore is definitely at the forefront of fintech in Asia and its being considered by most as the fintech launchpad into South East Asia. The two exceptions are China and Korea who are both also active in this space and stand on their own”.
On the other side, Hong Kong faces challenges with compliance and local laws. In fact, lawyers, consultants and fintech executives say that despite nearly $300 million in fintech funding start-ups face tough regulatory challenges. Hong Kong’s rules make it difficult to set up crowdfunding platforms, payment companies and peer-to-peer borrowing procedures – all of which reflect the latest in fintech innovation.
Chinese peer-to-peer lender Jimubox spent nearly a year setting up in Hong Kong only to suspend the plan because strict rules on account opening made it hard for the firm to take on customers.
Where’s the competition?
Fintech entrepreneurs say the two nations both have very efficient markets. However, there are other contenders in the region. Indonesia could be a healthy competitor but regulation and policy is seen as a hindrance. That said, some of the companies involved have started discussions with the country’s Financial Service Authority on what shape necessary regulations should take.
At the same time, Indonesia is distributing new credit office licences to improve centralized credit data collection and accessibility. Meanwhile, Malaysia was the very first ASEAN nation to issue a governing framework on fintech; releasing details last year of rules for equity crowdfunding, followed by marketplace lending.
The majority of fintech innovation in the last five years has taken place in the US and Europe. In Asia, it will be much larger, and develop at a faster rate; particularly when developments in China are factored in. Before the term fintech was even widely used,China’s Alibaba had started to offer an online payment system to people who do not even have a banking account.
A final contender to the race is South Korea. The tech-friendly nation has a good chance of becoming Asia’s fintech hub if it creates suitable regulations that its companies and take advantage of the country’s IT expertise. Jeffrey Jones, lawyer at Kim & Chang, explains, “Even with the incredible IT infrastructure and technological competences, the regulatory environment is not advantageous to innovative fintech business models.”
However, with the potential to attract investments from all over the world, fintech could drive and boost the country’s sluggish economic growth. Not only that, it can assist the Korean economy to be more flexible and receptive to external opportunities by nurturing an environment of creative innovation.