Deconstructing the Evolution of the Fintech Sector in Asia

Deconstructing the Evolution of the Fintech Sector in Asia

by April 20, 2023

Since the term ‘fintech’ was first coined in the early 2010s, the financial technology sector and the ecosystem around it has undergone a massive evolution. A fluctuating economic climate has seen some startups go public, while others have gone under – meanwhile, the pace of innovation has witnessed new technology, business models, and the requisite regulatory modifications to contend with this swiftly-changing environment.

To uncover more on where the fintech sector is heading and what trends are developing in different territories around Asia, Fintech News Malaysia Chief Editor Vincent Fong hosted a virtual webinar with Terry Chan, the Finance and Compliance Director at QFPay; joined by Robert George Padin, Philippine country lead of Spenmo; with Vitavin Ittipanuvat, the Executive Director for Vertex Ventures Southeast Asia and India; and Franco Manuel, the Master Principal Solution Consultant at Oracle NetSuite.

Observations of the fintech sector around Asia

Terry Chan“I think the most exciting [time] in fintech is now,” said Terry. “ Hong Kong is now catching up some crypto regulations and some payments regulations in the fintech area.”

He continued that the government is now stepping in to introduce more inclusive regulation, with the most recent proposal by Hong Kong’s Securities and Futures Commission (SFC) to allow retail investors to access trading services provided by licensed virtual asset trading platform operators. Under the current regulatory framework established in 2018, trading platforms were only allowed to offer their services to professional traders and institutional clients.

Terry feels it is better for the government to step up now rather than not at all, as Hong Kong looks to regain its position as a leading fintech hub. In sharp contrast, George of B2B spend management platform Spenmo says that as a developing economy, trust in traditional banks is high in the Philippines, and awareness of global banking incidents such as the Silicon Valley Bank collapse are relatively low.

Robert George Padin

Robert George Padin

However, George feels that a developing market will benefit from the strengthening of the software ecosystem, such as the implementation of banking-as-a-service software “to really help business owners”. Vertex Ventures’ Vitavin agreed with the developing economy assessment, but noted that mobile banking is fairly widely accepted in Thailand.

Vitavin pointed out not all highly disruptive fintech will enjoy a smooth ride in Southeast Asia, and some fintech companies won the market by simply getting the basic things done right, and Vincent countered that the pace of innovation in different countries can yield different results – using P2P and equity crowdfunding as examples that have outpaced VC funding in Malaysia for the last two years.

Franco meanwhile said that the fintech sector offers unique financial services and products, and to that end NetSuite works with businesses to fulfil their business goals with the right infrastructure “that can provide them real-time business insights, so that [businesses] can innovate, that they can respond proactively to those business changes.”

The biggest issues fintech can tackle this decade

Terry says that as a payment solutions provider, QFPay faces challenges to onboard smaller merchants to digital payments, citing tax issues and incomplete datasets that fail to put HK payments on par with China, especially in B2B and B2C transactions.

George added that cash had always been king in the Philippines, and while over 76 million adult Filipinos now use an e-wallet as a result of the pandemic, the B2B payments landscape still tells a different story. In the Philippines, the majority of B2B payments is still conducted using paper cheques, a US$200B+ volume per year in the Philippines.

Fintech can help improve B2B payment processes and lower the costs of cross-border transactions, which were too exorbitant in the Philippines. “So since Spenmo, we’re really going to allow business owners to have visibility, comfort and control over how, when, and why money is leaving their company.”

Vitavin Ittipanuvat

Vitavin Ittipanuvat

As for Vertex Ventures, an investor in high-growth startups in Southeast Asia and India, Vitavin said one of the exciting areas would be how challenger lending companies with higher risk appetite [versus incumbents, which will continue to be risk averse] come up with loans or credit products for the largely underserved MSME (micro, small & medium enterprise) segment.

Similarly, Vincent questioned if digital banks in the Philippines were fulfilling their roles of banking the underserved, to which George replied that most digital banks were run by incumbents, but that “regulators are working towards really creating more diversity and more competition, to really bring down the rates and costs of the consumers”.

Franco added that banks and payment providers needed to innovate and facilitate money transfers to be more accessible and cheaper for consumers. 

Post-pandemic environment shaping the fintech sector

Vincent questioned how the Federal Reserve interest rate hike intended to curb inflation in the US had ostensibly led to lesser liquidity for investors and startups, and what was the impact for the panellists. 

George said VCs and investors are now all focused on gross profits, but Spenmo is focusing on being efficient with its capital and the big bets it makes, to navigate that environment.

Franco Manuel

Franco Manuel

From the perspective of a VC, Vitavin said investors would be more careful (and take a longer time to decide) when looking at investment opportunities, while founders are required to be more disciplined with both capital efficiency and valuation to ensure a better safety margin for all shareholders to a good exit.

Franco highlighted the dichotomy between growing as a new company and acquiring customers, which is a balancing act that needs to be managed with the right business tools to keep costs manageable while scaling upwards. 

“And that’s where NetSuite helps them. Because it’s a pure cloud-based system that doesn’t require heavy capital investments, you can start with a few users,” he continued. “And as you scale up as you grow across them, then you’ve increased the number of users. So it’s a way of enabling them to scale up or down, relative to the demands of the organisation and market” while maintaining visibility over operations and focusing on customer acquisition.

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