In Asia, FinTech development has taken several paths. China is probably the leading FinTech country in the world. Singapore and Hong Kong want to add “FinTech hub” to their finance hub reputations. And emerging markets need basic finance solutions for the unbanked.
A tale of two ASEAN nations
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Vietnam has 95 million people, but less than 30 million have a bank account, and fewer than five million have a credit card. Singapore has excellent infrastructure, sophisticated services, and a well-developed finance ecosystem.
But although Singapore’s existing services fulfill basic needs for businesses and consumers, traditional finance companies want to protect their positions, and regulators struggle to find a balance between traditional and cutting-edge services.
In Vietnam, the financial infrastructure and ecosystem are weak. However, its growing population and economy need access to financial services, and nowadays there’s a clear path to next-gen services which bypasses obsolete finance services and technology.
Asia’s diverse FinTech markets
Singapore and Vietnam are just examples of the Asian finance and FinTech markets. They represent two different tracks of development, and how development is different in various Asian countries. This also means totally different situations for regulations, services, and technology developers.
In emerging economies like Vietnam, demand is high for basic finance services-like a simple account to receive, hold, and transfer money, get loans, and make payments. This opens opportunities for mobile banking, online lending, and mobile payment solutions. Integrated FinTech solutions offer many opportunities in these markets, e.g. online lending can be offered via e-commerce or a check-out process for people who have no credit card.
Developed economies like Singapore focus on increasing the efficiency of their existing services and offering advanced services to consumers and businesses. This means solutions for wealth and personal finance management, and more data- and AI-based end-user services.
But how can FinTech change the IT infrastructure, value chains, and processes within the finance sector? Banks and other traditional institutions must begin to renew their IT sooner or later. New solutions are more cloud-based, with open APIs, and will offer better tools to make data-oriented services and empower customers to do more.
The new models
New IT and data solutions are a common factor on both tracks. For example, a modern cloud-based back office-as-a-service can be maintained for a fraction of the cost of a legacy back-end IT. This makes it easier for companies in emerging economies to get to the new era fast, and requires courage from management of traditional finance companies in developed countries to dump legacy systems and move to new technology. The PSD2 regulation in Europe will have impact on this globally, and companies realize the influence of open APIs is not to use old banking IT, but build the ecosystem in a new way.
It also requires courage to go for open APIs and cloud-based models and choose a position in the changing value chain. Now is the time that finance institutions need visionary people to join management teams.
In 2018 we won’t see the finance world change overnight. We’ll see accelerating development within digital finance services and the ecosystem. Finance companies build their positions and capabilities for the future. In 2018 you cannot yet win the FinTech race, but you can lose it, if you ignore essential developments. It’s not enough to repeat key words like ‘blockchain’, ‘AI’ and ‘ICO’-you must build concrete things, go for new IT solutions and design future services based on actual customer needs.
Jouko Ahvenainen is founder and executive chairman, Grow VC Group
This article first appeared in Telecom Asia Vision 2018