While North America and Europe have long been considered fintech heavyweights, South-East Asia is emerging as a worthy addition to the list of major global fintech markets. The region's ability to innovate and adapt quickly has influenced the global fintech
landscape. A recent
KPMG report found that, while global fintech investment dropped by 30%, industry funding in the Asia-pacific region increased from $50.2bn in 2021 to $50.5bn. It is only a marginal increase, but other regions would be rightfully envious of this stability.
From the perspective of a Singapore-based fintech scaleup with a global presence spanning over 38 markets, I have the privilege of sharing some first-hand insights that shed light on these statistics. With its swift embrace of technology and the emergence
of superapps, the Asian fintech landscape indeed provides a wealth of knowledge that can greatly benefit the global industry.
Asia's swift adoption of the latest technology
The fact that Asia's fintech sector continues to flourish while other continents face challenges is due to several factors. Many Asian corporations did not face significant IT legacy system problems, and when given a chance, they swiftly adopted the latest
technology. Additionally, these countries have a considerably high percentage of young people who crave digital experiences and started exploring the internet even without knowing they were on it. I recall a market research study conducted around 2015-2016,
in which consumers from Indonesia and the Philippines were asked if they use the Internet; they answered no. However, when questioned about Facebook, they said yes.
The rise of mobile payments in China is another example of how new technology, such as QR codes, was utilised to compensate for the lack of POS terminals and the cost of deploying a merchant acceptance network in a vast country. Initially, consumers embraced
this payment method because it was trendy, then convenient, and eventually, it became a habit.
The banking systems in North America and Europe have a more extended history compared to Asia, but they are subject to stricter regulations. Furthermore, they are less fragmented in comparison. Interestingly, some innovative products in these regions were
born by copying the new products created in Asia but using local technologies. The example of mobile payments is relevant here as well. Many mobile payment providers in the US and EU focused on deploying the latest NFC and contactless technologies, whereas
they could have had faster traction and consumer adoption if they had adopted the QR Code approach initially. Conversely, a number of venture builders in Asia copied established business models in the US and EU, particularly in e-commerce and marketplaces,
and executed them successfully before the younger Asian population became natively tech-savvy and more willing to adopt these new tools and services.
Impact of underbanked and unbanked populations
Numerous Asian fintechs initially emerged as solutions for the underbanked and unbanked populations but soon recognised that even banked customers found value in their offerings. Over the past three years alone, Asia has witnessed the launch of numerous
neobanks and the transformation of many mobile wallets into lending platforms. This shift occurred because these companies realised that relying solely on revenue from interchange fees and attempting to monetising users without funds in their wallets was simply
wishful thinking. Initially targeting unbanked consumers for credit access, these propositions have now become nearly mainstream methods of obtaining financial services. User experience, speed of access to funds, and the availability of services from non-banking
entities are the key factors driving the widespread adoption of fintech services.
Some countries are already following in the footsteps of Asia. The similarities between Brazil and Indonesia, as well as between Mexico and the Philippines, are striking in terms of the percentage of banked/unbanked populations and their youth population,
GDP per capita, smartphone, and internet penetration. Several venture builders have taken products from the US and EU and replicated them in African and Latin American markets. Buy Now Pay Later (BNPL) services have become very popular in these countries as
many consumers do not have a credit card to start with.
Asian superapps change the face of global fintech
Superapps, such as Grab, WeChat, Line, and Alipay, have experienced a remarkable surge in popularity driven by the increasing demand for convenient one-stop-shop solutions that swiftly address daily challenges. In Asian cultures, where time is highly valued,
people seek quick and efficient services that cater to their needs. One of the key attractions of superapps is their ability to offer loyalty programs and discounts, which have garnered immense popularity among Asian users. Moreover, these apps possess the
capability to localise their services and user experiences to align with the preferences and tastes of diverse local cultures. For instance, Grab in Thailand provides different coupons and discounts compared to its Indonesian counterpart, catering to each
market's specific needs and preferences.
As the global fintech landscape evolves, superapps serve as a compelling example for the industry to explore and draw inspiration from as they continue to reshape how financial services are delivered and experienced. This trend presents an intriguing dynamic
between North America and Europe when it comes to developing superapps. In North America, where a common language predominates, there is a potential advantage in creating a superapp that resonates with customers across the region. However, European fintech
companies encounter language and regulatory barriers that necessitate a more fragmented approach. Adapting to various languages and regulatory frameworks within the European market poses challenges, compelling fintechs to adopt a more localised strategy.
Key lessons for the global fintech industry
Perhaps the most basic and obvious lesson we can draw from the Asian fintech scene is the customer-centric approach, which involves developing financial products and services that meet end users' specific needs and preferences. Asia's successful fintech
companies operate by prioritising the seamless customer journey, aiming to deliver exceptional experiences whenever and wherever customers engage.
Innovative solutions don't always require the latest technology. Take, for example, QR Codes, which can be activated with just a printer for the merchant and a camera for the customer. Alipay and WeChat demonstrate that fancy NFC readers or POS terminals
are not essential. While product innovation is vital, execution plays an equally significant role. Fintechs should avoid solely focusing on what sets them apart from competitors or meeting the expectations of venture capitalists. A holistic approach is necessary
for long-term success. Another critical lesson is the shift from fixating on credit bureau data to embracing alternative data. By leveraging smartphone metadata, telco data, and social media data, fintechs can extend financial services to a broader audience.
The strength of Asian fintech has also traditionally been supportive regulation. Authorities in Singapore, Hong Kong, and Indonesia have established sandboxes that empower fintechs to test new solutions. These regulators are not imprudent; they simply acknowledge
the importance of learning from those immersed in innovation, enabling the crafting of regulations that promote financial inclusion and safeguard consumer data. Regulatory frameworks should align with innovation rather than stifling it. For example, the Monetary
Authority of Singapore (MAS), for instance, offers the Fintech Regulatory Sandbox framework, providing a secure environment for financial institutions and fintechs to experiment with new products. By establishing rules and guidelines to encourage best practices,
MAS ensures that companies seeking licenses demonstrate the necessary financial track record and governance structure. This framework has fostered a sound and progressive fintech sector in Singapore.
Asia's fintech sector serves as a wellspring of valuable insights for the global industry. Its rapid technology adoption, emphasis on alternative data, supportive regulatory environments, and innovative execution offer valuable lessons. Drawing lessons from
Asia's experiences, the global fintech landscape can evolve further, driving financial inclusion and empowering consumers worldwide.
About the author
Michele Tucci is the Managing Director in North and Latin America and Chief Strategy Officer in credolab, the Singapore-based largest developer of bank-grade digital scorecards and data enrichment solutions. The company provides lenders, risk officers, and
marketers with a previously untapped, highly-predictive source of behavioural data: privacy-consented and anonymous smartphone metadata. Сredolab analyses over 70,000 data points with a proprietary, AI-driven platform and converts digital footprints into highly
predictive scores. Prior to joining credolab in 2018 as Chief Product and Marketing Officer, Michele worked on international consulting assignments, product management and business development roles with Capital One, MasterCard, Intesa Sanpaolo Bank, and
Telecom Italia Mobile.