Digital Realty - global provider of data centre and collocation solutions - recently revealed its predictions on the key trends that will support FinTech's future growth in Asia.
Following are five key trends:
1. FinTech to change the financial hub landscape
The FinTech fever has moved beyond Singapore, Hong Kong and China, to infect other Asian cities. According to Digital Realty, there is a lot of growth in FinTech in Malaysia, Indonesia, Korea, Japan, and India, with priorities ranging from payments to security. The growth of FinTech companies in these markets might see the shift in how these markets conquer new grounds in being financial hubs in the region.
2. A changing but fragmented regulatory environment
Regulations will play a big part in encouraging the growth of FinTech startups. For instance, Singapore has provided government support to startups, as well as ensured that its regulations would enable FinTech startups to grow sustainably. Following suit, countries such as Indonesia and Malaysia have also put forward regulations to help ensure that financial players, the economy, and consumers are well-protected.
3. Traditional banks fighting disruption from startups
The rise of FinTech have forced financial institutions to leverage technology to gain an edge against startups. For example, DBS Bank has focused on innovation anchored around increased focus on digitisation to further enhance processing efficiency, making the customer experience more interactive and intuitive, and using structured and unstructured big data analytics, to put their customers and the centre of their business.
4. Evolution of Payments
Tapping on the increasing adoption of smart devices in Asia, many companies are offering financial services through the Internet and mobile networks. This enables the unbanked to gain their first access to banking and mobile payments. In India, for example, mobile companies are applying for licenses to operate "payment banks" that can handle deposits and payments, but not loans. This push to access the unbanked through digital channels will continue to rise in the region.
5. Rise of P2P, driven by China
In China, the number of peer-to-peer (P2P) lending platforms has grown from 948 in February 2014 to more than 1,700 in March 2015. In Southeast Asia, P2P payments are picking up steam, according to a recent Forrester report. Regulatory challenges still exist but more regulators are beginning to make changes to its regulatory framework to allow P2P players to start operations.
According to a recent Accenture report, FinTech investment in Asia Pacific grew from US$880 million in 2014 to nearly US$3.5 billion in the first nine months of 2015. Krupal Raval, Senior Vice President (Finance), at Digital Realty, said: "The increased investment in the sector, particularly in this region, is testament to the great opportunity available, not just in the financial hubs of Asia, but for the growing startup contenders in the region as well. With the convergence of certain trends, FinTech in Asia is well-placed to see growth in the coming years."
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