In Asia, you are bound to find somewhere that has amazing technology that makes your entire day-to-day life, seamless, quick and easy. Every day you see something new, this is because investment and adoption rates for the latest technology are high in the Asia.
Take China alone, tech giants and start-ups drew a record USD59 billion from investors in 2017,1 while the mobile payment market is already valued at USD17 trillion.2,3 This is 50 times larger than the US market.4
“There is willingness to adopt new technology,” explains Jennifer Doherty, Head of Innovation for Global Liquidity and Cash Management, Asia at HSBC. “Our expectations are so much higher than what they used to be, that doesn’t change when a corporate treasurer or a chief financial officer walks into the office, they don’t expect less of a service than what they get in their retail lives.”
For instance, China’s big five state banks, which account for a third of the country’s total banking assets have all now teamed up with technology giants.5
Asia is being hailed as an innovation powerhouse due to the sheer scale of technological adoption amongst its vast population and the financial services sector that is evolving rapidly to serve them. India now has 380 million smartphone users,6 while over a billion people in China alone use WeChat, a mobile messaging platform.7
“If you look at some app that is being used in China, it probably has five to seven million users a day. So, the scalability of the technical solutions that you can implement in Asia is very difficult to find somewhere else,” explained Dr Ladina Caviezel, Head of Digital and Smart Analytics Consulting, Asia-Pacific, Swiss Re at the recent HSBC Financial Institutions Conference in Shanghai, China.
China tops global financial technology or fintech usage, followed by India and then the UK, according to a global survey by Ernst & Young.8 A lot of the impetus in the consumer space is now driving initiatives in commercial banking and financial institutions.
“Commercial banking hasn’t been as disrupted as retail banking with fintech, but certainly, over the next decade, we’ll see a lot of change,” states Zennon Kapron, Founder and Director of market research firm, Kapronasia.
A lot of innovations being adopted in Asia are true inventions not replicated elsewhere across the globe, whether it be developments in peer-to-peer lending, wealth management or insuretech. For instance, Alipay, Tencent, Lufax and ZhongAn have all made their names globally by developing disruptive business models.
“Every financial institution client in China now has to think about what they need to do to combat the disruption, to retain customers,” explains Angie Zeng, Managing Director, Co-Head of Financial Institutions Group, China, Global Banking at HSBC. “Asia, and especially China, has really advanced and grown in terms of fintech technology usage.”
It helps that the tech giants in Asia have warehouses of data that are unparalleled across the globe. Information on customers is the new battleground. “How they manage that data and how they can leverage that data is going to help them build artificial intelligence and improve customer service,” declares Carl Wegner, Managing Director, Head of Asia at R3. “We’re just scraping the surface of what the fourth industrial revolution can do for us.”
There is now more cooperation that’s happening between fintechs and banks. For instance, HSBC has a Strategic Investments team, which scouts the start-up landscape, identifying companies which are potentially good investments, and which provide technology the bank can use.
“Banks provide a valuable role in the financial industry. That can’t be easily replaced or replicated and so I think fintechs have realised that and banks have become a little bit more mature in terms of how they are engaging with the fintechs as well,” says Mr Kapron.
One area that HSBC has been working on recently in collaboration with fintechs has been the groundbreaking use of blockchain in trade finance. This involved using R3’s Corda technology platform9 (Watch video)
“It’s about co-creation and taking things to market with the technology firms that know what they’re doing in very niche spaces,” states Ms Doherty.
The majority of fintech executives globally say that their primary business objective is to collaborate with traditional firms, such as banks rather than compete with them, according to the World FinTech Report 2018. This is a big shift from the early days after the global financial crisis.10
“The mindset is very crucial in this journey of change, first of all it needs to be endorsed by senior leadership. It’s also about being more agile and having a broader overview, as well as being very creative and innovative with respect to how the world is changing,” states Dr Caviezel.
Many major financial service companies around the world are now investing heavily in new technologies, this includes HSBC. The bank has created its own in-house innovation teams, in addition to innovation laboratories in Hong Kong and Singapore. These labs focus on fintech solutions including AI, biometrics, big data analytics, blockchain and Internet finance.
“We are looking at this as ecosystems that are being built,” explains Surendra Rosha, Managing Director, Head of Financial Institutions Group, Global Banking, Asia-Pacific at HSBC. “This is not just about banks in the ecosystem; its other service providers coming together, fintech companies, insurance companies and asset managers in order to look at different discrete parts of the value chain and see how they can work together to provide better services.”
1 China sees record tech funding in 2017, Tech in Asia
2 Ant Financial's USD150 billion valuation, and the big recent bump-up, Reuters
3 China's mobile payments surge to SGD17 trillion, The Straits Times
4 China pulls further ahead of US in mobile payments, South China Morning Post
5 China's state bank looks to Alipay for help to embrace fintech, South China Morning Post
6 Strategy Update 2018, HSBC
7 Indian social media users more prone to data breach, Economic Times
8 Tencent’s WeChat hits 1 billion milestone, South China Morning Post
9 China tops global fintech usage rankings: report, Xinhua
10 HSBC and ING execute groundbreaking live trade finance transaction, HSBC
11 Fintech Start-ups Need Industry Partners to Thrive, Report Says, Bloomberg
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