The November announcement by India’s prime minister Narendra Modi to remove more than 85 percent of the country’s banknotes from circulation caught many by surprise. Overnight, individuals and merchants in India’s heavily cash-reliant economy were caught holding stacks of now worthless paper notes, the same notes they had relied on the previous day to meet payroll needs, pay vendors, and facilitate nearly all commercial transactions.
Also, seemingly overnight, India’s already popular digital wallet company, Paytm, became the payment option of choice for many caught holding the now useless paper notes. In the month that followed, Paytm experienced a surge in downloads, adding over 20 million new users in such time. Paytm, a company born out of the financial technology (FinTech) revolution and its corresponding digital payments technology had saved the day.
The Paytm anecdote reaffirms the very basic value proposition driving FinTech innovation: provide users with technological solutions which streamline and make processes more efficient while also solving or ameliorating structural or regulatory deficiencies affecting financial transactions.
Yet, India is only one of several Asian economies being impacted by new solutions that are changing how consumers and businesses undertake financial transactions. From mobile payments, financial advisory, to lending startups, Asian entrepreneurs across the region are capitalizing on existing opportunities to apply new technologies to improve existing processes. Such entrepreneurs are at the cutting edge of technology, for example, the flurry of global interest in the increased application of Blockchain technology to provide security and facilitate transactions is spurring an entirely new class of Asian FinTech companies.
While China and India remain the region’s FinTech leaders, other countries, including Singapore, Japan, Korea, and Malaysia are also fertile breeding ground for new FinTech companies. Consumers in the region have also been rapid to adopt new technologies, with digital banking in Indonesia, Malaysia, and Vietnam having reached 40 percent penetration as early as 2015. From an investment perspective, in 2016 alone, Asian FinTech startups raised more than $5.4 billion from eager investors.
Increased interest from important actors will also continue to spur FinTech activity. The recent signing by the Monetary Authority of Singapore of two separate FinTech cooperation agreements, one with Japan’s Financial Services Agency and the other with the Abu Dhabi Global Market are models likely to be replicated by other governments. FinTech-focused public-private partnerships are also emerging; a key example is the recent signing of a Memorandum of Understanding between Korean professional services firm Samil PwC, Korean regulator The Financial Services Commission, incubator The FinTech Center, and innovation center KIC China.
The Asian FinTech sector remains a vibrant regional hub of innovation. Increased entrepreneurial activity spurred by existing opportunities, new technologies, and greater interest in the sector will continue to impact how financial services are consumed and delivered. Like India’s Paytm, companies across Asia are working for their chance to revolutionize their country’s financial landscape. Rest assured, Paytm will not be the last company in the region to do so.