Deconstructing the evolution of the Fintech sector in Asia
Since the term “fintech” was first coined in the early 2010s, the financial technology sector and the ecosystem surrounding it have undergone massive evolution. A fluctuating economic climate has seen some startups go public, while others have gone under – meanwhile, the pace of innovation has witnessed new technology, business models and the necessary regulatory modifications to meet this rapidly changing environment.
To uncover more about where the fintech sector is headed and what trends are developing in different territories around Asia, Fintech News Malaysia Editor-in-Chief Vincent Fong hosted a virtual webinar with Terry Chan, the Finance and Compliance Director at QFPay; company of Robert George Padin, Philippine country head of Spenmo; with Vitavin Ittipanuvat, CEO of Vertex Ventures Southeast Asia and India; and Franco Manuel, Master Principal Solution Consultant at Oracle NetSuite.
Observations of the fintech sector around Asia
Terry Chan
“I think it’s the most exciting [time] in fintech is now,” said Terry. “Hong Kong is now catching up with some crypto regulations and some payment rules in the fintech space.”
He continued that the government is now in favor of introducing more inclusive regulation, with at the latest proposal by Hong Kong’s Securities and Futures Commission (SFC) to allow retail investors to access trading services provided by licensed virtual asset operators. Under the current regulations established in 2018, trading platforms were only allowed to offer their services to professional traders and institutional clients.
Terry believes it is better for the government to step up now rather than not at all, as Hong Kong looks set to regain its position as a leading fintech hub. In stark contrast, George of B2B spend management platform Spenmo says that as a developing economy, trust in traditional banks is high in the Philippines and awareness of global banking events such as the Silicon Valley Bank collapse is relatively low.
Robert George Padin
However, George feels that an emerging market will benefit from the strengthening of the software ecosystem, such as the implementation of banking-as-a-service software “to really help business owners”. Vertex Ventures’ Vitavin agreed with the assessment of the developing economy, but noted that mobile banking is fairly widely accepted in Thailand.
Vitavin pointed out that not all highly disruptive fintech will have a smooth ride in Southeast Asia, and some fintech companies won the market by simply getting the basics right, and Vincent countered that the pace of innovation in different countries can produce different results – by using P2P and equity crowdfunding as examples that have surpassed VC funding in Malaysia the last two years.
Franco, meanwhile, said the fintech sector offers unique financial services and products, and to that end, NetSuite works with businesses to meet their business goals with the right infrastructure “that can provide them with real-time business insights, so that [businesses] can innovate, that they can respond proactively to these business changes.”
The biggest problems fintech can tackle this decade
Terry says that as a payment solutions provider, QFPay faces challenges in integrating smaller merchants into digital payments, citing tax issues and incomplete data sets that fail to align HK payments with China, especially in B2B and B2C transactions .
George added to that cash had always been king in the Philippines, and while over 76 million Filipino adults now use an e-wallet as a result of the pandemic, the B2B payment landscape still tells a different story. In the Philippines, the majority of B2B payments are still made with paper checks, a volume of USD 200B+ per year in the Philippines.
Fintech can help improve B2B payment processes and lower the cost of cross-border transactions, which were too exorbitant in the Philippines. “So since Spenmo, we’re really going to allow business owners to have visibility, comfort and control over how, when and why money leaves their company.”
Vitavin Ittipanuvat
As for Vertex Ventures, an investor in high-growth startups in Southeast Asia and India, Vitavin said one of the exciting areas would be how to challenge lending companies with higher risk appetites [versus incumbents, which will continue to be risk averse] come up with loans or credit products for the largely underserved MSME segment (micro, small and medium-sized enterprises).
Similarly, Vincent questioned whether digital banks in the Philippines were fulfilling their roles as banking services for the underserved, to which George responded that most digital banks were run by incumbents, but that “regulators are working to really create more diversity and more competition, for to really bring down prices and costs to consumers”.
Franco added that banks and payment providers needed to innovate and facilitate money transfers to be more accessible and cheaper for consumers.
Post-pandemic environment shaping the fintech sector
Vincent questioned how the rate hike by the Federal Reserve intended to curb inflation in the US had apparently led to less liquidity for investors and startups, and what the consequences were for the panelists.
George said VCs and investors are now all focused on gross profit, but Spenmo is focusing on being efficient with its capital and the big bets it makes, to navigate that environment.
Franco Manuel
From the perspective of a VC, Vitavin said investors would be more cautious (and take longer to decide) when looking at investment opportunities, while founders are required to be more disciplined with both capital efficiency and valuation to ensure a better margin of safety for all shareholders to a good exit.
Franco highlighted the dichotomy between growing as a new company and acquiring customers, which is a balancing act that must be managed with the right business tools to keep costs manageable while scaling up.
“And there it is NetSuite helps them. Because it is a purely cloud-based system that does not require large capital investments, you can start with a few users, he continued. “And when you scale up as you grow across them, you’ve increased the number of users. So it’s a way to enable them to scale up or down, relative to the demands of the organization and the market” while maintaining visibility over operations and focusing on customer acquisition.
For more information on NetSuite and its services, visit www.netsuite.com.sg/
