If you’re not focusing on fintech Asia, you’re making a mistake, says Chris Skinner, who sheds light on what’s happening in the likes of Hong Kong and Singapore.

I just spent a weekend in Thailand at the Techsauce Summit. It was a great conference, and it reminded me of the time I’ve spent in Asia lately. After the books Digital Bank and ValueWeb were translated into Korean, Chinese and soon Japanese, I guess the region is interested in my thinking. Or maybe it’s more a reflection of the rise of fintech Asia, the Silicon Dragon.

Interestingly, it’s a very different flavour of fintech. We probably already know about how Alibaba is different, and the heavyweight battle between it and Tencent. This is why Citibank’s Digital Disruption report makes it clear that China is different.

Retail customer numbers at banks and internet companies, 2014. Source: Citibank's Digital Disruption report.

Source: Citibank’s Digital Disruption report.

And the internet financial sector in China is huge. McKinsey estimates $1.8tn, of which most is payments.

Market size of China's internet finance sector. Source: McKinsey.

Source: McKinsey.

For example, you may be aware that China has a unicorn called Lufax, one of the biggest fintech unicorns in the world, but you may not be aware that half of all of China’s unicorns are fintechs.

China's top 10 unicorns. Source: FinTek Asia.

Source: FinTek Asia.

This may account for the reason we’ve seen a spike in fintech investments in the region this year. For example, whereas the $50bn of funding from 2010 to 2015 was mainly pouring into firms such as Funding Circle, Betterment, Lending Club, Square, Stripe and company, this year has been all about fintech Asia.

30 largest fintech deals of H1 2016. Source: Life-SREDA.

Source: Life-SREDA.

That $10.6bn figure for the first half of 2016 is already more than double the $4.6bn invested last year, which in itself was a steep rise over the $797m invested in 2014. And, as can be seen, it’s not just China but across all of Asia.

Fintech investment, Asia. Source: Citibank's Digital Disruption report.

Source: Citibank’s Digital Disruption report.

New models of financial inclusion

Asian fintech is all about new ideas and new models. There are incumbent-led changes too – remember Frank from OCBC and Breeze from Standard Chartered? – but it’s not the same as what we see in Europe and the US. For example, there is a massive population in Asia that’s unbanked, and mobile smartphone developments are creating new models of financial inclusion, especially in the Philippines and Indonesia. Equally, it’s a region that has seen the rise of the new middle class, with millions of consumers gaining disposable income to afford aspirational products (and buying much of it online).

Alibaba, Flipkart,Tencent, Lazada and Snapdeal are some of the largest ecommerce players in Asia, but credit card use is still low. As a result, new payment systems are needed, as online commerce in many regions means that you order online and pay cash on delivery. This is why mobile money systems are proving a success, with Philippines leading the region. This is because the Philippines has two of the earliest pioneers in mobile money: Smart’s Smart Money launched in 2001, and Globe’s GCash launched in 2004. Since the launch of Smart Money and GCash, Filipino consumers have shown rapid uptake of the services used for a range of transactions, from remittances to bill payment. You can read more in ‘Tech in Asia‘.

Therefore, when we look at the region in this light, it’s obvious there will be an explosion of new ideas and new business models coming from Asia, with Singapore and Hong Kong being key focal points.

In fact, South East Asia is a hotbed of innovation, as can be seen from this infographic.

All in all, if your eyes are focused on London and Silicon Valley, you’re missing the key developments of the Silicon Dragon, and that would be a mistake.

READ NEXT: Tomo Yamadera on the unbanked of Asia

– This article is reproduced with kind permission. Some minor changes have been made to reflect BankNXT style considerations. Read more here. Main photo: Kanuman, Shutterstock.com

About the author

Chris Skinner

Chris Skinner is an independent commentator on the financial markets through the Finanser, and chair of the European networking forum the Financial Services Club, which he founded in 2004. He is an author of numerous books covering everything from European regulations in banking through to the credit crisis, to the future of banking.

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