Interest in financial technology (fintech) across the Asia Pacific region has skyrocketed, according to Accenture's report launched today (4 November 2015) at the FinTech Innovation Lab Asia Pacific's Investor Day in Hong Kong.
Titled "Fintech Investment in Asia Pacific set to at least quadruple in 2015", the report found that investments in fintech across the region has quadrupled — from about US$880 million in 2014 to nearly US$3.5 billion in the first nine months of 2015.
Payments (40 percent) and lending (25 percent), which have traditionally been in the sole domain of banks, took up the largest shares of the fintech investments in the region. Instead of competing with fintech startups in the consumer and merchant payment and lending space, financial institutions should look for opportunities in the business-to-business payments space — particularly in trade and invoicing — and new payment solutions within the sharing economy, advised Jon Allaway, Senior Managing Director of Accenture's Financial Services group in ASEAN and Executive Sponsor of the FinTech Innovation Lab Asia Pacific.
The report revealed that even though the volume of deals saw a slight increase, the value of the deals has increased substantially due to larger investments in and from China. These investments include those from Alibaba Group Holding and its Ant Financial Services Group subsidiary into Paytm; a mobile payment and commerce platform in India; and fundraising efforts by Ping An Insurance Group venture Lufax, which has been developing multiple alternative financing and investment platforms, including peer-to-peer and business-to-customer platforms.
"Major non-traditional financial services companies have been investing in fintech payments in China for the past year," says Beat Monnerat, Senior Managing Director at Accenture and the company's Financial Services lead in Asia Pacific. "The increasing deal size should serve as a wake-up call to financial services companies in China and across Asia Pacific that if they do not offer truly useful, customer-friendly digital solutions, competitors will step into the breach not just on the retail front but also in commercial transactions."
Fintech trends to look out for
The report also identified three potential areas for fintech innovation. The first is blockchain, the underlying distributed ledger technology that supports the exchange of cryptocurrency and cryptographically secured financial assets. As a standalone, blockchain could help banks, credit card companies and clearing houses collaborate to create safer, faster accounting, and optimise capital use by reducing counterparty risk and transaction latency.
"Blockchain technology enables democratic, distributed, evenly-balanced control to be implemented and exercised in situations where it's currently not possible or easy. These include cases where oversight by a central authority is not feasible - such as with international payments - or where a centralised control point, restriction, or intermediaries exist that create unnecessary inefficiencies, costs and barriers - like in the case of correspondent banking payments, card transactions and international remittances," said Monnerat.