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Fintech Wave-2 isn't digital. It's hybrid

ASIA is the epicentre of fintech innovation, with Singapore, and India, in particular, taking big and bold moves towards the development of their fintech landscape.

In Singapore, this is evident in the progress made in the short span of time between the formation of the FinTech & Innovation Group (FTIG) and the regional initiatives taken by the Monetary Authority of Singapore during the Singapore Fintech Festival in 2018.

Fintech represents the collision of two worlds - financial services and technology, a union that brings disruption and synergies.

Fintech came of age in the aftermath of the 2008 financial crisis. New regulations and changing consumer demands began to emerge as the world tried to pick up the pieces of the "great recession".

2008-2018 constituted the formative decade for Fintech 'Wave-1' that irreversibly sets the foundation for Wave-2 (2019 and beyond). More innovation is likely to happen in the next 10 years than the previous 80 years.

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In Fintech Wave-2, these six sectors of the financial industry will usher in the changes and reshape customer expectations, setting new and higher bars for user experience.

1) Alt-lending

The transactional and commodity nature of lending is making it hard, therefore, the investment community re-rated some startups from technology companies to lending companies.

Moving forward, only profitable and scaleable business-ecosystem models, can withstand the test of the credit-cycle to lead the new wave.

2) Payments

The original disruptors have gotten to scale and their playbook is changing. Rapid e-commerce growth, the digitisation of payments, enabling regulations, are causing rapid growth of payment companies in Asia - a growth that has seen Asia-Pacific accounting for nearly more than half of global payments revenue growth in the world at more than US$900 billion.

Also, the market is in a consolidation phase, signalled by Fiserv Inc's planned US$22 billion purchase of First Data Corp and Fidelity National's US$43 billion acquisition of WorldPay Inc.

3) Insurance

Insurance startups are at a pivot right now. Fast growth is leading to full-stack solutions. Historically, insurance startups were simply brokers or managing general agents.

There's a compelling case that insurance-tech startups need to become carriers. However, the ROE for carriers tends to be low, around 9 per cent. Insurance-tech players will need to figure this out.

4) P2P Lending

Many peer-to-peer (P2P) lending companies - among the earliest to list in the US - saw valuations drop drastically in the public market. A number of Chinese lending fintechs, listed on the NYSE and Nasdaq in 2017, are trading much lower than their IPO prices, driven by reports of bad loans and stringent regulations in China.

Accountability and better governance are critical for P2P lending to truly hit its potential. Understated risks, maturity mismatches, and illegal practices have to be addressed to restore faith in the business model.

5) Wealth Tech

Wealth and investment companies that have achieved scale are adding a chequeing account and trying to become banks.

Not necessarily licensed banks, but rather, a consumer's primary financial partner.

Chinese wealth-tech companies have proven that the winning operating model is "a platform for your whole financial life". Asia-Pacific is the world's largest wealth management market, with more than US$61 trillion in assets - bigger than the US or Europe - and growing at three times the rate of the rest of the world.

However, for markets like India and Indonesia, the key challenge (and opportunity) is to transition existing users "from part-time savers to longer-term investors". Making money off these first-time, low-income investors won't be easy for wealth-tech companies.

6) Decentralisation

Though 2017 were early days, blockchain tech was a revolution that became a disappointment 2018. In 2019, with a greater focus on the "fairness" of Bitcoin and other cryptocurrencies, it's inevitable that we will see new distribution-focused experiments.

The previous two years were about the infrastructure needed to build these products, the next two will be about scaling and attracting users.

An infrastructure based on utility and real-world applications for blockchain technology will become the foundation that gives fintech companies distinct advantages.


The financial services sector must look beyond the current open banking "phase" and towards a future of shared-marketplace that requires a dramatic rethink, emphasising:

1) Experience over products;

2) Data over assets;

3) Partnering over the build or buy;

4) Shared access over ownership.

Fintechs are now increasingly global, and threatening traditional banks by ushering in product-stack changes - for example, 'from un-bundling to re-bundling'. Banks have to recognise the value of the cloud and speed up their digital transformation efforts to meet customer expectations derived from fintechs with new operating and business models.

In the medium term, open banking will gain traction. Distributed Ledger, APIs, and AI (Artificial Intelligence) will become critical building blocks for both banks and financial services providers that trigger the age of Invisible Banking, and a new fintech and banking paradigm moving forward, where fintechs are the infrastructure providers.

The onset of Collaborative AI will make it possible to synergise financial services, where the line between deposits and lending will be blurred. Cash-flow-as-a-service will be a reality.

More attackers and incumbents will partner, and a high level of regional variation in fintech disruption will continue.

Extraordinary transformations are happening in the finance world, and we've only scratched the surface of the fintech revolution. Fintech in Asean is only one per cent done; it's a long game, but ultimately worth it.

The coming "second wave" will be the one that drives lasting change. And Fintech Wave-2 isn't just digital, It is a hybrid of the old and new.

  • The writer is the founder of fintech firm Atlantis Tech, headquartered in Singapore.

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