With the arrival of the information age, technology has brought disruption to many traditional industries, forcing the leading giants to adapt to the waves of change or be engulfed into oblivion. Recent examples of companies failing to adapt would be Kodak and Nokia, both of which were undisputed leaders in their respective industries, and only later failed miserably.
Another such industry that seems vulnerable to advancements in technology is the finance industry – banks. Many believe that this is because financial services provided by the banks are made up of “bits” and not concrete goods.
Even though the financial industry is heavily regulated which has kept it somewhat protected to this day, a new wave of startups backed by investors with deep pockets want o beat the banks at their own game.
These new startups are in the industry known as financial technology, or fintech, and they are companies that use technology to make financial services more efficient – something that is lacking in today’s banking system. One of the key success factors of fintech is its ability to disrupt unnecessarily complicated financial systems, but corporations have not used software to its full capacity yet.
Perhaps the most notable of such a company is PayPal. It has been a long time since PayPal was established to fill a gap in the market by providing reliable payment services. It seems that the time has come again for multiple startups to fill a gap in the modern financial industry – a gap created by the lack of initiatives from banks to keep up with the demands of consumers.
Why is Fintech in Asia Different?
Fintech in Asia has been on a rapid rise. In the last quarter of 2015, fintech investment was more than quadruple 2015’s number. Achieving a record US$4.5 billion investment, the Asian fintech industry is poised to be the global leader of tech firms looking to disrupt the financial services industry.
The industry’s growth is also impressive globally too at over 60% year on year growth rate. Latest reports from KPMG and CB insights show that the entire industry is now valued at a little over US$19 billion.
The reason for phenomenal growth rates in Asia is due to the contribution of China and India, the world’s two most populous countries. Their growth is expected to continue as a greater proportion of its billions of citizens get access to mobile financial products and services.
China alone attracted investments worth US$2.7 billion in its fintech last year. It is also home to the two most valuable fintech companies in the world, the online lending platform Lufax and internet insurer Zhong An Insurance.
Behind, but not by much, India is only in its beginning stage of fintech. Even though the country has been the site of outsourcing for anything related to technology, the majority of the local population is still not up to date. Nearly 40% of India’s 1.3 billion people do not have a bank account and about 75% are without internet access.
These incredibly low rates of penetration show potential for the local fintech market. Mobile phones and internet access will no doubt be the main drivers of growth in India, especially since it is home to the world’s 6th largest fintech company, One97 Communications – a mobile payment services firm.
With the robust growth of fintech in Asia, these startups are looking even more threatening in disrupting the traditional flow of the financial services industry.