With the arrival of the information age, technology brings disruption to many traditional industries. This forces the leading giants to adapt to the waves of change – or be outcompeted. Recent examples of companies failing to adapt are Kodak and Nokia. Both were undisputed leaders in their industries, only later failing miserably.
Another sector vulnerable to advancements in technology is the finance industry. Some believe this is because financial services are made up of “bits” instead of concrete, tangible goods.
The financial industry is heavily regulated which has kept it somewhat protected. However, investors with deep pockets are backing a new wave of fintech startups in Asia. These firms want to beat the banks at their own game.
These new startups are in an industry called financial technology, or fintech. They use technology to make financial services more efficient. This is something which is lacking in today’s banking system. A key success factor of fintech in Asia is the ability to disrupt 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’s been a long time since PayPal was founded, filling a gap in the market by providing reliable payment services. Once again, it’s time for startups to fill a gap in the modern financial industry. A gap created by the lack of effort 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 sector’s growth is also impressive globally with a year on year increase of over 60%. Reports from KPMG and CB Insights show the entire fintech industry is valued at more than 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 will continue as a greater number of citizens gain access to mobile financial products and services.
China alone attracted investments worth US$2.7 billion in fintech last year. The country is also home to the two most valuable fintech companies in the world. These are online lending platform Lufax and internet insurer Zhong An Insurance.
Behind, but not by much, India is only in its beginning stage of fintech. The country is a major hub for tech outsourcing, but most 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 fintech in Asia. 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. Specifically, 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.
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