Asia taps new technologies to drive growth and transform economies
Financial technology, or fintech, is creating business opportunities and driving engagement across much of Asia. It’s borne of necessity as much as anything, particularly in the region’s less developed markets, where fintech is tailored to suit specific local needs.
Since the turn of the century, a confluence of trade liberalisation, a growing middle class and rapid urbanisation, along with transformational new technologies, has directly benefited people across the region.
Besides China’s 1.4 billion people, Southeast Asia has a population exceeding 630 million across 11 countries. It means that the rewards for businesses that understand this market well enough to reach it - and stay one step ahead of it - can be huge.
In Hong Kong, the rate of consumer fintech adoption surged from 29% in 2015 to 67% in 2019, according to consultancy EY. Meanwhile, Singapore took first place in the latest Digital Society Index, which ranks countries based on how successful they are at creating an inclusive digital economy. The US is ranked second, with China third.
Not Disruptive, Just Plugging a Gap
Digitalisation, affordable smartphones – typically local brands – and democratisation of information via the internet are major drivers of growth. In many parts of the region, the process is one of development rather than disruption, because there was nothing in place beforehand to disrupt. The new technology simply plugged a gap, leapfrogging more traditional markets hampered by old hardware and other infrastructure – usage is highest where legacy infrastructure is lowest.
A good example is in China, where Alipay and WeChat Pay dominate e-payments from ticket purchases, road tolls and hotel payments to restaurants, shops and roadside vendors in the remotest corners of the country. These highly user-friendly apps provide a cheap, secure and fast way to make cashless payments, linking directly to bank accounts – so easy to use that they are the default option. Now catering internationally for Chinese tourists overseas, these e-payment services are moving offshore for locals in neighboring markets.
Alongside Alipay and WeChat Pay, other so-called super-apps have taken hold, such as ZhongAn in the insurance sector and Grab in the ride-hailing space. ZhongAn, China’s largest online insurer, offers low-cost micro-insurance to users and also insures the shipping of products bought online from Alibaba. In March, ZhongAn was awarded a virtual banking license in Hong Kong. Grab meanwhile is moving on from ride-hailing to wealth management, insurance and e-healthcare – all supported by its network of drivers, all developed at a micro-level.
The impact of these technologies is profound. They are driving economic growth in a way that doesn’t wait for trickle-down. Instead it goes straight to the heart of the matter at a micro- and small-business level. In Southeast Asia, the internet economy is forecast to grow to US$240 billion by 2025, up from US$72 billion in 2018, according to joint research by Google and Temasek.
Asia Governments Have a Long-Term Vision
The usage and growth of fintech is aligned with government policy. Across the region, governments have strategic long-term visions to acts as a compass for decision-making. Beijing has made no secret of its ambition to “upgrade” China’s entire economy, moving it away from manufacturing cheap consumer electronics and other low-end goods to highly sophisticated technology and services, creating an environment in which the likes of Alibaba, Tencent and Huawei have flourished.
However, while there is an acceptance in parts of the region that convenience means giving up some privacy, it appears that companies’ internal controls are sometimes lax. The financial and reputational penalties for data leaks can be high, so it’s a significant risk – one that will increase with the growth of e-healthcare and facial-recognition technology.
Japan, China, Hong Kong, Singapore and Taiwan all have ageing populations which may curtail growth in some areas – and possibly boost growth in others, such as healthcare. In Japan, the ageing population may to an extent account for the relatively low level of mobile internet usage. Old habits die hard. On the flip-side, however, the populations of Indonesia and Philippines are much younger, with high mobile usage, pointing to greater growth potential.
Across Asia, more and more shoppers – particularly younger ones – look for environmentally friendly products and brands that are purpose-driven, such as making a stand on social issues. They want to admire the brand as well as the product.
Amid the post-2008 financial crisis austerity elsewhere in the world, Asia’s tech sector has taken off and created multitude new markets and industries, delivering products and services at a scale and speed scarcely imaginable a few years ago.
 ASEAN.org, October 2018
 EY, Global FinTech Adoption Index 2019
 Dentsu Aegis and Oxford Economics, Digital Society Index 2019