The Future of Fintech in Asia

While the headline sounds grandiose, it would not be an exaggeration to say that fintech is the crossroads of Asia. Over the past few years, low interest rates and asset bubbles have driven global fintech valuations higher, and Asia is no exception. However, inflation, rising interest rates, and a shift in venture capital to “safe-haven” investment strategies have stalled the incredible growth across all fintech sectors, including cryptocurrencies. In a recent report by Kapronasia and Elevandi, we examine how the nature of fintech is changing, especially in growth markets.

Growth markets remain a key element of Asia’s fintech story as technology combines, with the financial industry creating new solutions for individuals and businesses in financial inclusion and financial exclusion.

In developed markets, new solutions bring convenience to individuals who typically already have bank accounts. More importantly, they also introduce a competitive factor that pushes traditional suppliers to upgrade their products.

In emerging markets, the development of DFS (Digital Financial Services) has had a huge positive impact on financial inclusion. The numbers show success: UPI alone has brought more people into the financial system in a shorter period of time than any other initiative in modern history.

As progress has been made, the discourse around financial inclusion is also changing. Financial inclusion is broadly defined as an individual’s access to traditional financial services – today through traditional banks, non-bank financial institutions or one of their digital counterparts. As evidenced by previously shared World Bank data, we are making progress towards financial inclusion in many jurisdictions.

Therefore, for the industry to progress, we must advance the traditional definition of financial inclusion to include a wider range of financial products and services. In other words, the future of financial inclusion is not just access to traditional financial services, but all the products and services the financial industry offers.

FinTechs will be an integral part of this future, and in fact already are. In India, these start-ups are offering loans to merchants using UPI. In Singapore, a digital wealth manager is making it easier for investors to move money using PayNow. Across the region, nimble start-ups are leveraging technology to redefine the customer experience.

That’s not to say the journey will be easy. With all the geopolitical and economic issues we discussed earlier in this article, the next few years will be challenging. As the industry becomes more selective and focused on sustainable business models, securing venture capital funding is becoming increasingly difficult.

FinTechs will have to go back to basics and focus on customer problems to build solutions that address friction points, rather than relying on gimmicky but ultimately unnecessary technology. It’s about resilience in the face of adversity. Innovate, but remain at the same time.

The fintech companies that survive will be those that find such a delicate balance.

To learn more about the future of fintech in growth markets, view the full report Gentlemen.

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