Fintech progress seems to be as unclear in Asia as most other regions. China is probably the leading fintech market, but as a whole, fintech development is still more like an evolution for launching new services with some more tech than really disrupting anything. Lending is the most important service category, but it is not always what it looks like.
Autumn has again been the time for several fintech events in Asia. For example, I moderated a couple of Horasis think-tank discussions with top level fintech experts and influencers from China and the rest of Asia. The common conclusion was that it is not easy to summarize the status of fintech. There are several interesting new services and technologies, but nothing has really disrupted traditional finance services – yet.
Typical fintech discussions include comments about Chinese money transfer services, several mobile and online lending services, online identification, KYC and AML solutions and importance of data in all new services. We have seen some big success stories in payment and money transfer services globally, like Stripe, TransferWise and Square, but not too many other unicorns have emerged yet.
Several online and mobile lending services are making significant money. One could ask, is it really fintech, alternative finance or loan shark business. For example, Indonesia has closed several P2P lending services, that haven’t been real P2P lending, but more similar to high interest rate lending to poor people. They include some tech, like loan applications with a mobile app, but it is hard to call them disruptive businesses.
We can say new services are often:
- New applications to handle the customer interface,
- Expanding the customer base to formerly unbankable people,
- Collecting and utilizing more data on these people.
All these things are relevant and can be good for those people who were previously outside traditional banking services, exposed to loan shark business that were using these people. But it is not really about forcing the existing Asian banks to change in any significant way. One discussion I participated in included jokes about how terrible some online banking and mobile services are, when banks have just built some new front-ends onto legacy IT systems that make the services even slower than before.
Blockchain and distributed ledger versions have been the candidates to seriously challenge the old finance systems. Now we have suffered the hangover of the ICO hype and it has cast a shadow on all blockchain solutions. It doesn’t mean that distributed ledger solutions couldn’t be the real challenger, but it will take some time and more solutions that can prove their real value, not just selling fancy tokens.
One panelist crystalized the fintech problem in a nice way: “we don’t see a real disruption until we move from fintech to techfin.” This can really illustrate the problem of slow progress. Most fintech solutions haven’t really been able to use technology to totally change existing services, processes and infrastructure. It has been more about using stepping-stones to introduce some more tech and develop services. Many fintech people also come from the finance industry and try to convince others that strong finance competence is necessary to build new services. But they don’t have an understanding and competence of how technology disruption really works.
Some components that are typically important for faster technology disruption:
I have sometimes summarized those points by saying, when we have the ‘Uber of finance services,’ meaning a company that has resources to make an excellent service, push it to the market and also challenge incumbent players and the old regulation.
It is easy to see that finance services will encounter a significant disruption. The difficult question is, as always, how and when it will happen. Let’s be frank, we are still in the very early phase of fintech and most fintech companies have a hard time to find their purpose and business model. The main reason is that they still simply try to be upgrades to existing finance services and not create new, disruptive and totally digital finance services. Maybe we will never see the big breakthrough to techfin while fintech continues to change finance services.