As Asia’s digital economy continues to soar and its consumers continue to lead in digital and mobile-first behaviors, technology disruptors—including FinTechs—are driving industries through a significant transition. Take Gojek, for example. The mobile app, which offers ride-hailing, logistics, and digital payment services, is Indonesia’s first company to reach decacorn status. Gojek has embraced a platform model and collaboration between ecosystem players, from small and medium-sized enterprises to data scientists. As a result, it has helped to raise employment, improved work-life balance for its drivers, and reduced journey times in a notoriously traffic-heavy country. It is telling—and in the current climate unsurprising—that the company, which has revolutionized digital payments in Indonesia, is a tech startup as opposed to a traditional bank.
One key factor in the embrace of this digital self-service wave is the emphasis new FinTech providers place on the ease of user experience—ensuring rapid service delivery so that consumers get to their desired outcome (e.g., get a taxi or make a payment) more quickly and with increased certainty. As time is the one thing you cannot buy, getting some back delivers a compelling proposition.
The trend towards “smart cities” is another factor in the ever-changing social and economic landscape of many Asian nations, enabled by collaboration among governments, industry, and international players that can provide the physical infrastructure, such as data centers, fiber networks, etc. for digital infrastructure scale. UBS in a recent report predicted that the Asia-Pacific region will account for 40 percent of the global addressable market growth for “smart city” projects by 2025. The West has its eyes on smart city investment opportunities in Asia, where economies grow at a faster rate than the global average. According to a United Nations report, by 2050 Asia will be home to 64 percent of the world’s urban population. The region’s “smart city” ambition, coupled with the digital economy expansion, has given rise to an extremely competitive innovation ecosystem that is seeing financial services, FinTechs, innovative companies, and players across multiple industries collaborate to better serve the consumer.
The linking of “smart cities” will also be a key factor—for example, the move towards both regional and global cooperation in China’s Belt and Road initiative (BRI), which will place Asia at the center of global trade routes. The attraction of the BRI is not only in its promise to better connect participating markets in terms of infrastructure but also, one would also speculate, with regard to financial connectivity. The BRI will be a major driver of investment and growth for the region (and beyond) and could have a significant impact on the financial services space as a result of increased capital mobility and financial inclusion.
As digital innovation continues apace in Asia, particularly in centers such as Singapore, the next few years will see Asia take the driver’s seat with regard to innovation in FinTech and financial services solutions, as well as building regional and global “innovation corridors.”
Another area within the digital realm where we can see industry attitudes in the East advancing over those in the West is open banking. This allows consumers to access additional financial applications and services via open APIs. Finastra’s inaugural Open Banking Readiness Index 2018 and additional research conducted this year demonstrate that traditional global financial hubs—such as the US and UK—are falling behind on open banking indicators such as cloud adoption, as compared with Asian markets, including Singapore. For example, in cloud adoption, financial services decision-makers in Singapore (42 percent) are more likely than the UK (30 percent) and US (33 percent) to have already moved towards payments or collaboration in the cloud. Further, the expectation of customers to have access to “online or mobile-enabled” banking has been found to be a key driver (64 percent) for the implementation of digital initiatives and FinTech adoption in Singapore, as compared to 53 percent in the UK and US.
We live in the age of the democratization of data, meaning there is more control in the hands of the consumer with regards to data access; in the context of financial services, this indicates that the strength of traditional banks continues to be challenged. As the aforementioned figures demonstrate, Asia has a comparably high readiness for open innovation within the financial services space. This drive is being led in the region by companies that encourage collaboration and innovation via a platform approach from both individuals and enterprises.
Asia’s rise unlocks unprecedented opportunities to learn from and engage with the region’s dynamic markets. It will be an age for open innovation and collaboration where economies and ecosystems across the globe will be more intertwined with each other on platforms to test new ideas and help deliver solutions that unlock the potential of people and businesses for the future.