In the wake of a seismic shift in global fintech dynamics, Asia has emerged as the undeniable nucleus of innovation. With its vast population share and a burgeoning user base, the region embodies the forefront of fintech evolution.
The COVID-19 pandemic has served as a catalyst, hastening digitisation throughout Asia, notably in Southeast Asia, where over 60 million people have swiftly adopted digital technologies. In addition, a significant portion of East Asia & Pacific (19 per cent) and South Asia (32 per cent) remain unbanked, indicating ample room for further growth.
Businesses and investors seeking growth amid uncertainty gravitate toward Asia’s thriving fintech sector. Despite a global decline in fintech venture capital, Asia-Pacific stands resilient, maintaining investment levels. This resilience positions Asia at the forefront of fintech innovation, potentially surpassing North America by 2030.
BCG forecasts that by 2030, Asia will lead the global fintech revolution with an impressive 27 per cent Compound Annual Growth Rate, surpassing North America. Despite currently holding a modest two per cent share in global financial services revenue, the fintech sector is projected to reach US$1.5 trillion in annual revenue by 2030, comprising nearly 25 per cent of global banking valuations.
Competition for dominance in the Asian fintech space intensifies, which is also seen by the example of the region’s megacities that most often appear at the top of the global fintech ratings.
Competitive landscape: Fintech megacities in Asia
China’s major cities, though diverse, collectively form a unified fintech landscape, primarily focused on the domestic market. While Chinese fintech experienced explosive growth from 2013 to 2018, recent years have slowed down, attributed to stringent national regulations and dominance by tech giants like Ant Group and Tencent.
Notably, Beijing stands out as a vibrant venture capital and startup hub, boasting top-tier talent and extensive access to capital. With its concentration of national fintechs and numerous unicorns, Beijing maintains a pivotal role in global fintech, reflected in its consistent top ranking in fintech hubs.
Also Read: Unlocking Southeast Asia’s financial potential with AI-powered fintech
Hong Kong emerged as a formidable player in the Asian fintech arena, distinguished by its robust regulatory regime, state support, and large-scale fintech events. Despite its relatively small size compared to mainland Chinese cities, Hong Kong boasts a substantial number of registered fintech companies, surpassing even Shanghai and Beijing in certain metrics. Particularly noteworthy is its remarkable post-pandemic growth.
Seoul presents a strong contender to Hong Kong, boasting a sophisticated regulatory environment, government support, and rapid industry growth. While both cities are on par in many aspects, Seoul stands out for its ability to attract larger investments, further bolstering its fintech ecosystem.
As the capital of Japan, Tokyo holds significant potential in the fintech sphere, leveraging its high-tech manufacturing expertise and widespread digitalisation. However, Japan’s already advanced digital financial landscape presents challenges for local fintechs to achieve extraordinary growth compared to neighbouring regions.
Repeatedly hailed as Asia’s premier fintech hub, Singapore stands out for its thriving fintech market, which is expected to exceed US$35 billion this year. The country is home to global fintech giants and large international events. With robust regulatory frameworks, extensive international relations, and post-pandemic growth surpassing Chinese competitors, Singapore solidifies its pivotal role in the regional fintech ecosystem.
India’s Silicon Valley, Bengaluru, emerges as a frontrunner in the Asian fintech race, boasting unparalleled growth and leadership in key metrics. Bengaluru is also considered to be the most concentrated region of fast-growing tech startups in India.
With a developed IT sector, which is evaluated at more than US$100 billion, the city is attractive for fintechs. Being not far behind, Mumbai forms a formidable fintech centre, propelled by India’s burgeoning fintech ambitions.
Dubai emerges as a significant hotspot on the Asian fintech map, leading global rankings in innovation and market size. Supported by progressive business reforms and infrastructure development, the city is one of the key players in shaping the future of fintech in the Middle East.
Also Read: Cross-border payments: Can incumbent banks compete with fintechs in Asia?
The prospects for Chinese and Indian megacities in claiming regional fintech leadership appear challenged by several factors. Despite a turn towards greater openness to foreign capital and increased local companies’ expansion into international markets, significant barriers remain unresolved at the domestic level.
These barriers necessitate comprehensive solutions that involve coordination across numerous institutions and a holistic approach. Achieving a fully-fledged resolution to these issues is likely to be a lengthy process, extending beyond a mere few years.
Looking ahead
In the dynamic realm of Asian fintech, Singapore has long been a leader with its cohesive ecosystem, yet it may further improve its investment environment to cement its status. Meanwhile, Dubai’s rapid ascent in the global fintech arena presents a formidable challenge fueled by efforts to attract businesses and expand influence beyond the Middle East and Africa.
As the landscape evolves, the region’s diversity remains crucial, with current hubs like Singapore in Southeast Asia, Dubai in the Middle East, Bengaluru in South Asia, and Beijing in East Asia likely to share the leadership.
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This article was first published on February 22, 2024
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