In the developed regions of the Asia-Pacific (APAC), financial inclusion tells a tale of success; in Japan, 98 per cent of adults aged 15 and above have financial accounts, while South Korea boasts a 95 per cent banking service penetration among the same demographic.
Southeast Asia (SEA) is also experiencing robust growth. According to the e-Conomy SEA Report by Google, Temasek, and Bain & Company, SEA’s digital economy is expected to reach approximately US$360 billion by 2025.
Amidst this growth, a dynamic narrative is unfolding where younger investors are leading the burgeoning economy of digital finance.
Demand drivers for financial opportunities
The technological transformation of SEA is driven by a highly adaptable, digitally savvy youth. This is evident in their preference for mobile channels, particularly in mobile banking. A study by IT security company Entrust revealed that in SEA, mobile banking usage through apps is notably high, with 65 per cent and 71 per cent of respondents in Singapore and Indonesia, respectively, using these tools predominantly to manage their finances.
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Reflecting on this transformation, an EY Singapore report emphasizes, “In 2024, Southeast Asia’s financial services sector will see the profound impact of emerging technologies and strategic innovation. The sector will increasingly be characterised by instant cross-border payments, embedded finance, and core banking modernisation.”
Besides core financial services, SEA has experienced the rise of novel finance apps and new methods of generating online income. For instance, the play-to-earn model of Axie Infinity gained significant traction in the Philippines, where it became an alternative income source during the pandemic-induced unemployment surge.
However, the rapid growth and popularity of such platforms also highlight critical flaws, including a significant gap in financial knowledge and economic sustainability. The volatility of Axie Infinity, for instance, has sparked debates about the long-term viability of play-to-earn models, raising concerns about players being able to generate sustainable long-term revenue.
While acknowledging the novel efforts of gamified fintech models, innovations are stepping in to offer simplified, accessible entry points into the world of fintech — especially trading and investments.
Copy trading platforms, for example, allow novice traders to enter the trading space even with little knowledge of trading. New entrants can copy the strategies of seasoned traders and emulate successful trading strategies.
“Conventional copy trading has apparent benefits for novice users. However, the shortcomings often outweigh the benefits — the technical inefficiencies associated with this model lead to varying results for the copiers. The leading traders’ results will always be different than the copiers’, making it an ineffective tool for portfolio management,” says Bartolome R. Bordallo, Co-Founder and CEO of Zignaly.
AI’s revolutionary impact on fintech
For fintech, the role of artificial intelligence (AI) and machine learning (ML) are pivotal in democratising access to financial services. These technologies simplify complex market dynamics and provide users with in-depth analytics and critical insights that were once exclusive to institutions and professionals.
Social investment platforms, for instance, use AI extensively to enhance tools for retail users. AI’s ability to process information from large data sets makes it a great ally in the trading industry. It can help recommend stocks, predict market movements, optimise portfolios, automate risk management, and manage trading bots.
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Another example is the use of AI-powered algorithms like Zignaly’s Z-Score, which analyses data from over 22 million trades. The algorithm evaluates trader performances based on factors like risk, profitability, asset diversity, and management efficiency, ensuring that highly qualified traders are curated through smart algorithms.
“In Southeast Asia, where the fintech industry continues to grow rapidly, the adoption of AI and ML is especially strong. With the help of new technologies, companies can provide more convenient and affordable services, improve the speed of processing requests, and increase their level of security,” states Natalia Ishchenko, CEO of UnaFinancial.
With fairness in mind, AI-driven profit-sharing models ensure consistent outcomes for all participants, enabling users to securely delegate their funds to qualified traders through a pooled fund management approach.
Asia’s financial trajectory
As the fintech industry continues to evolve, the emergence of profit-sharing models and user-friendly trading platforms is making professional-grade financial tools available to the mainstream. Furthermore, the integration of AI is democratising algorithmic trading, making sophisticated trading strategies more accessible, affordable and tailored to individual preferences.
The availability of retail-friendly platforms tailored for Asia’s digitally savvy investor base also creates a clear incentive for fund managers to deploy high-quality, successful trading strategies. For platforms like Zignaly, this model has successfully onboarded 500,000 users to connect with over 150 veteran fund managers, who collectively managed US$125 million in digital assets.
Financial tools are becoming not just sophisticated with AI but also more attuned to the diverse needs of Asia’s growing investor base, elevating the standards of mainstream fintech.
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