By Afsana Zarin
Fatima is an industrious worker at a garments factory in Dhaka who has a father, mother and two little brothers and sisters back at her home in the village. Her father is a landless peasant and lives on cultivating other people’s lands which is not enough to support his family. So, as the eldest child of the family, it falls on Fatima to contribute to her family every month to keep them running. If it was before 2011, Fatima would have to travel every month back to her village to give her share to the family but now she and 17 million other bKash users can send their money digitally through their mobile phone in 2 minutes. bKash is a mobile wallet based out of Bangladesh serving the unbanked. We call this technology a Fintech innovation.
Fintech has been a buzzword lately in all the popular tech conferences around the world. Since Singapore’s central bank’s decision to make Singapore the Fintech hub of Asia and the record $4.5 billion investment into financial startups in Asia in the year 2015, the Fintech sector has been on the rise. As per the World Bank, about 2 billion of the world’s population is unbanked and across developing Asia, only 27% of the total population are banked. Fintech has disrupted the monopoly of the traditional banking channels and opened new financial markets in rural areas through a previously ignored demography – cell phone users. It is difficult for poor people to afford traditional banking channels fundamentally because they are expensive. However, Fintech is closing that gap by making financial transactions cheaper and affordable for the poor and typically the transaction fees for mobile wallets are more affordable than banks and even microfinance and cooperatives.
Even though Fintech has been a popular category among founders, it wasn’t until 2016 that from governments to big banks, everyone started to pay serious attention to the Fintech scene in Asia. These are the key findings about the Fintech growth and investment in Asia for the year 2016:
i. While Alibaba’s financial subsidiary scored a huge $4.5 billion investment itself, it also set out its footprints in countries like India and Thailand by investing big in Paytm and Ascend money.
ii. From July 2015 to June 2016, China has received a total of $8.8 billion for Fintech investment.
iii. Besides Paytm, India has around fifteen other Fintech companies who have secured more than $20 million in funding.
iv. Growing economies like Myanmar, Indonesia, Vietnam and the Philippines are coming up with creative solutions (Momo, Ayannah) to serve the 430 million unbanked people in Southeast Asia.
v. Omise, a startup from Thailand secured around $20.4 million funding and became one of the most promising Fintech startups in Southeast Asia.
vi. Japan is also not behind, as per Google, search interest in the word “Fintech” has increased in Japan greatly in 2016 because of the inflow of Fintech investments of around $99 million in Japanese Fintech companies.
vii. The top business models in the Fintech area have been: Payment, Investment tech, alternative lending, big data and integrated financial services.
viii. The key Venture Capitals have been: Sequoia Capital, Golden Gate Ventures, Accel Partners, SAIF Partners, East Ventures and 500 Startups.
ix. While core technologies like Blockchain, Artificial Intelligence (AI) and Biometric are being watched by business sectors, the number of startups that can focus working on this kind of core techs is still limited. This fact makes those startups more attractive to investors.
x. Singapore is still the innovation hub for Fintech in Southeast Asia with the constant growth of companies like Fastacash, Tradehero, Calllevels, 2C2P and a hush-hush investment in M-daq from Ant Financials along with 100s of other Fintech startups.
In the year 2017, Regtech, Alternative engagement platforms, Big data, block chain technologies and their impact on doing things differently will keep getting attentions from the investors, banks and government bodies.
Fintech in Bangladesh:
bKash has been doing a phenomenal job in serving the unbanked in the country. Starting from 2011, they have now more than 17 million users. The Bill & Melinda Gates Foundation contributed to bKash initially with grants and then as investors in 2014. bKash is now thinking about expanding their services to loans and other financial services. However, the Bangladesh Bank has given 28 more licenses to other banks to avoid a monopolistic situation in the mobile wallet market. Other than this, the Fintech innovations in Bangladesh are very limited.
The time is ripe for the Banking industry to change its course using emerging Fintech technology, especially considering the dominance of millennials and cellphone users around the world. Regulatory bodies should take these changes into account and aid Fintech innovators to make a mark in the financial set up in developing countries like Bangladesh.
The writer can be reached at afsana.nabila@gmail.com.
