Boasting one of the highest fintech adoption rates in the world today, Asia Pacific (APAC) is a rapidly advancing power in financial technology. Since 2019, users in the region have installed finance apps over 2.7 billion times, and with 160 million unique users total, an uptick on previous years, making this is one of the most formidable markets for fintech globally to watch out for.
That said, the market did not remain untouched by the coronavirus pandemic. In fact, quite the opposite. While the region’s nations’ responses have been varied, what is clear is that the economic landscape, in general, has changed, perhaps forever. So, what does that mean for businesses and investors looking in the APAC region in 2021 and beyond? Let’s take a look.
Lockdowns and restrictions, in response to the COVID-19 pandemic, have left their mark on the APAC landscape as we see it today. Recovery, in general, has been deemed “uneven” by the World Bank, with some parts of the region, namely China and Vietnam who have predicted growth of 8.1% and 6.6%, respectively, recovering more rapidly. In contrast, others, such as Myanmar, are set for a tough 2021 downturn and will experience challenges in 2022 and beyond.
Better than expected recovery but still some way to go
As we noted, some parts of the Asia Pacific region are set to somewhat recover in 2021 (China, Vietnam), whereas others, even once-strong economies, are set to struggle.
For example, tough lockdowns in Australia and Japan have led to temporary economic stagnation, which may prove challenging to overcome. That said, government programs and the rapid adoption of technology to support the economy have gone someway to its recovery, and this is a trend that will likely continue to play a role this coming year as we observe the impact of vaccine rollout programs and the continued presence of COVID-variants.
Rapid transformation to digital
Digital technology and access to it have proved essential during the pandemic, and the APAC region was no exception. The region continues to rank highly in terms of numbers of citizens with access to the internet, largely thanks to China’s vast population. However, this is not felt across the region as a whole. Many continue to experience challenges accessing digital services, and this will remain a focus of the government in 2021 and in the future. However, this inequality isn’t without opportunity and this will play a huge role in the development of the region moving forward.
Entering the age of start-ups
However, this inequality isn’t without opportunity, and, in fact, could deliver new potential to the region moving forward. To highlight this point, according to Statista, there are 6,129 fintech start-ups in the Asia Pacific region, compared to the larger markets of the Americas with 10,605 start-ups and the EMEA region with 9,311. While less than these larger regions, it does represent a sizable market share, and offer potential both for citizens and businesses in the region.
The Number of Fintech Startups
Business models are changing
Additionally, in the wake of COVID, what we are seeing globally are changes to the way business is done and the role of banks and governments in that. APAC is no exception here either. Alongside the increased focus on digital, we are also observing a renewed interest in financial support for small businesses, individual traders, medium enterprises, and sectors of the economy affected most by the COVID restrictions. Whether this will be enough to limit the impacts of the pandemic or not is up for question. However, it is a gesture of good faith that businesses, financial institutions, and individuals need to work together to build economic recovery.
Fraud remains a significant issue
With any technological development comes a downside. In the case of the APAC region, that downside, among others, is undoubtedly, fraud. While downloads of financial applications have been increasing, so too has fraudulent activity. According to AppsFlyer, 224 million fraudulent installs were noted in the region, proving a significant challenge to fintech security.
What’s the Future of Fintech in the Asia Pacific?
So, what does this spell for the future of the Asia Pacific region and what should we expect in the coming years? Just as the recovery has been “uneven,” so too are the region’s advancements in terms of financial technology. Unfortunately, while some economies will focus on basic must-haves, such as access to financial services, others will be forging ahead in the future and seeking to build cutting-edge solutions.
That said, let’s take a look at some of the trends that will impact the region in general in the coming years.
Opportunity for development
There is no doubt that the coronavirus pandemic changed the world as we know it, and this is true for the APAC region as well. In the Asia Pacific, we will continue to see the growth of the fintech section, with a focus on development (SMEs, individuals, etc.) and access to services. For those entering the market, the common sentiment for the region is opportunity, and this holds true across the region.
Shift towards more intelligent lending
At the same time, we are unlikely to see reckless growth. Instead, future developments in the region could be more sustainable. Following the coronavirus pandemic, both businesses and institutions are more cautious in their approach to business, and this sentiment will remain for a few years to come. That’s why we could be set to see more responsible business practices and that extends to business and personal lending.
Data protection and security
Just as fraud is a major concern for the region, it’s likely that the global trend for data protection and security will apply here too. In a post-pandemic world, we are more digital than ever and it only makes sense that businesses will prioritize digital security, and especially so when it applies to the financial sector.
All the signs are in place for an exceptional period of development in the APAC region as new technologies emerge and traditional financial structures continue to focus on digital transformation. However, it is too soon to assume this as guaranteed. With new variants of COVID emerging and continuing socio-economic challenges of the APAC, it is important to remain vigilant when striving for economic and technological advancement. Asia Pacific is an extremely diverse region, and what applies to one country may not fully apply in another. For businesses seeking to enter the market or develop their offerings, it’s vital to look local but with a global perspective to tackle issues and forge ahead with new business developments.
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