Australia
China
India
Indonesia
Japan
Malaysia
Philippines
Singapore
South Korea
Taiwan
Thailand
Vietnam
In recent years, Asia’s fintech landscape has rapidly ascended, establishing itself as a global powerhouse. Notably, Asia boasts the largest concentration of fintech users globally, underscoring the region’s pivotal role in shaping the future of financial technology.
The continent has also solidified its standing as a hub of digital payments, which is the largest segment in Asia’s fintech market. As per Statista, India and China, with their rapidly growing populations and tech-savvy demographics, constitute two-thirds of the global user base in proximity mobile payments.
Among other countries, Singapore has established itself as a major player. Data from the Singapore Exchange suggests that the country hosts more than 40% of the total fintech companies in the Southeast Asian region.
In the coming years, the Asia-Pacific (APAC) region is poised to surpass the United States and become the global leader in the fintech market by 2030, as indicated by the Boston Consulting Group (BCG) and QED Investors. During this period, APAC is expected to achieve a CAGR of 27%, outpacing North America.
“The fintech sector, currently holding a mere 2% share of global financial services revenue, is estimated to reach $1.5 tn in annual revenue by 2030, constituting almost 25% of all banking valuations worldwide,” says BCG.
“With 42% of all incremental revenues, the largest market is projected to be Asia-Pacific (APAC), especially emerging Asia (China, India, and Southeast Asia), where fintechs will help expand financial inclusion,” adds the management consulting firm.
Government measures to strengthen Asia’s fintech market
Recognising the pivotal role of Asia’s fintech market in driving economic growth, governments across the region are implementing accommodative measures to boost the industry further.
In 2018, the Central Bank of the Philippines initiated a policy aimed at catapulting digital payment adoption by achieving a twenty-fold increase in record time. This move led to a surge in payment platforms, alternative finance firms, and blockchain companies in the country.
China, a frontrunner in fintech, has outlined a comprehensive strategy in its Fintech Development Plan for 2022-2025. The plan emphasises the need to use fintech solutions to contribute to an environmentally friendly economy.
Other initiatives include India’s Unified Payments Interface and Hong Kong’s strategic funding and tax incentives to fuel fintech growth.
The collaborative spirit extends to cross-border initiatives, with successful implementations of new payment systems in Indonesia, Malaysia, Thailand, and Singapore. This system allows residents to transact in their local currencies using QR codes.
Despite the promising landscape, the fintech industry in Asia grapples with challenges. Navigating a labyrinth of regulations across different countries adds complexity, with each nation boasting its regulatory framework for fintech operations.
Additionally, fintech firms face escalating cyber threats, necessitating robust cybersecurity measures. Upholding customer trust and ensuring data privacy emerge as critical imperatives for fintech enterprises operating in Asia, urging the formulation of resilient strategies to overcome these hurdles.
How to invest in Asia’s fintech sector?
Fintech is considered one of the megatrends on the stock market. With a promising outlook in Asia, time for us to check three companies from the sector.
Grab
Grab, originally a Singaporean ride-hailing and food delivery giant, has diversified its operations into the fintech sector. Embedded within Grab’s array of fintech services are solutions for payments, insurance, micro-investments, and financing.
For the full year 2022, Grab experienced a surge in revenue, marking a 125% increase, totalling $1,433 bn, in comparison to the preceding year. Noteworthy is the substantial reduction in the annual loss during the same period, demonstrating a 51% decrease and amounting to $1.74 bn.
Traded on the US Nasdaq (NASDAQ: GRAB), the firm holds a market capitalisation of $11.93 bn. Over the last year, the company’s stock has risen by 2.67%. Its PE ratio stands at a negative 14.89, and it maintains a price-to-book ratio of 1.90.
“Valuations continue to look reasonable given the forecast growth rates for the company, its stable financials, and its stable outlook in terms of adjusted EBITDA…,” writes Angus Mackintosh of CrossASEAN Research, who publishes on Smartkarma.
“The next stop would be to book a net profit, which is currently forecast in FY2025 but could happen earlier,” he adds.
Paytm
Paytm is an Indian multinational financial technology company. It specialises in digital payments and financial services, offering a web-based and mobile-based platform for mobile recharge, money transfer, bill payments, and various other financial transactions.
Paytm’s revenues increased 61% year-on-year to Rs 7990 crore ($959.07 mn) in the fiscal year ended March 2023. Meanwhile, the company’s contribution profit surged by 160% to Rs 3900 crore ($469.13 mn).
This fintech firm has a market cap of $6.76 bn and is listed on the Bombay Stock Exchange (BOM: 543396) and the National Stock Exchange of India (NSE: PAYTM). The company’s stock has risen by 92.56% in the past year. Additionally, the stock has a negative PE ratio of 53.12 and a price-to-book ratio of 4.32.
Tencent
Tencent, a world-leading internet and technology company, is known for its diverse business ventures, including a significant presence in fintech through Tencent Financial Technology. The company provides an integrated platform offering mobile payment and financial services.
The company’s revenues fell by 1% year-on-year to 554.6 bn yuan ($78.37 bn) in the full year 2022. During the same period, the company’s net profits shrank by 16% to 188.2 bn yuan ($26.59bn).
Tencent is primarily listed on the Hong Kong Stock Exchange (HKG: 0700), with depository receipts available for sale in the over-the-counter market in the US (OTCMKTS: TCEHY). The company has a market capitalisation of $20.05 bn. Since last year, the company’s shares have spiked by 21.04%. Along with that, the shares have a PE ratio of 13.75 and a price-to-book ratio of 3.60.
Editor’s note: All stock movement figures as of November 29, 2023.
