Fintech Adoption in Asia Pacific – An Upward Growth Trajectory
In today’s fast-paced world, consumers look for ease in every aspect of their lives. This is the reason for the widespread use of technology to complete everything from basic tasks to complicated operations. It is also the reason for the widespread adoption of fintech services across the globe, especially in the Asia Pacific region.
Fintech is an umbrella term that encompasses technological solutions which help individuals and businesses automate their finance-related decisions and actions. These can include software and applications, among other technologies, that deliver a financial service. Needless to say, they greatly reduce costs, boost safety and protection, and empower individual and business users.
In this article, we discuss these drivers of the increase in fintech adoption in Asia Pacific, among others.
Increased Financial Technology Adoption in Asia Pacific
The fintech space in Asia Pacific is seeing tremendous growth. According to EY’s Global FinTech Adoption Index 2019, while fintech adoption has increased around the world, Asia remains at the top of the list. EY surveyed around 27,000 individuals active in the digital space across 27 territories, with the results clearly pointing towards increased use of fintech services.
Across the globe, fintech adoption rose from 16% of people in 2015 to 64% in 2019. Additionally, a whopping 96% of them were aware of at least one fintech service that facilitated online transfer of money and payments.
The report states that 10 of the 27 markets surveyed were emerging markets, the largest ones being India and China, important players in the Asia Pacific region.
The countries that topped the list of fintech adoption rates, according to EY’s Index, are:
– China – 87%
– India – 87%
– Russia – 82%
– South Africa – 82%
– Colombia – 76%
– Peru – 75%
– Netherlands – 73%
– Mexico – 72%
– Ireland – 71%
– UK – 71%
The three countries to top this list are part of Asia Pacific. Not much further down the list are Hong Kong, Singapore, and South Korea, with an adoption rate of 67% and Australia, with 58%. The Singapore Fintech Report 2022 clearly indicates an increase in the use of virtual banking services among the population, with e-wallets becoming the second most popular method of online payment for e-commerce activities, for example. Similarly, Sequoia Capital has recently raised US$2.85 billion across a number of funds for startups in India and Southeast Asia. These are just two examples of the immense growth the industry is facing.
A wide array of fintech services are used by individuals in Asia Pacific to facilitate their everyday financial dealings. These include software and applications that support digital money transfers, online payments, and so on.
But what are the potential reasons for the increase in financial technology adoption in this part of the world?
Drivers of Fintech Adoption Increase
The Move Towards Cashless Economies
Many economies and governments are steadily moving towards cashless transactions as the norm. This eliminates the need for individuals to carry anything but their cell phones and/or their bank cards, resulting in ease for the consumers. Consumers, naturally, are drawn to a solution that makes their lives more convenient, although there is some concern about privacy issues.
Management of Finances
Technology helps individuals keep track of and manage their finances in a better way. Fintech is not all about payments and money transfers: many companies in the space facilitate budgeting and saving activities, among many others, enabling individuals to become more financially responsible and secure.
Consumer Awareness
More and more consumers know about fintech services and the benefits they serve. As mentioned above, 96% are aware of at least one fintech service/application. This boost in knowledge and awareness about how technology can make life easier encourages consumers to adopt the technology.
Increased Competition
Asia Pacific markets have seen a large increase in the number of firms providing financial technology services. In order to stay ahead, these companies provide attractive offerings in order to incentivize customers to choose them. This strategy leads to increased interest by consumers.
Safety as a Top Priority
When it comes to traditional financial institutions and services, the industry has been historically slow to adopt technology. On the other hand, the fintech industry, which relies on technology to even exist, takes important, timely measures to ensure that the digital space in which transactions are taking place is secure for consumers.
Great Spending Power
Across the region, consumers have mostly witnessed an increase in their level of disposable income. This is especially true for the younger population, which is also extremely comfortable with the use of technology in order to facilitate everyday activities. These individuals opt for fintech services without much need for convincing.
The Impact of COVID-19 on Fintech Adoption
The global pandemic forced countries to implement various levels of lockdowns in order to curb the spread of the virus. In order to cope, individuals needed alternative methods of getting things done. Technology services that allowed people to continue their daily lives without having to leave their house (such as apps delivering groceries to one’s doorstep) grew in popularity.
Fintech services were just one technology that saw an increase in adoption during COVID-19. Research found that financial apps saw an increased number of downloads during the period. This is indicative of a growing trend of conducting financial dealings through technology vs traditional mediums in the face of crisis. It is safe to assume that once individuals experienced the ease of carrying out financial transactions safely from the comfort of their homes, they refused to go back. Instead, it is likely that they started exploring varying technologies for multiple financial functions, contributing to the increased level of adoption.
The Future of Fintech in Asia Pacific
The level of competition in the fintech space in Asia Pacific is growing at an ever-increasing rate. With an increase in the number of virtual banks, users willing to use technology to facilitate financial transactions, companies integrating financial technology, and a staggering increase in the number of firms providing fintech services, Asia Pacific, with China taking the lead, will likely lead development in fintech world for the near future. As mentioned, though, privacy concerns – that can’t be ignored – are of varying importance across the region. The level of adoption is also likely to grow across younger and more mature markets due to the reasons discussed.
Sources:
https://doi.org/10.1016/j.jfi.2021.100945
https://globalfintechnews.com/5-reasons-why-fintech-is-important/
https://www.euromonitor.com/fintech-in-asia-pacific-digital-payment-platforms/report
EY Global FinTech Adoption Index 2019
