4 reasons why Asia is about to dominate FinTech
----Johnny Mayo Co-Founder @ Neuroware.io & Blockstrap #500strong
FinTech has become a universally accessible industry. It’s even becoming sexy.
Once dominated by powerful corporations and brain-draining grey suits, the powerful corporation of Goldman Sachs recently had some grey suits report that the industry is now worth a staggering US$4.7 trillion – and it’s only just getting started.
The explosive growth of FinTech has been a long time coming. Other than the advent of PayPal and the novelty of e-commerce the internet has actually done very little in terms of revolutionizing how money could work, but all this is now changing at a frighteningly efficient pace.
As software continues to eat the world it’s not just forcing finance into its biggest rethink in decades, it’s literally dragging it into the 21st century by the scruff of its neck.
The Economist said of The FinTech Revolution, “From payments to wealth management, from peer-to-peer lending to crowdfunding, a new generation of startups is taking aim at the heart of the industry” – and of all the different clusters of FinTech companies that are emerging perhaps none are drawing more attention, mindshare, opinions, and ire than those looking to set the industry standards in the crazy world of Bitcoin.
Having grown out of its awkward early adoption phase and tip-toeing into the wider public lexicon, headlines about banks and institutions considering blockchain technology have become as commonplace as a Miley Cyrus scandal. Bitcoin (formally known as scary scam terrorist money) is now being courted as the darling of the FinTech scene. Just be careful which words you use. Bitcoin is sometimes bad. Blockchain is usually good. The worldwide ledger is probably best.
Meetups and startups are springing up to honour Satoshi in financial capitals and tech-savvy cities all over the globe, while accelerators and investors scramble to snap up the talent and stake a claim in this new and emerging ecosystem.
Although the US is generally considered to be leading the way in the field of crypto-currencies (it certainly is in terms of venture-capital invested), the world still waits to see what regulations they could impose. Meanwhile Europe has also started to look kindly at the space with several leading banks making murmurs about the technology. UBS, which is one of the largest investment banks in the world, has even gone as far as toset up a Blockchain Technology Lab within the walls of Europe’s largest FinTech accelerator, the incredible Level39 in London.
South America and Africa have both been busy with Bitcoin and have each produced interesting startups and use cases of their own. The go-to use case for blockchain technology is the latter continent’s Bitpesa, which allows users to send Bitcoin while recipients claim it in Kenyan Shillings via their M-Pesa accounts – a mobile wallet that has over 17 million users and can pay for everything from milk to electricity in the country.
As the race continues to see which nation will be the first to fully embrace blockchain technology on a governmental or societal level, Asia is fast becoming a region to be recognised, having made huge leaps as of late and securing a number of ‘firsts’ for the industry.
Based on some of the conversations we’ve had with business-leaders, startups, accelerators, and developers around Asia (as well as our combined experience of working in the region over the past 30 years) we’ve compiled some of the top reasons why when it comes to blockchain potential and alternative economies, you should avert your eyes East.
#1 – Accelerators, incubators, and investors are everywhere
From SparkLabs in Korea to JFDI in Singapore, Asia is certainly not short on quality accelerators. The Philippines have Kickstart and Launchgarage, Malaysia has 1337and MaGIC, Hong Kong has AcceleratorHK and NestVC, while Indonesia has Project Eden and the ridiculously stunning Skystar Ventures.
Almost every accelerator loves a bit of FinTech in their portfolio, but the number of exclusive FinTech plays in the region are growing in number and influence. The most notable new entrants to Asia include Singapore’s Startupbootcamp and Hong Kong’sFinTech Innovation Lab, while The Co-Foundry and Plug and Play recently announced ayear-long FinTech program spread between Silicon Valley and Singapore and backed by Bluehill Asset Management.
Even banks are ramping up their programs in Asia for fear of missing out on the next big thing. DBS recently partnered with NestVC in Hong Kong and plans to invest around US$150 million into new FinTech ideas, while just last month we at Neuroware gave a presentation on blockchain technology at the launch of Maybank’s FinTechprogram for emerging markets – a program which is willfully encouraging blockchain-related applicants.
For those accelerators and incubators all-in on FinTech there are very few who are unwilling to hear a blockchain pitch. Startupbootcamp already boasts three different blockchain ventures in its first batch, whereas SeedCoin has been exclusively funding Bitcoin startups out of Hong Kong for some time already. The hunt is very much underway.
The competition for finding and accelerating Asian-based blockchain ventures has even gone global. A handful of local ventures have been snapped up by prestigious accelerators stateside, with both Blockstrap and CoinPip being forged in the 500 Startups program and CoinHako being mentored by strictly-Bitcoin accelerator BoostVC.
Silicon Valley’s intentions for Asia are becoming increasingly ambitious and some of the biggest names in the industry are now more active on the ground than ever before. 500 Startups have new funds dedicated to Thailand and Korea, Sequoia Capital have an ever-increasing presence, and Y Combinator’s Kevin Hale, who’s legendary accelerator is on the lookout to add to its Asian portfolio, is on the record as saying “there are probably more hard working founders there than anywhere else on Earth.”
As the regional conditions ripen for finding the next generation of blockchain startups, there is one country that has been leading the charge almost single handedly….
#2 – The Smart Nation of Singapore
Singapore is a proud anomaly in the world of economics. A small island nation of few resources, Singapore succeeds through education, ingenuity, hard work, and little else – turning itself into a global financial capital in just half a century. The scary thing that many people forget to consider about Singapore is, much like both the global FinTech scene and blockchain tech themselves, it’s only just getting started.
In some ways Singapore feels more like a project than a country – which is not to downplay its rich heritage or incredible history – but to play-up its ambitions in becoming a global example of how a future-focused nation could operate. There are few other governments who would dare to embark on an initiative as ambitious as ‘Smart Nation’ – the monumental effort of bringing together tech companies, businesses, developers, academics, and organisations to share ideas, build infrastructure, work on projects, and create policies.
The result is one of the most vibrant and well supported tech scenes on the planet, populated by global-thinking developers and riddled with institutional investors and experienced angels. The Early-Stage Venture Funding Scheme (which allows investors to back ideas while Singapore essentially takes the risk) has seen a number of SV heavy-weights come to town or partner up in what’s become perhaps Asia’s biggest tech playground.
Given the global buzz around blockchains as of late it was only a matter of time until the first bank publicly challenged developers to explore the technology with them. Singapore’s reputation as a global financial hub, combined with its regionally-unchallenged tech scene, gives it the ability to experiment in ways that only London or New York could ever likely equal – but it was DBS Bank (formally known as the Development Bank of Singapore) who stepped up first and admitted there might be something to this whole blockchain thing they keep hearing about.
Last weekend saw DBS Bank team up with Startupbootcamp, IBM, and our own blockchain infrastructure service Blockstrap to challenge over 70 developers in 15 teams to more than 32 hours of blockchain hacking (a more technical summary of the event can be found in our latest Blockstrapin’ blog post). As pleased as we were to see our flagship project get through its first hackathon, we were even more ecstatic by the fact that a bank-backed blockchain hack happened here in Asia first.
In a rapidly emerging ecosystem where whoever takes the initiative could take all, the DBS Blockchain Hack was the first of many experiments from countless interested parties that are working on how Singapore can establish itself as the crypto-financial capital of the world – an achievement it will most certainly want if blockchain technology continues to prove itself within the FinTech sector.
While the hustle and bustle of Singapore will likely create a number of exciting blockchain startups it’s less likely to create the best use cases. For those there are far more exciting and potentially explosive markets nearby…
#3 – It’s the bottom-up economy, stupid!
In developed markets, especially in the West, consolidation comes quickly. Acquisitions or incorporations are a regular event and we’re left with fewer, larger players in any given industry. These bring economies of scale when it comes to affording the high fees of existing payment networks and turns everything into a numbers game.
It also makes them somewhat lazy. When you own a payment gateway and have both low competition and high profits, why make the effort to innovate? You don’t want to create an entirely new system if you already own THE system. Just sit back and suck up the profits. Of course this isn’t always the case, but it is the status quo.
In emerging markets the characteristics lean more towards a large number of smaller, independently owned businesses where cash is still very much king. Your average street vendor, market stall, or family run business is unlikely to even have a bank account in most places, let alone the ability to accept Stripe.
There’s also very little incentive to be ‘banked’. Considering the average transaction size of these solo-vendors may be as small as a few dollars (and Asia has millions of people surviving on less than $1-2 a day) transaction charges alone are going to wipe out an already meagre living. And for what? The joy of perhaps bailing that bank out one day?
It is here that the largest opportunity for bottom-up commerce exists. You won’t find a lot of bank accounts in Asia, but what you will find is one of the highest concentrations of mobile phones on the planet. When small business owners can take the initiative and accept digital payments without the onerous permission of established payment providers, the local economies can leverage the many benefits of blockchains and really begin to flourish.
As heart-warming as it is to hear of fully-banked westerners either saving money or sticking it to the man, Bitcoin has a much greater purpose for the world. It’s the perfect financial tool for liberating emerging economies and alleviating poverty. It just needs to get out there.
For this fight the blockchains biggest issue isn’t its technology, transparency, or usability – that’s already proven and there’s every reason for it to work in Asia. Instead, Bitcoin adoption is only going to come via a generational battle of education and awareness.
Indeed, the battle for hearts and minds is already underway in Asia, with great use cases in the Philippines where Bitcoin remittance is is already making a difference, or awareness initiatives already long underway like BitIslands in Bali.
All this and we’ve yet to mention perhaps the biggest reason of all…
#4 – The numbers involved
There’s a lot of Asian people who exchange currency for goods and services.Especially in Asia.
Just ask any Indonesian startup. They laugh at your ‘metrics’.
While the region’s massive potential for big blockchain plays has remained eerily untapped so far, there’s many more reasons than the ones listed above as to why it shouldn’t be underestimated.
When you take the perspective of the underbanked or unserved, mix it with a lot of hard-work, determination, and the ability to learn from the mistakes of other fully-developed nations, it’s hard to ignore the incredible potential that is boiling-up in Asia.
All that and I didn’t even mention China.