It cannot be
denied that financial technology (fintech) has been the recipient deep
interest from media, investors and entrepreneurs since the inception
of the concept.
With the ever increasing attention that the segment is receiving, it
is evident that the banking industry’s digital transformation is
already here and corporate businesses are coming to grips with how
they can transform their businesses to adapt to this.
Revealing the precise point at which fintech engagement is the
strongest and why this is so provides a glimpse into what the future
would look like for global treasurers. Data suggests that investors
poured
US$4.5 billion into fintech companies in Asia in 2015, which
was far higher than investments in their peers in Europe. India is one
of the fastest growing startup environments in the Asia Pacific
region, second only to China in deal size and number of deals.
Currently there are over 40 active venture capital funds making
significant investments in the region.
Spending
Seeing the importance of fintech in their businesses, corporate
treasury departments have already committed a portion of their current
budget for newer fintech solutions, as revealed in the
Treasury FinTech Index conducted by GTNews and East & Partners.
Singapore has emerged as the Asian leader in the fintech adoption
race, committing an average of 11.6 percent of their technology spend
to fintech, showing how seriously the city-state is taking this
revolution.
When examining various industries, it is evident that the
manufacturing and retail are the two sectors who are expecting their
large investment in fintech to result in the achievement of greater
speed and efficiency.
The manufacturing sector, committing 10.3 percent of their budget to
fintech, are directly affected by innovation and the development of
new technology through Internet of Things (IoT) where more and more
household items have Wi-Fi capabilities and sensors. Meanwhile, the
retail industry is more dependent on fintech advancements into
contactless, mobile and biometric payment mechanisms and platforms
which is the reason investment into fintech constitutes 9.8 percent of
their budget.
Importantly for the sector and its investors, the glaring finding has
been that there is no intention for any of the corporate treasurers to
decrease their spending on fintech over the coming year, illustrating
that the digital journey will continue for businesses across the
industries.
Regulation
and Security
An area where fintech spend will be concentrated on would be to stay
abreast of the rising volume of regulation and compliance.
Finding ways to stifle money laundering, terrorist activity financing
and over tight regulations such as ‘know your customer’ (KYC) requires
an injection of funds into fintech.
Next generation systems are needed by financial institutions to
satisfy regulators and resources will be directed to improving
regulatory technology (RegTech). As the instances of hacking – both on
the corporate and consumer sides – increases, businesses will be
burdened with additional regulatory requirements to curb and limit
those inherent risks. |
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Equity Investment
The investment opportunities in fintech are evident as almost one
fifth of corporate have already in invested in these technologies.
There is a sizeable portion of corporate who state they are in the
exploration stages of investing in newer solutions through fintech
investments. China is the most fertile region where fintech investment
plays a prominent role as 30.8 percent of its corporates have already
invested in fintech, with 43 percent of corporate treasurers intending
to explore opportunities in the future.
What sets China apart from their global competitors is that the
Chinese consumer, who has rapidly moved to the middle class due to the
country’s economic prosperity, is more inclined to place their trust
in new technologies.
The mindset of most Western consumers focuses on safety and expertise
and they believe that this can be achieved by archaic financial
services i.e. brick and mortar services. Due to the large population
in China, the need was to reach mass market and the best solution was
to invest in technology that can be easily scaled, and able to reach
the remote countryside of China.
Mobile adoption in China is staggering with 1.3 billion registered
users. Technologists have built financial solutions on top of the high
number of platforms that exist in China, which facilitates proximity
payments made by the user. China has enabled high activity with tech
startups, due to the country’s limited regulatory restrictions,
resulting in the drive in fintech innovation in the region.
A close competitor to China in the fintech race is Singapore. Long
considered the region’s “hub”, it is home to approximately 55,000
startups, Singapore is making strides to ensure that they are geared
for fintech growth, by lowering the compliance barriers for fintech
startups and creating new relationships with other countries to
facilitate trade in new technologies.
Last year, there were several high profile fintech startup investments
within the region, with Quoine and Tagit among the largest, receiving
US$20 million and US$9 million in funding respectively.
Outcome of
fintech investment
Investment in fintech has to translate into returns for treasurers.
Almost 33 percent of businesses, regardless of industry, feel that the
largest impact of their investments will be lowering market engagement
barriers, allowing them to widely reach their customers and gain a
better understanding of their customers need.
Differentiating the customer proposition and reducing costs while
improving inefficiencies made up the top three of fintech’s impact on
the business.
Overall, sentiment in the market is that fintech investments are
bringing a positive impact on business activities, especially in the
UK and Singapore.
However, those continuing to fund the sector will need to see past the
razzle dazzle, focus on the market gap and ensure there are problems
being solved and needs being met. |