Fintech needs to be less about the technology and more about solving real problems in the next couple of years. The sector is proving more disruptive in Asia than elsewhere around the world, according to the panelists for “2017 – A better year for fintech?” session at TechCrunch Shenzhen.
Jack Zhang, co-founder and CEO of cross-border payments platform Airwallex, and James Lloyd, Asia Pacific Fintech Leader at professional services firm EY (formerly Ernst & Young), were unanimous in their outlook for fintech.
“Less hype around [fintech] funding and more real new products,” said Lloyd with Zhang of the similar opinion that “. . . [i]t needs to be about how we’re solving problems, not just talking about tech like blockchain. It has its uses, but isn’t necessarily solving problems.”
But that’s the future. We are now seeing non-traditional finance firms in China becoming to ones pushing outbound expansion, said Lloyd.
“It’s difficult to see anyone else building a retail proposition in mainland China than can challenge [Alibaba and Tencent],” said Lloyd, “They’ve been incredibly smart about how they’ve maintained their foothold in other areas such as bike sharing.”
China’s payment providers are pushing outwards regionally and globally, whether they identify as fintech companies or provide services as part of a broader offering, such as Grab, said Lloyd. With the arrival or these services which provide a “. . . cheap, efficient way to get merchant acceptance in places like Indonesia… [these countries] will jump straight past European and American style credit card systems. The West is now learning from Asia,” said Lloyd.
When it comes to inbound expansion into China, foreign financial institutions or fintech companies, “You need a very strong connected local player to come into China, that will turn out to be one of these guys [Tencent or Alibaba],” said Lloyd who also said he was skeptical of any outsiders still trying to “parachute into China.”
China’s fintech companies have had to innovate to survive. Platforms adopted the QR code as a way to enable payments not because it was the best thing to do, but because of the constraints of not being able to use existing networks such as UnionPay and lack of penetration of NFC technology, according to Lloyd, who added: “Optimal solutions aren’t always the most successful solutions.”
Fintech outfits in China are proving increasingly disruptive towards Asia’s financial sector. “The vast majority of fintechs are enabling technologies for banks,” said Lloyd, but that “In China you have scale disrupters such as Ant Financial. In Asia we’re seeing more disruption than in Europe and the US.”
Airwallex, which recently secured $13million of funding led by Tencent and included MasterCard, is “on track to work with WeChat” for international payments, said Zhang, but that for Australia-based Airwallex itself, “. . .[a]t the end of the day, you still have a bank account unless you get a banking license, so it’s quite obvious to us that we have to work with banks. So we find the most digitally-savvy bank in each country.”
Their service is aimed at businesses rather than individuals. They connect banks’ APIs to create a system that is faster and cheaper than the existing SWIFT network and also allows a lot more data to accompany, and be generated by, the money flows. This makes it much more trackable, which is proving more disruptive in Asia than in Europe and America; it is the first player in Asia Pacific, Europe, and America with many of the new generation of international payment providers such as TransferWise and Solaris predominantly been focused on individuals.
“Our proposition is not to aggressively find more clients – we can’t at the moment,” said Zhang of Airwallex’s growing success.
One further reason why the disruption may continue to be greater in Asia’s financial market than elsewhere is regulation. China’s tech giants have diversified into fintech, such as the Alibaba to Alipay to Ant Financial route. “Surely we can expect the same [move into fintech] from Facebook and Google? No. They’re already under pressure for their dominant market positions,” explained Lloyd.