5 Key Trends Emerge from Money20/20 Asia 2024

Exploring the vibrant landscape of financial innovation in the Asia-Pacific region, Money20/20 Asia 2024 served as a catalyst for industry leaders to delve into emerging trends reshaping the future of finance. From the soaring popularity of cryptocurrencies to the dynamic evolution of open banking, this recap encapsulates the key highlights of the event, offering insights into the diverse facets of Asia's fintech revolution. Join us as we navigate through the pivotal trends that are driving unprecedented growth and transformation across the Asian fintech landscape.

Trend 1: Crypto is flying high in Asia.

Cryptocurrency is soaring across Asia, positioning itself as a nucleus for innovation and adoption within the financial technology landscape. Notably, in Hong Kong, industry stalwarts such as Harvest Funds and VSFG are primed to file applications for a coveted spot in the burgeoning Bitcoin ETF arena. Concurrently, regulatory frameworks are undergoing refinement across pivotal markets like Singapore, Japan, Hong Kong, and South Korea, shedding light on the rules surrounding security token offerings.

Financial institutions are also making decisive forays into the crypto realm, with DBS Bank in Singapore, the Hongkong and Shanghai Banking Corporation, and Hana Bank in South Korea spearheading pro-crypto initiatives. Recently, Hong Kong, a cornerstone of financial prowess in Asia, took a significant stride forward with the launch of its inaugural crypto ETF. This watershed moment not only underscores Hong Kong's emergence as a crypto epicenter but also beckons questions about its potential to lead the Asian crypto charge, prompting speculation on the prospects of other financial hubs in the region following suit.

Venturing deeper into the heart of the continent, Central & Southern Asia and Oceania (CSAO) unveil a kaleidoscope of cryptocurrency dynamics, perhaps unrivaled elsewhere in the world.

While centralized exchanges dominate web traffic across these nations, intriguing nuances emerge. In the Philippines, a staggering 19.9% of crypto-related web traffic gravitates towards gaming and gambling platforms, surpassing Vietnam's 10.8%. This inclination towards cryptocurrencies in gaming and gambling realms underscores their versatility and appeal in diverse Asian markets. Enthusiasts have long extolled the potential of cryptocurrencies to revolutionize the lucrative $217 billion video game industry, facilitating transactions for in-game items and enhancing player engagement.

A compelling case study emerges with Axis Infinity, a play-to-earn game that has catalyzed widespread crypto adoption in the Philippines. Against the backdrop of the COVID-19 pandemic, which left many confined to their homes and grappling with unemployment, Axis Infinity emerged as a beacon of entertainment and economic opportunity. Notably, web traffic for Axis Infinity surged to 28.3%, coinciding with a palpable uptick in cryptocurrency transaction volumes during the summer of 2021.

In essence, Asia's embrace of cryptocurrency transcends mere speculation, heralding a paradigm shift in financial innovation and socio-economic empowerment across the continent. As regulatory frameworks evolve and industry players intensify their crypto endeavors, the Asian fintech landscape stands poised for unprecedented growth and transformation.

Trend 2: Unveiling the Dynamics of Open Banking in Asia - A Regulatory Mosaic

The concept of open banking, pioneered by the UK before gaining global traction, has seen varied regulatory approaches across different regions. While the EU regulates open banking under PSD2, regulatory divergence is evident in the Asia-Pacific (APAC) region. In Southeast Asia particularly, open banking models differ significantly from those in places like Hong Kong, Australia, or Europe. There's no universal approach across the region, but a clear trend towards greater customer data ownership is evident.

Regulators in Southeast Asia often adopt an "action-first" approach, prioritizing the resolution of challenges within financial services before establishing standards. Many Asian banks are offering value-added services to customers, focusing on indirect commercial benefits like customer retention rather than direct charges. For instance, in Singapore, open banking has gained significant importance, with 99% of customers considering it either a "must-have" or "important" in 2022, according to KMS Solutions. 星展银行 , for example, has extended its seamless open banking experience to partners through a developer portal featuring over 200 APIs.

Open banking not only facilitates secure access to customer data but also fosters collaboration between banks and fintech companies, enabling the development of innovative apps and services. It lays the groundwork for an API-rich economy, extending beyond data sharing to shared functionality. Open finance builds upon this foundation, connecting resulting products and services across a shared framework, fostering financial inclusion by allowing local agents to offer core banking services on behalf of multiple providers under one brand.

In some cases, open banking is democratizing access to digital financial tools, offering small loans and credit to individuals and businesses previously excluded from traditional banking services. For example, individuals with limited or no credit history, such as retirees without debt or new immigrants, can now demonstrate creditworthiness through alternative means, like payroll data or rent payment history, improving their access to loans and credit.

While open banking has been around for some time, its recent prominence is driven by the broad range of services it enables, from account aggregation to payment services. In Australia, regulations encompass savings, investment, and pension accounts, with plans to include utility, telecom, and travel data connections, offering consumers a holistic view of their finances and a wider array of financial products.

However, challenges persist, including lack of standardization and broken APIs, raising concerns about data ownership and governance. Local regulators play a pivotal role in shaping the landscape, with banks, fintechs, and retail technologies navigating regulatory barriers. Research indicates that a significant percentage of financial institutions in Singapore and Hong Kong view regulations as a barrier to open banking adoption, highlighting the need for regulatory clarity and cooperation to unlock the full potential of open banking in Asia.

Trend 3: Advancing Financial Inclusion in Asia

Dispelling the myth that financial inclusion lacks sustainable business models, it has emerged as an attractive proposition for banks and fintech companies when leveraged effectively. According to ThePaypers, over 70% of Southeast Asia's adult population falls into the categories of 'underbanked' or 'unbanked,' highlighting the pressing need for improved access to financial services.

Financial inclusion targets two key groups: the unbanked, who are entirely outside the financial system, and the underbanked, who are underserved by traditional financial institutions. Different countries prioritize one group over the other; for instance, Australian banks focus more on the underbanked, while Indian banks prioritize bringing the unbanked into the formal banking sector.

While mobile phones are often hailed as a solution to financial inclusion challenges, access to financial services extends beyond mere device availability. While having funds stored on a mobile phone is a positive step, it does not automatically ensure financial inclusion, though it does lay a solid foundation.

One of the main challenges in achieving financial inclusion is improving access to finance through enhanced credit scoring and digital identities. Robust electronic know-your-customer (e-KYC) certification, spanning banking, finance, e-commerce, and gaming, is vital for seamless customer onboarding. Notably, a significant portion of Asia's population is deeply engaged in online gaming and live e-commerce, necessitating accurate KYC processes for these accounts.

Open banking, facilitated through Banking-as-a-Service or Banking-as-a-Platform, offers promising avenues for fostering financial inclusion:

• Financial management tools
• Diverse payment options
• Credit provision based on data from various sources, enabling instant micro-loan approvals
• Transparent banking and financial product comparison in competitive marketplaces
• Remote onboarding and KYC certifications

Examples of enhancing financial inclusion through open banking include local retailers serving as banking agents, providing financial services on behalf of banks, thereby reaching underserved communities more effectively.

Trend 4: Combatting Fraud in Asia's Financial Landscape

Asia leads the global charge in mobile payments, with countries like Japan, South Korea, and China spearheading the adoption of digital wallets and instant payment systems. In China particularly, many young adults bypass traditional credit cards entirely, opting for the convenience of digital payment platforms. Online payment activities extend far beyond e-commerce, encompassing social media engagement, live-streaming shopping, and online gaming, making digital identity protection paramount.

However, the evolution of banking interactions also introduces new avenues for fraud and criminal activities. Social engineering and card fraud are among the prevalent methods employed by criminals, with China experiencing some of the highest rates of credit card fraud globally. According to a recent ACI survey, nearly 42% of respondents in the region encountered card fraud in the last five years.

In addition to traditional card fraud, the rise of the internet economy has given rise to novel forms of fraud. Instant account opening processes have altered the Know Your Customer (KYC) landscape, exposing financial institutions to identity crimes and fraud attacks. The demand for instant financial products, such as instant bank accounts, loans, and credit card applications, is driving rapid adoption across the Asia-Pacific (APAC) region. Mobile wallets and banking are becoming ubiquitous, with mobile phone numbers serving as de facto identities for customer onboarding.

GBG's research highlights concerns among financial institutions in ASEAN regarding future spikes in fraud, with scamming and money muling being prominent issues across different markets. To combat fraud efficiently, firms are digitizing and automating core Anti-Money Laundering (AML) and fraud detection processes, reducing operating costs and enabling prioritization of relevant alerts.

Regulators are intensifying efforts to combat fraud and enhance consumer protection in the ASEAN region, with a shift in risk management priorities towards addressing synthetic identity fraud, digital fitness, stimulus fraud, automated attacks, and fraud in terrorism financing.

According to a report by Experian, as fraud rates continue to rise, APAC consumers prioritize safety and security in their online experiences. An overwhelming majority expect businesses to enhance security and data protection measures online, with physical biometrics and mobile PIN codes emerging as preferred authentication methods. This signals a shift towards modern security measures, urging businesses to adopt comprehensive security strategies encompassing visible and invisible layers of protection.

Trend 5: Advancements in Cross-Border Transactions

The Asia-Pacific region, boasting 60% of the world's population and the majority of its fastest-growing economies, is undergoing a significant shift in cross-border payments. The transition from cash and plastic cards to mobile wallets is revolutionizing the financial landscape, with mobile QR infrastructure playing a pivotal role in expanding payment accessibility, driving down costs, and empowering small merchants to engage with international clientele, thereby enhancing convenience and affordability.

At Money20/20 Asia 2024, two-thirds of exhibitors are offering cross-border payment services or multi-currency wallets for both end-customers and businesses. Cross-border payments are evolving beyond individual travel and business trips, emerging as integral components of international e-commerce and trade.

While cross-border payments took center stage at this year's event, speakers also highlighted the compliance challenges faced by cross-border businesses in Asia. Collaboration between businesses and financial institutions is imperative to embrace emerging Asia-centric payment networks alongside global players. Through strategic partnerships and innovative solutions, traditional barriers can be overcome, facilitating seamless cross-border transactions.

Navigating the diverse regulatory landscapes inherent in cross-border finance necessitates a standardized framework. Dialogue and collaboration between industry stakeholders and regulators are vital to establish clarity, foster international cooperation, promote innovation, and uphold compliance and ethical standards.

Several noteworthy examples highlight the significance of cross-border businesses:

• Thunes ' recent acquisition of Tilia , announced at Money20/20 Asia, positions the Singapore-based fintech to tap into the creator economy, including gaming, virtual worlds, content creation, and digital publications. Thunes prioritizes the low-value transactions market, focusing on the US$15 trillion of smaller payments currently transferred across SWIFT, with transaction values as low as US$50.
• Alipay+ now facilitates seamless payments in Hong Kong for users of 14 leading overseas mobile wallets and bank apps from nine countries and regions, representing the largest number of international payment apps introduced to the city's offline commercial network through cross-border cooperation at one time.

About Money20/20 Asia

Money20/20 , the world's leading fintech exhibition, took place in Bangkok, Thailand, from 23-25 April, 2024, bringing together thousands of innovative thinkers from the payment, fintech, and broader financial services industries to explore the latest trends, technologies, and strategies that are shaping the future of fintech and financial services.

Follow Christiane Zhao for more.

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