Carman Chan
According to a recent report by PWC, 20% of financial services business are at risk to fintechs. This figure may be underestimated when you are narrowing it down to the Asia region. According to CBInsights, Asia will be very likely to overtake US in 2019 as the top market for fintech innovation with a surge in early stage and mega round investments. Asia has a record level of fundraising $22.65B across 516 deals. In this article, I would like to share some interesting Fintech use cases and business models in Asia.
In Asia, because of the large population of unbanked consumers, we see a lot of new Fintech business model around payments, remittance, lending and insurance. There are more than 70% unbanked consumers and more than 70% SME merchants are cash-only in South East Asia. The region’s smartphone penetration is one of the highest compared to other regions globally and its even higher than the banking penetration. In China, we have already seen wechat pay and alipay captured more than 98% of the populations and have evolved into a big platform. The lines between the pure-play fintechs and consumer technology platforms are blurring and companies like Grab, Wechat, JD.com are crossing to the fintech space. With the success of Wechat through wechat pay, companies like Grab are expanding to the mobile payment arena. We shall continue to see more leaders broaden their service offerings to capture their customers’ needs.
Payment
In South East Asia, as the unbanked consumer does not have full access to traditional financial services, therefore, technology enabled new business models not only can provide them services to fulfill their daily needs, but also in a much more effective and efficient way as its not limited by the bottlenecks of traditional financial services. For example, if you purchased something with your credit card and then tried to cancel the purchase immediately. You may need to wait for many days or even one month for the refund go back to your credit card. However, with mobile payment, your refund can be credited to your wallet directly within a few minutes or at most two hours. The user experience is tremendously different and the fictions of purchasing something is sometimes much less when the refund process is so instant and transparent facilitated by all the messages and communication centralized in one place instantly that provide you clarity of the refund process and schedule.
Payment and Referral seamlessly
In China, we can see innovative business model and processes that integrate instant messaging, payment and marketing into one platform. When a potential customers decided to purchase the service after a few wechat messages communication, they can pay for the service right away by clicking the url provided within the wechat message and pay with their wechat pay. Right after, the salesperson can message a banner/ poster immediately and encourage the customer to share the post within their social network and capture the screen to redeem some reward. All the actions related to payment and referral to redeem reward only takes 1-3 clicks and it takes less than one minute. The user experience is very different compared to traditional business models and it's very tempting to take a few clicks to earn the incentive and provide your friends discounts on the services or product that you are purchasing. This maybe one of the reasons why social commerce evolved and expanded quickly.
Digital Identity
There are more supportive regulations and government policies to facilitate fintech in the Asia region. Electronic know your customer services further improve the efficiency of these digital financial services. The advancement of AI further support new use cases such as biometric payment, eg. payment by fingerprint or even facial recognition. The adoption speed and adoption rate of biometric payment are both very high in China.
Lending
Another interesting model is the use of credit system to streamline the personal or small business lending. For example, JD.com process a lot of small merchant business data in their platform and they are able to use these data to develop their credit system and provide business loan to these small merchants in their platform.
Insurance
Digital insurance are starting the revolution by vertical. For example, car accidents easily generate photo evidence on the car damages and can be captured by the mobile phone of the users easily and then studied by machine learning to evaluate the damage levels and reimburse the insurance compensation within seconds and therefore automate the whole process with very high accuracy.
As an early stage VC firm, Click Ventures is excited to witness more innovation around this arena and enjoy the efficiency and effectiveness enabled by these disruptive new business models.
