The next big opportunity in fintech is here

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Asia's emerged as a key market for financial technology players, as the continent's large population and limited banking network lures billions in funding.

Investors poured $4.5 billion into fintech companies in Asia in 2015, three times the amount attracted by their peers in Europe, KPMG data showed.

Discussing the future of fintech in the region at InnovFest UnBound 2016, a digital technology conference organized in Singapore, a panel of experts said Asia's appeal lay in several factors: first, it was a relatively new market, hence there were fewer competitors as compared with the U.S., which remains the largest fintech market.

Second, the region had a sizable population that still lacked access to traditional means of banking, but had more than 1 billion mobile users. The number was expected to grow in the future, particularly in under-penetrated, populous markets such as India and China.

One of the panelists, Ron Hose, founder and CEO of, a mobile money transfer service that uses blockchain technology, explained in the Philippines, for example, "more people have Facebook accounts than bank accounts." Hose explained this was because the traditional model of banking does not fit well into a market such as the Philippines.

"If you are going to provide financial services over bank branch, your costs are just too high," he said, adding potential customers in the country have a low savings rate. "Every time the customer is walking into the [bank] branch, you're going to be losing money.'

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Disrupting the banks

Where banks fall short in providing necessary financial services to the wider population in Asia, several factors including greater mobile phone penetration and emergence of new technology have made it ripe for fintech disrupters to thrive.

Hose said greater access to mobile phones meant companies providing financial services such as peer-to-peer money transfers and mobile payments could directly address customers, without needing to go through any intermediaries. He added availability of new technologies meant companies did not have to rely on existing infrastructure; investments have also been driven by a push from regulators to drive greater financial inclusion.

"All these three things together are building a very healthy ecosystem for fintech right now," said Hose.

The emergence of the fintech industry has also put the spotlight on banks in the region.

"Just look at the banks. Look at what they're doing. I think all of them are ripe for disruption, whether it's payments, treasury management, customer service, anything at all," said Shailesh Naik, founder and CEO of MatchMove Pay, a virtual payments company.

MatchMove provides virtual credit cards that are linked to an online account, called a MatchMove Wallet, where users add funds using traditional means and shop on their mobile phones.

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Peer-to-peer transactions

Alternative sources of banking are not a new phenomenon. In Asia, moneylenders charging high interest rates have been a mainstay in rural areas in many countries for years.

The emergence of fintech, however, saw a flurry of investment into start-ups that took the concept of peer-to-peer transactions digital, bypassing banks in the process.

One example is TransferWise, a fintech company that transfers money from one user to another online , and is backed by the likes of Andreessen Horowitz, Virgin and Paypal.

Its co-founder and CEO, Taavet Hinrikus, told CNBC the decision to found the company was borne from the same frustrations that many users had with banks and money transfer companies - transferring money was "hard, expensive and slow."

"So we thought of a better way of doing it," said Hinrikus, whose company has transferred about $750 million to date, adding it took about 24 hours for the transaction to complete over TransferWise.

Overcoming regulatory hurdles

The growth of the industry has also attracted the attention of regulators. Stateside, LendingClub, the first online lending marketplace to be valued more than $1 billion, saw the resignation of its CEO, Renaud Laplanche, after a review found the company failed to comply with instructions from an investor.

A report from PwC released this year stated that regulatory oversight of fintech start-ups was tightening, with 86 percent of financial services CEOs worried about the impact of being heavily regulated.

But panelist Dusan Stojanovic, founder and director at True Global Ventures, said regulation will not hobble the rise of fintech as some feared. Regulation "depends on what kind of service you have within fintech," he said, adding some areas are more regulatory sensitive than others.

He acknowledged that while the example of LendingClub would create a snowball effect, it was not the first peer-to-peer lending company that came under scrutiny. "It's part of the game," he said.

As for the future of banks, all of the panelists agreed banks will need to adopt new technology to stay competitive.

Benjamin Mah, CEO of V-Key, a start-up that digitized the chip used by credit cards for transactions, added that it's important to recognize that banks are not sitting still.

Big banks recognize the competition but they are too big to abruptly change their internal structure, he said. Once the changes came through, then the competition in the fintech space would heat up, added Mah.

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