Asia's supercharged financial block in the center of the world's "New Monetary Order."
Asia's future split between globalization and fintech.
Asia’s future is a play on the impact of globalization and fintech on Asia’s domestic champion banks. In short, they will face challenges from new “non-bank financial institutions (NBFIs), the Grabs and Alipays of the world, and larger global banks looking to elbow into their territory. Which will win? Let’s look at the four scenarios!
👉TAKEAWAYS: My 👍 👎 on the scenarios
1. Ever-dominant local banks 👎
In this scenario, local banks triumph, and global banks pivot, particularly in the deposit space. Local banks increase dominance, and global banks strategically recalibrate due to heightened competition in building a local deposit base.
2. Non-bank challengers in the mainstream 👍
In this scenario, non-banks mature rapidly and grow their market share, particularly in lending. Customers seek more competitive lending solutions.
3. A highly globalized Asia 👎
In this scenario, the US dollar and global capital remain pivotal to the region. Geopolitical tensions ease global bank activity remains robust, and the US dollar retains its primary status.
4. A supercharged Asian financial bloc 👍
In this scenario, a resilient Asia bloc takes shape. Higher intraregional capital flows, increased non-US dollar settlement, and improved cross-border settlement drive a regional financial bloc.
Fintech is one of two unstoppable forces of nature that will fundamentally change banking throughout Asia.
The other, which surprisingly Oliver Wyman does not even mention, is de-dollarization.
Both impacted voting since, to me, the outcomes are clear.
Why I voted 👍 for 2! Fintech and its assorted NBFIs are already taking a bite out of the incumbent’s small and medium enterprise loan books, and you can expect that to continue. I agree that Fintech will be no match at the larger end of the scale of lending, but it will also impact all of the asset management in Asia. I can say that with certainty because it is already happening.
And what about 👎 for 3? When key Asian nations like China, Indonesia, Malaysia, and India –ALL– say that they want to reduce dollar usage, it’s hard to see a scenario where globalization continues as defined by the consultants. Oliver Wyman makes a key error in linking globalization to USD usage.
And the winning 👍 for 4? Easy reduced dollar use will increase trade between Asia and other nations as the dollar is considered “expensive” to use. This does not support a mass migration away from the USD so much as a slow decline. Combine this with Asia’s regional CBDC-based trade centered out of Hong Kong, and you’ve got a killer combination!
Watch as Asia’s “supercharged” financial bloc helps develop a new monetary order….and it will use CBDC!