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.
👊STRAIGHT TALK👊
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!
