Exciting Times as Asia Runs Away With The Fintech Trophy
A Milken Institute Report shows that Asia is where the action is!
This Milken Institute report, which follows two meetings of senior finance and technology experts from the East and West, reads like a lovefest for Asia.
The reality is that Asia is quickly running away with the fintech trophy, much of this due to its rapid growth in real-time payments and the ecosystems it creates.
Whether palm-pay-based ID, digital loans, or connecting digital wallets across borders, many of the innovations highlighted in the report all exist because of real-time payments.
Yes, innovations are happening elsewhere, and the report highlights them well, but the action is in Asia.
For example, only one section of the report covers specific EU developments in Open Finance. An area pioneered by WeChat and Alipay a decade ago.
It amazes me that the West continues to report on Asia’s progress but has yet to develop a national hero payment system like Indonesia’s Grab or China’s WeChat.
Visa and Mastercard have such a strong lock on the market that we’ll need dynamite to break the impasse.
Could the digital euro be explosive enough?
👉ASIA HIGHLIGHTS
From Real-Time Payments to Credit
The provision of credit lines on the Unified Payments Interface (UPI), India's real-time payment system, would be both a step change for the financial system and a massive opportunity for financial institutions. Yes, but would it be fintech for good?
The magnetic attraction of loans based on RTPs is a perpetual battle of fintech for good or evil. The evil side drives indebtedness, as have buy-now-pay-later schemes in Indonesia and Malaysia and microfinance in Cambodia and Sri Lanka. This is to say nothing of China’s early days of lending, which bankrupted millions.
From Domestic to Cross-Border
Recognizing the opportunity for impact in remittances, real-time payment systems, and, to a lesser extent, central bank digital currencies, linkages across borders are increasingly being established.
Singapore has linked its real-time payment systems through multilateral connections provided by the BIS’s “Project Nexus.” Eight out of 10 ASEAN members have signed a Memorandum of Understanding on Cooperation in Regional Payment Connectivity. India has forged relationships with Malaysia, the UAE, and France.
From Fees to None
Fees are a pain point that decreasing numbers of consumers are willing to tolerate. Real-time payment systems align with the broader trend in the race to zero transaction fees. Are you surprised?
No fee payments set the lower threshold for clients’ ability to pay! Stablecoins are another breakthrough that has the potential to reduce transaction costs.
From Manual to Al for Identification
Al is increasingly used to identify and authenticate individuals. In Asia, palm pay is an example of an Al-based, electronic know-your-customer process that allows consumers literally to take payments into their own hands.
Palm-pay technology offers several benefits in addition to the security of real-time authentication. First, palm scans identify vein patterns ("vascular biometrics") unique to individuals.
From Private to Regulatory Innovation
Regulators are now innovating and using regulatory sandboxes to introduce new services and experiment with everything from tokenization to CBDC.
Asian examples include Project Guardian, a collaboration initiated by the Monetary Authority of Singapore and industry players to explore asset tokenization. In parallel, the Hong Kong Monetary Authority established its Project Ensemble Sandbox in 2024 to experiment with fixed-income and investment funds.
From Open Banking to Open Finance in the EU
This is the sole category with an EU focus. EU's Financial Data Access (FiDA) framework as a regulatory-led approach to democratizing financial services. FiDA seeks to expand access to financial services data beyond existing open banking initiatives mandated under the revised Payment Services Directive, PSD2.
This is all well and good, but data sharing on superapps has been around for a long time in Asia.
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