The financial technology, or fintech, sector has come of age. In 2014, global fintech investment broke the $12 billion mark, a 201 per cent jump from a year earlier, according to research company CB Insights.
Fintech is largely an American and European phenomenon, with Silicon Valley, New York and London dominating the global landscape. Asia accounted for only 6 per cent of total 2014 investment, but the region is quickly moving to foster its own fintech ecosystems.
The two places with the most immediate potential are the region's most vibrant financial centres: Hong Kong and Singapore. Both are well positioned. First, their high concentration of financial companies gives them a particular advantage in wholesale and commercial banking innovation. Second, their geographic location at the heart of Asia allows them to drive financial inclusion through retail financial services.
On the institutional side, Hong Kong and Singapore provide proximity to some of the largest potential fintech customer bases in the world. Seventy of the 100 largest global banks have a presence in Hong Kong. Some 200 banks with a total asset size of almost $2 trillion have operational headquarters in Singapore. Banking and securities companies have serious buying power. According to research company Gartner, their information technology procurement budgets amounted to $485 billion in 2014.
Globally, a collaborative model of innovation in financial services has emerged. Banks have become more willing to incubate, nurture and fund fintech startups. This openness is driven in part by the banks' need to partner with nimble innovators due to capital constraints, new regulations and legacy systems. As part of the finance sector's efforts to work more closely with tech communities, both UBS and Citigroup have launched innovation labs in Singapore, while DBS Bank and Accenture have started accelerator programs in Hong Kong.
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