The View | Fintech’s success will be measured by how wide its reach is, not by flashy IPOs

At the recently concluded Future of Finance round table co-hosted by the Bank of Thailand and the Milken Institute to help mark the Thai central bank’s 75th anniversary, a critical point emerged that remains particularly relevant at a time of growing inequality across the Asia-Pacific region, including in both China and the United States. That theme? In a word, “inclusivity”.

Among the some 40 leaders in finance who had convened, there was no ignoring the importance of including inclusive measures to assess the development and application of innovative new financial technology – “fintech” – that is upending traditional ways of banking and financing. Thanks to fintech, industries are being disrupted and individuals and companies are interacting in new ways. 

Electronic payment using a mobile phone app is perhaps the easiest-to-understand example of how fintech is changing day-to-day life. From cryptocurrencies such as bitcoin and ethereum and initial coin offerings (ICOs) that allocate “tokens” as a new means of crowdfunding capital, to an evolving mobile payments industry that has pushed us towards a cashless society, fintech can seem overwhelming and unsettling, but it is a disruption to be welcomed. 

China and the United States have always been ambitious. Now, the race is on to see who will lead the world in such areas as artificial intelligence, supercomputing, biotechnology and space. If this competition between the two largest economic powers yields a race to the top, not the bottom, when it comes to fintech, that could indeed be a very good thing. 

By some accounts, China’s fintech industry has flourished in the absence of significant regulation, with tech companies instead of traditional banking institutions leading the way. Yet, along with the benefits of greater financial inclusion via financial innovation can come the downsides of scams and fraudulent companies taking advantage of unsuspecting consumers or investors.

Cryptocurrencies have been of particular concern to regulators who moved to ban ICOs and cryptocurrency exchanges. In the case of cryptocurrencies, instead of letting market forces decide, the People’s Bank of China has outlined a vision for a centrally issued and managed digital currency.

China’s fintech deals and initial public offerings (IPOs), in particular, continue to make waves because of their size. Much of the venture capital in Asia has predominantly flowed into China, particularly among a handful of large tech companies. This remains the case even as other countries have worked hard to position themselves as fintech hubs, says Jackson Mueller, associate director at the Milken Institute’s Centre for Financial Markets.