More established markets like the US, UK and Europe have followed a similar evolution. Due to more transparent regulations, it has allowed players to enter the market and try new models. The inherent flexibility has enabled a natural evolution to occur:
- Equity Startup Crowdfunding
- Equity Real Estate Crowdfunding
- Debt based Real Estate Crowdfunding (Operated by Established Companies)
- Debt based Peer to Peer Marketplaces
- Internal Initiative Institutional Involvement
This progression is true across all markets, and as they mature more established players enter providing credibility and stability. Points (3) and (4) above are best observed in the initiatives taken by UK firms. The US and Europe are likely to follow suit once regulation and operational framework are more clear.
The most active involvement in digital finance (outside of mainland China) may be South East Asia. Malaysia in particular has been actively drafting their P2P framework, taking a similar stance in their regulation to the FCA. Hong Kong recently created a regulatory FinTech “Sandbox”, which may spark activity in what could be a very exciting market, while Singapore’s involvement has sputtered.
In general, the most activity in Southeast Asia and Asia as a whole has been:
- Consumer Debt Peer to Peer Platforms
- Small Business Debt Peer to Peer Platforms
- Invoice Discounting or Factoring
Asian countries have had the opportunity to observe the trial and error of developed markets. As a result they have identified the best way to enter initially is to provide transparent access of capital for consumers and SME’s rather than alternative assets for high net worths.
Japan, although being the world's third largest economy has been slow to react. With the assumption that a market of that size may follow a similar course of action to the UK, US and EU.
Like Southeast Asia, the emerging markets of Latin America are solely focused on providing debt capital to the general population and businesses. Interest rates offered by banks, regulated and non regulated institutions are 3-6X higher when comparing to developed markets. On top of high interest rates, the lack of willingness to lend capital, makes Mexico, Central and South America ripe for FinTech innovation. Although a number of hurdles can occur when entering these countries:
- Each country may have bespoke regulatory framework that can be difficult to navigate without local market experience
- The general ecosystem to support automation of tasks can be lacking
- Partnering with a bank may be necessary to operate
- Strict underwriting criteria is needed to combat the lack of public data
We believe the opportunity is great with over 600M people (not including Brazil) and a growing middle class needing access to capital. Getting in on the ground floor will allow innovators to shape regulation and be in a strong position as the ecosystem grows.
Pioneers looking to capitalize on collaboration within the fintech space, please get in touch with us at Crowd Valley to leverage our industry leading Digital Back Office and API operational in dozens of countries and territories around the world.
Pete has worked within FinTech since 2013 across a broad range of security applications serving multiple verticals. He has scaled Google Venture backed startups in the AdTech space before joining Crowd Valley. Originally from Canada with a education background in Mechanical Engineering and Marketing. Pete has helped to open up new global markets in the digital investing and lending space. When not firmly rooted in the London FinTech scene he enjoys travelling, always mixing business with pleasure. He has spoken to over 1000 digital investing entrepreneurs, which makes him a valuable resource for trends in new security models.