Enterprise Ireland, an agency of the Irish government that supports homegrown innovative companies, has identified Asian regtech (fintech companies in the regulatory, compliance, and security space) as a leading business opportunity, particularly in the wake of the COVID-19 pandemic.
“COVID has hurt our payments companies, but if there’s a silver lining, it’s regtech,” said Mo Harvey, fintech and financial services lead for Hong Kong. “There’s been an uptick among regulators and financial institutions for solutions in customer onboarding, handling documents, and conducting due diligence.”
Australia has traditionally been the region’s center of regtech. In a new report released by Enterprise Ireland, Australia is ranked sixth worldwide in terms of the percentage of local regtech companies that are headquartered there or have a significant market share.
However, Singapore and Hong Kong have recently become important regtech centers. Their regulators have identified this as both a big need as well as a commercial opportunity to grow their fintech ecosystems.
“We’re seeing huge volumes out of these two markets, and Ireland is taking note,” Harvey said.
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The new report, called “The State of Regtech in APAC”, represents the agency’s most visible effort to connect Irish regtechs with financial institutions, consultants, and ongoing proofs of concept in the region.
It’s a doorstopper, or whatever is the digital equivalent – a screenstopper? – running over 300 pages of analyses of the industry players, regulations, and trends in 10 of Asia Pacific’s markets.
The group decided to make the research public, even to regtech companies competing with the Irish contingent. “We want to be an ecosystem player,” Harvey said.
Enterprise Ireland supports its fintechs with venture funding, from pre-seed all the way to growth capital, as well as with incubation and networking. “We’re a trade agency on steroids,” Harvey said.
The report’s conclusion follows:
“Asia, home to over half the world’s population, is soon set to house half of the globe’s middle class. As incomes and living standards rise, so too does demand for durable goods, such as luxury goods and automobiles.
“Corporations, that used to see the continent as a hub to build things cheaply, are now investing heavily in the region in order to capture a slice of the growing demand.
“Governments in the more mature APAC economies like Singapore and Hong Kong, with no resources other than their people, realized long ago that their comparative advantage lies in building up a conducive environment for business and finance to thrive. These policies are at the core of why these enclaves are a magnet for multinationals looking for a springboard into the region and why they have become leading financial centers. They act as oases in an otherwise “Wild West” of a region.
“At the same time, disruptive new technologies, platforms, and players are emerging in the financial realm that offer both enormous opportunities and risks. These have found a natural home in the more mature APAC economies, with their deep financial ecosystems. Governments in these jurisdictions are cautiously embracing these disruptions, recognizing the need to do so in order to maintain their leads as thriving financial centers hubs. Incumbent financial institutions, meanwhile, have also recognized the need to adopt these technologies if they want to stay ahead.
“As the interlinkages within these financial ecosystems become ever more convoluted, regulators in these economies are all too acutely aware of the need to regulate this moving target. At the same time, they have also sought to improve their supervision and mandate more stringent compliance and risk management regimes over their charges.
“This regulatory scrutiny has not occurred within a vacuum either. It has occurred in a region that has been beset by recent financial wrongdoing, such as the 1MDB affair in Malaysia and the misdeeds of the Big Four in Australia that culminated in the Royal Commission there. It has also occurred in a world that has been beset by such malpractices by its financial institutions, is vulnerable to an increase in cybercrimes, and is still recovering from the global financial crisis. In this more complex environment, welcoming yet cautious regulators within the mature APAC economies recognize the power of regtech to assist them in these untested waters. Firms within these economies, meanwhile, facing ever more onerous demands from their regulators, recognize the need for technological solutions to help them manage these demands.”