“People that are outside of the Asia region, and even immediately outside China, do not understand how advanced fintech has become in this part of the world,” said Melissa Guzy, managing partner of Arbor Ventures, speaking at the SuperReturn Asia event in Hong Kong last week.
“People in the US, for example, do not understand the power of WeChat and Ant Financial and what they have done in China.”
“What is a bank? The biggest bank in the world today happens to be Wechat, with 600 million customers, and when you think about the three entities that now have one billion banking customers it’s Wechat, Ant Financial and Google. So you’re starting to see the rise of the non-bank bank.
“The real question for all of us is what is how do you define a bank as we go into the future and I don’t think it’s a clear cut as HSBC and Citibank would like to think,” Guzy said.
With the rise of the non-bank bank in China, the question is whether they can scale that outside of China. Guzy suggested we are starting to see that shift.
“If you look at the four [Chinese] e-commerce giants – JD, Baidu, Alibaba and Tencent, and I’d also include Ping An, as they are doing a brilliant job in financial services – they are teaming up with fund and wealth management providers and they are going to accelerate the growth of online financial services in Southeast Asia.”
Robo advisors not scaling
Guzy said her firm has stayed away from robo-advisor investments.
“We do look at it and in fact the largest investor in our funds is very interested in it. But venture returns have not been very good in this space.”
She noted that US firm Future Advisors was acquired by Blackrock for just $150m and the firm has made other acquisitions in Europe. But she questioned whether the assets under management are adequate within robo platforms.
“We think it’s a great space for large institutions to adopt the technology, but I think what’s going to happen is that because the market has been so slow to gain AUM, you are going to see large wealth managers doing their own robo advisory, and then picking some of the early stage venture-backed companies for not a lot of money.”
Although large global firms such as Blackrock and JP Morgan are picking up some of the more successful robo firms for relatively small sums, the suggestion is that the traditional wealth management firms, particularly the banks, have yet to figure out fintech.
While mobile technology is revolutionising financial services, robo-advisors have struggled to achieve scale. A recent study by Deutsche Bank Wealth Management noted that the costs to create and run robo-advice technology platforms are significant right now, and the industry hasn’t achieved the wide-spread adoption that would push costs lower.
