If fintech is a technology revolution, it’s a revolution Asia is winning.
Partly this is down to necessity. Asian economies lack the deep cash infrastructure of the U.S., the bank branches and ATMs. This means it can be bypassed. The new infrastructure of cloud-based blockchain and mobile wallets is cheaper to build.
It is also a choice. Asian leaders have no problems with western notions of privacy, when placed against the need for stability. Stability leads to economic growth. Every leader there has lived through the alternative, civil conflict and war.
Paytm Taking Over the Indian Economy
The decision by India, announced Nov. 8, to stop recognizing its most popular currency, the 500 and 1,000 rupee notes, worth $8-$16 each, posed huge risks to the economy. But for one fintech company it was an opportunity.
Paytm was founded in 2010 so people could buy use of their phones. The name stands for Pay Through Mobile.
Paytm introduced its mobile wallet in 2013, after founder Vijay Sharma saw people in China using mobile wallets to buy vegetables. Users would download software to create accounts with Paytm, depositing money at mobile phone shops to buy phone services.
After that it was simply a matter of finding other things that money could buy, creating merchant accounts that would take the money, and software to process the transactions which ran on their mobile phones. Paytm now has 200 million users and 3 million merchants
Alipay, a unit of Alibaba Group Holding Ltd (NYSE:BABA), saw the opportunity in Paytm, and took a 25% stake in 2015, paying $575 million, valuing the whole company at $1.5 billion.
The same year Paytm got a license to open a payment bank. In 2016 the company was valued at $5 billion. By the time India’s government made its announcement about limiting cash, called “demonetization,” Paytm and its Chinese partners were ready.
This May Softbank put $1.4 billion into Paytm, valuing it at $8 billion., and is in the process of opening its bank, which will offer credit cards and make loans.
The men running brick-and-mortar banks in India are no smarter than American bankers. They still don’t think, for instance, that mobile wallets can compete with them on price.
But the bankers no longer have control of the payments process. Paytm has it, and competitors will have it. Today you can pay your traffic fines with Paytm, and buy transit tickets with it. Paytm is now India’s second most valuable startup, after Amazon.com, Inc. (NASDAQ:AMZN) competitor Flipkart.
Paytm is just one example of something that is happening around the world with fintech.
Startups, backed by venture capital, are building new infrastructure that gives people in Africa, Asia, and Latin America the kind of access to financial services that Americans take for granted. The economic freeway is wireless, and Americans are late to the party.
Why Ethereum Matters
For all the talk about Bitcoin, the hottest cryptocurrency of 2017 is Ethereum. Its value is up nearly 4,000% in 2017 alone.
Ethereum was created by a Russian-born Bitcoin programmer, Vitalik Buterin, who grew up in Canada and is now based in Singapore. It’s hotter than Bitcoin because it includes its own programming language, so transaction applications can be written on it. While Bitcoin is money, Ethereum is money attached to software.
The success of Ethereum illustrates a key point about blockchain, the technology both Bitcoin and Ethereum are based upon. It’s not just that money is becoming digital, traceable, and more anonymous, but that every question around money can now become software.
And Finally …
A Vietnamese fintech company has partnered with a bank to open Timo, which does most of its work using mobile phones but also offers “hangouts” instead of branches, complete with coffee shops.
If they can offer a decent bowl of pho, I’m in.
Dana Blankenhorn is a financial and technology journalist. He is the author of the historical mystery romance The Reluctant Detective Travels in Time, available now at the Amazon Kindle store. Write him at danablankenhorn@gmail.com or follow him on Twitter at @danablankenhorn. As of this writing he owned shares of BABA. To follow the value of crypto currencies, bookmark Coinmarketcap.
