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Digital banks attract more capital as regulators open up markets
In Asia Pacific, South Korea’s Kakao Bank, Alibaba-backed MyBank and Judo Bank in Australia are the top three digital banks that have raised the most capital

March 18, 2020 | Foo Boon Ping
  • Financial services will become increasingly digitalised
  • More funds will be raised to launch the new digital banks in the next two years
  • The capital raising outlook for digital banks in Asia Pacific is expected to remain strong in the foreseeable future

Since the advent of financial technology (fintech) companies and incumbent institutions started to digitalise their business, regulators have been on the back foot of supervising the activities of these new players. They worry more about the disruption it will bring to incumbent players and the impact on financial stability and soundness. Few jurisdictions foresaw, much less welcomed the disruption to come that would be a catalyst of positive change – to enable financial inclusion, raise service level and improve overall experience of consumers, among other benefits.  

However, there are a few front runners among them who saw the future and took steps to introduce regulation that facilitated the growth of fintechs – especially the new breed of digital banks. For example, the Financial Conduct Authority in the UK was among the first to introduce regulatory sandboxes and open banking standards that allowed fintechs to experiment and compete with incumbent institutions. The European Union followed with Payment Service Directive (PSD) 2 that further levelled the playing field for new entrants.

In the technologically focused market of the US, fintech players are flourishing as they are embraced by a hungry and receptive investor community. They also face a generally ambivalent regulatory environment comprising a plethora of different, sometimes competing financial regulators who mainly deferred to the Securities and Exchange Commission and the Consumer Financial Protection Bureau to supervise this new generation of digitally-enabled challengers. These were introduced in the US and the UK with the entry of players such as Simple (2012), Moven (2013), Fidor...

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