3 things Asia can learn from Sweden’s booming fintech scene

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Many hail Sweden as the country to watch in financial technology. Venture capitalists have taken note of Swedish fintech companies, with companies like Klarna already boasting a unicorn status. The country’s fintech sector is influential in ushering in a cashless Sweden, something that some Asian countries like South Korea and Singapore are intending to emulate.

However, the fintech scenes in Asia are experiencing varying rates of progress. Asian countries are culturally diverse and have different economic conditions. On one hand, there are the developed countries and large markets such as South Korea, Singapore, and China that boast growing fintech adoption. On the other are developing countries like India and the rest of Southeast Asia where fintech has yet to take off.

Lesson 1: Cater to market attitude

Fintech ventures should actively address specific needs and tailor their services accordingly as they consider the prevalent attitudes of their market. In Sweden, bank accounts are central to people’s finances. The Swedish receive salaries, make payments, and transfer funds through their bank accounts. They also use those as proof of financial capacity when applying for loans.

Swedish fintech players focus on this particular mindset. Trustly, for example, empowers merchants to accept payments from their customers’ bank accounts. Since a number of other European countries also share the same attitude toward debit, the company is able to grow as a cross-border payments solution.

Lesson 2: Simplify the experience for everyone

Borrowing money from traditional institutions can be a tiresome process, with several forms and documents that need to be accomplished. Some lenders would even ask for collateral before they process the application.

Stockholm-based lending platform Lendify seeks to make borrowing easier through a peer-to-peer lending model. Instead of being the lender itself, the company connects creditworthy borrowers with willing lenders. For borrowers, the application can be done through the web app. For prospective lenders, they can simply put their money into Lendify to provide loans to borrowers. The company allows payments to and from bank accounts, so the whole process can be done through a computer.

Lesson 3: Collaborate rather than compete

Rather than taking an uncompromising stance and view banks as threats, Sweden’s fintech ventures have successfully found common ground on which to collaborate. For example, Izettle enables small businesses to accept credit card payments using mobile devices. Among its investors are MasterCard, American Express, and Santander.

More sweeping changes are also set to happen once the European Union’s revised payments directive or PSD2 takes effect by 2018. PSD2 enables consumers to allow third-party services to access their account information. For example, a personal finance app can directly manage a user’s finances since it can tap into banks’ APIs to manage funds. The directive will also make cross-border transactions easier. This also creates new opportunities for European fintech to deliver unique financial experiences to users.

What Asian fintech should do now

So, how can fintech companies in developing Asian countries apply these lessons? They would do well to review their propositions and whether or not their services really aim at solving market issues.

A lot of the challenges of Asian fintech are cultural. The prevailing conservative mindsets are averse to digital financial services. Many still rely on cash and traditional financial products, as observed in India and the Philippines despite high internet penetration in these countries. Governments and businesses should both invest in educating the public on the benefits of going digital like the ease of use and security.

For markets with low banking penetration, payment services have their challenges as well, with cash on delivery being the preferred payment method in most ecommerce transactions. Forcing the unbanked to start their own bank accounts could alienate this market segment.

As a workaround, some payment services and ecommerce platforms in the Philippines have partnered with local physical establishments such as pawnshops and convenience stores to process cash funding and payments. Placing point-of-sale terminals in convenient locations to fund accounts could also be explored. In markets where a good number of the population own a mobile device, an alternative method could involve prepaid or postpaid credits.

Streamlining processes should be core to any fintech service. Because of the lack of integration, it has been a challenge for many fintech companies to contain the user experience within their platforms. For example, users of DragonPay, a Philippine third-party online payment service, have to check out through the merchant’s platform first before reaching DragonPay where they only receive instructions on the next steps. After that, users switch to their banks’ online banking facility to transfer funds from their accounts and head back to the payment service to confirm and complete the transaction. The long process and having users switch from one context to another hamper the user experience.