Having begun his career at Citibank in 1998, Zennon Kapron has seen the finance industry evolve significantly over three decades. Since leaving Citibank for an MBA and moving to Asia, he can understand both technological advancements and geographical differences. “One thing I noticed when I started my career in China was a lack of actionable research and insight on what was happening in the financial industry,” he comments. In 2007, this led to the foundation of Kapronasia, now a leading consultancy which enables finance and fintech businesses to understand and navigate the challenging Asian landscape.
Kapron says that his experience in banking has been instrumental in allowing him to put himself in the shoes of his clients. “Being able to relate to the challenges of the financial institutions and help financial technology providers understand what those challenges are is very beneficial,” he comments. “I think a balance of technology and banking knowledge has helped us make a footprint and develop our brand in the region.”
The rise of the fintechs
“Fintech is much more of a reality on the ground here in Asia than it is in other markets,” says Kapron, noting that while many traditional financial institutions may initially see challenger banks and other fintech startups as a threat, the key is to adapt and collaborate. “Here in Asia, you have companies like Alibaba, Grab and Go-Jek disrupting millions of dollars of business of the traditional banks. There’s been a blurring of finance and technology that is really unique to the market here, with super apps like WeChat or Alipay where you’re not just doing finances and payments, but also wealth management, booking taxis, paying your phone bill… a number of different things.”
In Asia, notes Kapron, collaboration with fintechs is more prominent than other markets. “The original idea of fintechs disrupting the entire business of the traditional banks hasn’t really played out that way,” he explains. “We’re starting to see fintech players cooperate with banks to provide various products and services.” For example, some larger Chinese fintechs are able to work with rural banks in China to help develop end-to-end core banking services which the banks may not have been able to do on their own.
A key issue thrown up by the rise of technology in finance is prioritising security or convenience, with the latter vying increasingly for first place. “In general, consumers make a choice when they use any of these new platforms like Alipay and Grab – there’s a certain amount of data individuals are giving up,” says Kapron, noting that this is also a unique aspect of the Asian market. “People are willing to make that choice about privacy and security and to share some of the data for better financial return or a better experience. In China for example, millennials are more willing to give up data – however, in certain places, especially for the financially excluded, this might be the first time they’re interacting with a digital platform or even with a financial institution — developing trust is really critical.”
A challenging market
For the market segments that fintech is best placed to serve, Asia is rife with opportunity as well as challenge. “Across the region, there is a strong portion of unbanked and underbanked individuals, in places like Indonesia and the Philippines.” Geographical issues mean it’s often not cost effective for larger banks to serve a region, so a fintech can swoop in to fill a gap in the market.
“I think one of the biggest challenges for traditional financial institutions in Asia is fragmentation,” affirms Kapron. “You have multiple countries, hundreds of dialects and languages, multiple regulators… there is very little cohesion. The way you’d set up a business in Singapore is different with how you’d run it in the Phillippines or Indonesia. Here in Asia, financial institutions have their work cut out for them.”
For organisations looking to grow across this disparate region, Kapronasia aims to “take the risk out of expansion into Asia”. With regulation a challenge for many companies especially as new technology breeds updated rules, the consultancy works with its clients to provide up-to-date insight. “One of our products is an update service that looks at all the regulation in China,” says Kapron. “Often for clients, we’ll analyse these regulations and then look at the impact for the particular client. How they action that is up to them, but we try to equip them with the insights they need to be able to adapt their business.
“For our clients, one of the biggest challenges is that what’s news today may not even be the case in a couple of months – staying abreast of changes and what they need to do with their business model to excel in the market is a big challenge. We want to try and derisk that and help them understand what’s happening, make better decisions and develop more actionable strategies to address those challenges and opportunities.”
The perfect match
For clients to get the most out of Kapronasia’s offering, a consultative process must take place whereby client and consultant make sure they are the right fit for each other. “It’s important to find out their challenges, needs and pain points in the market,” says Kapron. “Often times, depending on who we deal with, they may not know how we can help or what their pain points are in a particular area.”
On occasion, there might be nothing Kapronasia can do to help a particular client – “they may have their own ideas on how to approach the market or they may not have an immediate need” – but Kapron emphasises that every discussion can be beneficial. “As a research institution, we’re trying to capture all the things that are happening in the market, so engaging them and understanding their strategies benefits all of us anyway, even if it doesn’t turn into a paying client.”
Its diligent research, at the forefront of industries in Asia, is what makes Kapronasia truly stand out. “It’s that insight our clients rely on — not just for projects but for regular updates on what’s happening in the market,” affirms Kapron. “Through our website, social channels and many of the free reports we publish, we try to bring new viewpoints on the news that’s out there. We’re certainly not a news organisation but we try to analyse the trends and help people understand what’s happening behind the scenes.”
From global businesses looking to accelerate its footprint into the region, to a local fintech keen to expand, Kapronasia can remove some of the risk and enable clients to scale and grow in what is a mammoth, challenging, and in some cases relatively untapped market. Through insights provided by the consultancy, businesses can look to make smarter decisions and optimise how they drive revenue and profitability within the region.