12 ASIAN LEGAL BUSINESS – JUNE 2024 WWW.LEGALBUSINESSONLINE.COM F INTECH The innovative force of fintech has been sweeping across Southeast Asia as the fast-growing region embraces technological disruption with open arms. Ever since the IPO of rock-star Indonesian tech company GoTo burst the fintech scene wide open, tech startups have been dreaming of reaching skyrocketed valuations as their countries continue to cruise towards digitalisation. However, the momentum driving the industry seemed to have reached a critical juncture as concerns of overvaluation have put fintech companies in doldrums. Fintech startups in the region have been bracing for potential funding challenges and market consolidation. between the buyer and seller, and thus introducing opportunities to look at distressed assets. “Fintechs would need to look at new opportunities so that they do not enter a market which is already crowded, particularly with potentially shorter runways from a funding perspective,” adds Magnus. Another area that has been gaining the favour of fintech companies is digital tokenisation, especially with Singapore being a cautious aspirant for the region’s virtual assets hub. Digital tokenisation refers to the process of documenting an asset’s ownership rights utilising blockchain technology, which in theory, could give rise to permissionless liquidity and boost efficiency by reducing transactional friction compared to traditional assets. “Digital tokenisation is garnering wide discussion with technology players, small fintech companies and larger financial institutions being interested in the potential of greater liquidity on a cross-border basis. This is a space which will grow,” observes Magnus. Chong also underscores the tokenisation of real-world assets, such as real estate and artworks, as a trend that has the potential to become mainstream in the fintech realm, boasting the prospects of fractional ownership and increased liquidity. “Financial institutions are working to democratise access to high-value assets and create new investment opportunities for a broader range of individuals. Tokenisation also presents an opportunity to enhance fund distribution and facilitate secondary market trading of fund shares, to facilitate greater efficiencies in the industry,” notes Chong. Other notable developments include embedded finance, which involves integrating financial services into non-financial platforms. Such “The current macroeconomic environment presents several significant challenges for fintech startups in our jurisdiction, including heightened regulatory scrutiny, access to capital, and maintaining operational resilience,” says Grace Chong, head of financial services regulation at Drew & Napier in Singapore. Stephanie Magnus, principal of financial services regulatory and fintech practices at Baker McKenzie Wong & Leow in Singapore, expects potential consolidation and an increase in M&A activity in sectors including the payments space. That will partly be driven by the closing gap of valuation expectations INNOVATION UNLOCKED The era of technology is currently prevailing, with Southeast Asia emerging as a prominent hub for fintech. However, even the leading markets for groundbreaking fintech startups are facing challenges due to economic instability and increased regulatory scrutiny. Fintech lawyers discuss significant developments and regulatory playbooks in the industry, particularly with the integration of artificial intelligence. BY SARAH WONG Image: CHOKCHAI POOMICHAIYA/Shutterstock.com
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