How does peer-to-peer lending fit into a trade delegation to South East Asia?

The first trade delegation of this parliament travelled to South East Asia in the first week of August. Led by UKTI and the Prime Minister, we visited four countries – Indonesia, Singapore, Vietnam and Malaysia – in four days. It was the second time that Cameron had visited Indonesia, a sign of this government’s keenness to forge links with this Asian giant – a country with a population over 250 million. Singapore is familiar territory as the region’s entrepôt and financial hub. It was also the first time that a serving British Prime Minister had visited Vietnam – a noteworthy overture to this country of over 90 million people.

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Alongside the politicians, there were 31 British businesses on the delegation. These included some familiar names – FTSE 100 companies such as Aviva, institutions including Lloyds of London and household names like Rolls Royce. There were also businesses from the area now defined as “FinTech” – Earthport, the cross-border payment company; Blockchain, one of the largest BitCoin businesses; the small business lender iwoca and my company, the peer-to-peer lender RateSetter.

So, why this region and why was FinTech involved?

The reason for visiting these four countries – part of the ASEAN region – can be expressed in a few numbers: a total population exceeding 700 million people, young demographics (the opposite of the ageing Western markets) and annual growth rates over 5%. The Asian tigers – as they were known in the ‘90s, before the Asian Financial Crisis – are roaring again and this time, it would appear, in a more self-sustaining way.

Why FinTech? There were two macro themes to trip: physical infrastructure and digital infrastructure. The region has mind-boggling plans to build out its physical infrastructure – ports, airports, roads – a big opportunity for the UK’s world-beating engineering, design and construction companies. The second pillar is digital infrastructure. One fact you might not know is that Jakarta is the Twitter capital of the world – more tweets are sent from the Indonesian capital than from any other city in the world, which puts the popularity of digital services in the region in to context.

A question that many are wrestling with is this: what is the best way to build the financial structure and systems of these fast-growing economies? Should the infrastructure be physical or digital?

There’s the potential for something big to happen here. Because the physical banking and payment infrastructure that we take for granted in the UK is still absent in many of these countries, they have the opportunity to skip a generation and go straight to digital. Surely it makes sense to not worry about legacy networks and leapfrog straight to the latest technology?

This is why FinTech companies were present: by combining London’s centuries-old heritage in finance with the country’s technology skill base, the UK is positioning itself as the leader in FinTech – and the government is keen to showcase this. For businesses like my own, meanwhile, it was a great opportunity to fact-find and explore possible partnerships in new markets.

What then of peer-to-peer lending in the region? Exchange lending has become huge in China, something that players in South East Asia hadn’t failed to notice. Crowdfunding – equity and debt – was mentioned at the very first meeting of the delegation, offered as an emerging solution to SME finance in the region. One banker (from a global bank) in Indonesia explained that peer-to-peer lending was already huge in South East Asia – it just happened literally peer-to-peer in communities as opposed to via online exchanges.

Bringing some of this offline activity onto digital exchanges is clearly a huge opportunity – a true tech solution to an age-old financial activity. The benefits we have seen in the UK from the development of these exchanges – the value, the transparency – would be a big prize for these young and growing economies. The key, as ever with all things financial, will be good regulation: this is what gives markets confidence to grow and this is where the UK, with its explicit support of peer-to-peer lending and FinTech, can point to a world-leading framework.

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