Shifting winds turn Japan’s investors to Southeast Asia

In The Top Up this week, we look at a rebound of Japanese investments into Southeast Asia and slowing growth at wealthtech firm StashAway. [Read from your browser]( The Top Up 💵 Welcome to The Top Up! Delivered every fortnight via email and through the Tech in Asia website, this free newsletter breaks down the biggest stories and trends in fintech. If you’re not a subscriber, get access by [registering here](. IN FOCUS In today's newsletter, we look at: - [MUFG spurs rebound of Japanese investment in SEA fintech]( - StashAway’s slowing revenue growth in 2022 - How generative AI [can transform banking]( via bots and by streamlining back-end processes --------------------------------------------------------------- Hello {NAME} Singaporeans (myself included) have been flocking to Japan in droves ever since the country eased its Covid-19 restrictions late last year. Sampling the delectable cuisine, viewing cherry blossoms, or hiking up Mount Fuji might be on the top of your list depending on the kind of traveler you are, but purchasing “Made in Japan” electronics is, in all likelihood, not (unless it’s a Nintendo Switch). Once a trailblazer in tech, Japan has long fallen behind other major economies in tech prowess for reasons including pragmatism, preference for job stability, a lack of software engineers and tech talent, and a dearth of tech funding. But it appears that a shift is happening. Since 2021, Mitsubishi UFJ Financial Group (MUFG) and other Japanese investors have spurred a rebound in Southeast Asia’s fintech investments, my colleague Budi writes in this week’s Big Story. MUFG’s increased investments in the region coincides with a palpable shift in how Japan views tech and entrepreneurship. Driven by a desire for change, more young Japanese citizens are considering a career in tech at a time when startup funding in the country is gaining momentum. (Funding grew between 2021 and 2022, the same year that funding in the US and EU decreased by 30% and 16%, respectively.) As an aging and shrinking population drives Japanese firms to seek investment opportunities abroad, Southeast Asian markets stand to benefit. On the topic of investments, the murky economic climate coupled with rising inflation certainly hasn’t helped wealthtech firms. In this week’s Hot Take, I dive deeper into how changing investing, saving, and spending habits are affecting wealthtech players like StashAway, which reported slower growth in 2022. -- Melissa  --------------------------------------------------------------- THE BIG STORY [Return of the Rising Sun: MUFG fuels rebound in Japanese investments in SEA fintech]( After the pandemic-induced drop in Southeast Asia’s Japanese fintech funding, MUFG was among those driving its comeback.  --------------------------------------------------------------- THE HOT TAKE Growth hits a snag for wealthtech firms Here’s what happened: - Wealth management startup StashAway logged [US$6.8 million]( in revenue in 2022, up 13.5% year on year, which is lower compared to the 150% growth it saw between 2020 and 2021. - Losses in 2022 decreased 12% year on year to US$20.1 million. - Personnel expenses drove a bulk of costs last year. Here’s our take: 2022 was not the best year for Sequoia-backed StashAway. After laying off 31 employees or [14% of its staff]( in June, the Singapore-headquartered firm ended the year with significantly slower revenue growth than in the preceding year. In March 2022, [a controversial move]( to liquidate its holdings in a key China tech fund upset many investors, who felt they had missed out on a market rally as a result. Some 300 of 500 respondents on an informal Facebook poll said they would be looking for alternative platforms following the incident. We’ll never know if those investors walked the talk and the full fallout of the move in the months after. But fellow wealthtech firm Endowus appeared to have zipped past its competitor in the months since then. The Endowus group, which includes Hong Kong-based wealth manager Carret Private, now boasts [over US$4 billion]( in client assets. Just two years ago, both StashAway and Endowus [crossed the US$1 billion threshold]( in assets under management (AUM) months apart from each other. StashAway’s AUM does not appear to have significantly [exceeded that figure]( to date. See also: [Mapping Southeast Asia’s key wealthtech players]( But 2022 has been a challenging year for wealthtech firms overall. A confluence of rising inflation and interest rates, as well as a murky economic outlook, have led many to withhold or pull back on spending and investing. The year saw a “sharp pull back in the financial markets and tech sector,” Endowus CEO Gregory Van [said]( in March. As its growth trajectory slowed, the company was forced to rein in costs by letting go of under 10% of its staff. It also slowed down on hiring, among other cost-cutting measures. In this environment, people are keeping more of their money in “cash management” accounts, which have greater liquidity, rather than putting them in funds or buying stocks. In the first three months of 2023, US-based online brokerage Robinhood made [more revenue from cash products than on customer trading]( as customers piled billions of dollars onto the platform to benefit from its above-average interest rates. Similarly, wealthtech platforms in Singapore - from Syfe to StashAway and Moomoo to Endowus - have been wooing customer deposits through [cash management accounts]( touting high liquidity and attractive interest rates that rival those of banks. But a poor economic outlook continues to weigh on saving and investing habits. An [OCBC survey]( of over 2,000 working adults in Singapore in August 2022 found they were allocating 32% of their savings into investments, down from 35% from a year ago. Of the respondents, 31% were taking on unsecured debt, an increase of 7% from last year, while 40% said they were facing some kind of mortgage stress. Those levels are likely to have increased with mortgage interest rates trending further upward since then. But the tougher times may be short lived. Demographic and structural trends have been signaling a greater demand for wealthtech products from a growing, more digitally savvy segment of emerging affluent people seeking greater control over how they manage and grow their wealth. As a region, Asia is forecast to overtake Europe as the second-largest wealth hub globally by 2026, with its number of high net worth individuals (HNWIs) and ultra-HNWIs expected to [grow at the quickest pace]( across all regions. Firms like Endowus appear to have their sights set on the long haul. In April, the firm [officially expanded to Hong Kong]( its first overseas market. The move plays to the needs of its investors’ preference to diversify their asset holdings across several markets, Steffanie Yuen, managing director and Hong Kong head at Endowus [told]( Bloomberg in June. “We see Hong Kong and Singapore continue to be important wealth hubs for Asia… What the last 12 to 18 months have taught us, it’s to diversify,” Yuen said. – Melissa  --------------------------------------------------------------- NEWS YOU SHOULD KNOW Also check out Tech in Asia’s coverage of the fintech scene [here](. 1️⃣ [Spenmo names ex-Coinbase, Gojek exec as new CEO amid allegations]( Justin Choi, the spending management platform’s new CEO, will replace co-founder Mohandass Kalaichelvan, who will act as an advisor at the company. 2️⃣ [Robinhood lays off about 7% of its full-time employees]( About 150 staff members were let go in what is the online brokerage’s third round of layoffs since April last year. 3️⃣ [Apple restarts talks for Apple Pay launch in India]( The tech company wants iPhone users in the country to make payments through QR codes and the United Payments Interface without going through a payments service provider like Google Pay, PhonePe, and Paytm. 4️⃣ [MAS proposes protocol to set standard for digital money usageÂ]( The standards proposed by Singapore's central bank establish common protocol and conditions for the use of digital money, which includes central bank digital currencies (CBDCs), tokenized bank deposits, and stablecoins. 5️⃣ [ID fintech firm Amartha raises $100m from US debt provider]( The peer-to-peer lender will channel the funds into working capital loans for MSMEs in the country.  --------------------------------------------------------------- FYI [How generative AI can transform banking via bots and streamlining the backend]( This new tech can transform how banks operate, but concerns over regulation, data security, and systemic biases will act as a constraint.  --------------------------------------------------------------- That’s it for this edition - we hope you liked it! Do also check out previous issues of the newsletter [here](. Not your cup of tea? You can unsubscribe from this newsletter by going to your “edit profile” page and choosing that option in our preferences center. In the meantime, if you have any feedback or ideas, feel free to get in touch with Terence, our editor-in-chief, at terence@techinasia.com. See you in a fortnight! P.S. Don't miss out on the biggest tech news and analysis. Add newsletter@techinasia.com to your address book, contacts, or safe sender list. Or simply move us into your inbox. Too many emails? Switch to a different frequency or get new content through our [preference center]( or [unsubscribe](. You can also break our hearts and remove yourself from all Tech in Asia emails over [here](  Copyright © 2023 Tech in Asia, All rights reserved. 63 Robinson Road, Singapore 068894