Why Meta is missing the boat on Asia’s Fintech Boom

by James · February 14, 2023

but has so far failed to make a significant impact. (Photo by Justin Sullivan/Getty Images)

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Meta earns almost all of its revenue from advertising. The company has long known it needed a new engine for revenue growth, but it waited too long to introduce payments and explore fintech in general.

In Asia, where fintech growth has generally been much faster than in Meta’s home market of the US, the company has faced market barriers in some cases and intense competition in general. At this point, it may be able to gain some payment market share in certain Asian countries with WhatsApp Pay, but it will be an uphill battle.

Meta’s first digital asset venture, meanwhile, ended up a failure: ill-conceived and ill-fated.

The US tech giant’s failure to capture significant market share in digital finance illustrates the dangers of complacency – an occupational hazard of Big Tech – and the limits of the superapp concept.

The super app that wasn’t

Starting with Alipay and WeChat Pay in China, major platform companies in Asia sought to centralize a suite of digital services into a single app, with fintech as the key to making money. Alipay and WeChat Pay would never have become so dominant in China if not for their ability to act as digital banks for the world’s largest consumer market.

The Chinese superapps spawned many imitators, some more successful than others, from Kakao in Korea to Line in Japan to Grab, GoTo and Sea Group in Southeast Asia. While these companies face challenges in reaching profitability, chances are they will get there eventually, and when they do, it will likely be on the back of their digital financial services.

Facebook has significant market share as a social media platform in many Asian countries – and thus a potentially huge user base to which it can sell digital financial services. For example, of Facebook’s 10 largest markets, 7 are in Asia: India, Indonesia, Philippines, Vietnam, Thailand, Japan and Pakistan. Facebook also has a dominant presence in Taiwan, with 18.6 million users in a population of 23.2 million.

The main problem is that graaaaaFacebook was late to the game. There are regulatory barriers to entry into financial services in many Asian countries, not to mention intense competition among e-wallets and online banks.

Customer trust, the most important factor in financial services, is also an important issue. Given its history of playing fast and loose with user data, Facebook doesn’t come across as the most reliable provider of financial services.

Betting on WhatsApp Pay

Meta’s best bet to tap into Asia’s fintech boom is through WhatsApp, which is one of the most popular messaging apps in several major Asian countries. According to BusinessofApps, India is the largest market for the messaging app with 390 million users, Indonesia is third with 112 million and the Philippines is fifth with 88 million.

So far, WhatsApp has focused on India for good reason. In theory, the subcontinent offers it huge growth potential if it can sync its messaging app with a range of digital financial services.

Unfortunately for WhatsApp, in India it has faced a perfect storm of protectionism, intense competition and growing concerns about user data security. For these reasons, despite its huge user base and the fact that India is one of the world’s most dynamic and fast-growing digital payment markets, WhatsApp Pay remains an insignificant player there.

WhatsApp Pay has a market share of India’s main retail payment lane United Payments Interface (UPI), somewhere between 0.5% and 1% by most estimates. In comparison, WalmartWMT-backed PhonePe has more than 50% market share. Google Pay has about 35% of the market.

While WhatsApp Pay may improve its position in India in the future, we won’t hold our breath. The UPI leaders are well entrenched. PhonePe is booming, having just received a new investment of $350 million, while Google’s GOOG digital services ecosystem in India stretches deep and wide.

Another market where WhatsApp Pay can grow significantly is Indonesia. The problem is that the rumored launch in Southeast Asia’s largest economy never happened. The first media reports about that possibility appeared in mid-2019.

Instead, WhatsApp Pay has focused its energy on the Brazilian market, partnering with a number of Brazilian banks. So far, however, it has encountered differences with its local partners that have prevented the company from gaining significant market share.

Crypto fiasco

The most distinguished of Meta’s fintech ventures has been the crypto project, which starts with the Latin nomenclatures that do not match the company’s brand. The original name “Libra” brought to mind astrology, while the renamed “Diem” had many observers wondering how Facebook planned to “seize the day” with its rapid expansion into digital assets.

One of the more gruesome moments came when Mark Zuckerberg tried to persuade the US Congress to support the Facebook crypto project to ensure that America would not fall behind China in digital money. Of course, in his comments he did not differentiate between e-CNY, a central bank digital currency developed by the People’s Bank of China, and Libra/Diem, a USD-backed stablecoin that never received any official government support.

“The balance will be mostly backed by the dollar, and I think that will extend America’s economic leadership as well as our democratic values and oversight around the world,” Zuckerberg told Congress in October 2019.

Although we cut Zuck some slack—he was, after all, trying to sell a crypto project to the China-held US Congress—the idea of Libra/Diem expanding US economic leadership (some might call it “dollar hegemony) and democratic values (no comment) strikes us as a poor selling point for Asia, where many regulators have been wary of cryptocurrency.

It’s probably for the best that Facebook stayed away from its crypto project in Asia, as crypto-skeptic regulators like the Reserve Bank of India (RBI) would have had yet another reason to scrutinize the company’s expansion into financial services.

Fintech In The Metaverse

Now that it’s focused on the metaverse, Meta will inevitably try to explore fintech opportunities there. Performance so far looks like more of the same: This company lacks a sense of what works in digital financial services and what doesn’t and/or isn’t allocating the resources to make it happen. Payments always seem to have been an afterthought.

To that end, Meta’s crypto payment wallet Novi didn’t even last a year. It launched as a pilot in October 2021 and ended in September 2022. Meta has not explained why it pulled the plug on Novi.

Nor has Meta’s reported testing of support for NFTs gone anywhere yet. Perhaps that’s for the best given the declining value of Bored Ape Yacht Club’s digital collectibles.

For now, the metaverse is more hype than reality, and in Asia, Meta is still Facebook: a platform used for communication and entertainment, but not banking.

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I am the founder and director of Kapronasia, one of Asia’s leading providers of consulting services with a focus on the fintech industry. I have been involved in financial technology for over 20 years and cover all topics fintech and blockchain. Before Kapronasia I was Global Banking Industry Manager for Intel based in Shanghai, China and before Intel I was CIO for Citigroup Portugal. I have testified before the US Congress on issues of fintech in China and am the author of ‘Chomping at the Bitcoin: The History and Future of Bitcoin in China’ published by Penguin. I have a BS in Computer Science from Syracuse University and an MBA from INSEAD.