Figuring out the Fintech Path
An Interview with Zennon Kapron, Keynote Speaker at Lankapay Technnovation Awards
Lankapay recently celebrated the sixth edition of the Technnovation Awards, a prestigious event recognising the forefront innovators in payment technology within Sri Lanka’s financial services sector. As the pioneer and sole platform for honouring such innovation, this event celebrates the nation’s commitment to digital payment advancement and customer convenience.
This is an exclusive conversation with the keynote speaker at the event, Zennon Kapron, Managing Director of Kapronasia. Zennon brings over two decades of experience in financial technology, having traversed roles from technology within banking giants like Citigroup to strategic positions at Intel, before establishing himself as a thought leader at Kapronasia.
Q COULD YOU SHARE YOUR PROFESSIONAL JOURNEY AND HOW YOU NAVIGATED BETWEEN TECHNOLOGY AND FINANCE?
Initially, my journey was rooted in a Computer Science background, which led me into the tech corridors of major banks like Citigroup. However, the integration of technology and banking was less prominent back then. I vividly recall my days in Portugal, where technology was perceived more as a support function than a catalyst for revenue generation. Fast forward to today, witnessing the surge of Fintech and digital payments has been transformative. From the days of physically carrying cash to paying bills seamlessly via mobile apps, the evolution has been remarkable, reshaping the financial landscape significantly.
Q AS AN EXPERT IN FINTECH, WHAT TRENDS DO YOU SEE SHAPING ASIA’S FINANCIAL LANDSCAPE?
The story in the financial industry has revolved around digitalization, from payments, lending, and wealth management to every financial product and service. The pandemic accelerated this shift, forcing businesses and individuals towards digital solutions. Payments have undergone a dramatic transformation, evident in Sri Lanka›s adoption of QR codes and linked payments. This digitalisation serves as the backbone for financial activities, enabling the rise of innovative fintech solutions that offer faster and more affordable services to both consumers and businesses.
Q THERE’S A NOTION THAT FINTECH THRIVES BEST IN UNDERBANKED REGIONS. CAN IT SUCCEED IN NATIONS WITH ROBUST TRADITIONAL BANKING SYSTEMS?
The Fintech landscape evolves constantly, presenting opportunities wherever it can make an impact. The arrival of platforms like Revolut and Wise has compelled the three traditional banks dominating the welldeveloped financial sector in Singapore, to innovate, particularly in cross-border payments. Even in a market saturated with banks, the emergence of digital banks like Trustbank, offering high-yield deposits and lending tied to local businesses, demonstrates how Fintech can carve out a niche. In developed markets, Fintechs increase competition, challenging traditional players. Conversely, in developing markets across Southeast Asia and South Asia, it addresses financial inclusion, serving the unbanked or underbanked populations with innovative solutions tailored to their needs. SMES represent, I think, around 50 per cent of Sri Lanka’s GDP. That’s a huge impact. So, SMES are another segment that is typically underserved by traditional banks. Whether it’s catering to SMES or individuals lacking credit history, Fintech bridges gaps overlooked by traditional institutions.
Q WHERE DOES FINTECH SOURCE ITS DATA, GIVEN THAT IT LACKS THE VAST DATASETS TRADITIONAL BANKS POSSESS?
Often, Fintech platforms generate their own data. Let’s say they lend $10 to someone with no credit history. If the borrower repays promptly, it’s a low-risk transaction. This iterative process allows for the gradual scaling of lending. Additionally, these platforms gather extensive transactional data from users’ daily lives. In China, we met a small business owner in Hangzhou. He had a small shop and he had maybe eight electric scooters to sell. For him to go to the bank and try and borrow money was impossible. The bank would have dismissed him right off the bat as it is too expensive for a traditional bank to service small loans.
What Alipay started to notice was his transactions, because he had a QR code on the wall, and he was accepting payments through Alipay. He was also paying his utilities through Alipay. So, there are a lot of data points that these apps can capture on
their own. Alipay can see how much money he’s making. They can see how regularly he’s paying bills and his invoices, and if he’s paying his utilities on time. And those are all strong indicators of whether this person is credit-worthy or not.
And if you think about your interactions with your bank, now, in my case, digital platforms like Wise, and when I was living in China, Alipay knew more about me than my traditional bank.
Q WHAT’S THE TYPICAL TIMELINE FOR A FINTECH COMPANY TO TURN PROFITABLE IN MARKETS LIKE SRI LANKA, GIVEN THEIR HIGH CUSTOMER ACQUISITION COSTS AND LACK OF ASSET BASE OF TRADITIONAL BANKS?
Profitability timelines for Fintechs vary based on their business model. For instance, platforms like Wise focused on cross-border payments, require less capital as they primarily facilitate fund transfers without a significant deposit base. Conversely, lending platforms demand more assets for loans, driving up customer acquisition costs. However, partnerships, like Trust Bank’s collaboration with NTUC, leveraging an existing customer base, can reduce these costs significantly. Successful Fintech models often integrate with existing ecosystems, like Alipay and Wechat Pay, or forge partnerships to access assets they lack internally. Ultimately, collaborations between Fintechs and traditional institutions can mutually benefit by leveraging technology and existing assets for increased financial inclusion and profitability.
Q WHAT’S YOUR PERSPECTIVE ON FINANCIAL INSTITUTIONS ADOPTING BLOCKCHAIN TECHNOLOGY, CONSIDERING BOTH CHALLENGES AND OPPORTUNITIES?
Blockchain presents a unique solution to a problem that often doesn’t exist. While it’s touted as transformative, the incremental advantage over existing technologies is often minimal. The industry’s initial excitement about blockchain has led to numerous attempts to integrate it into business models, but few have gained traction. Trade finance, for example, requires consensus and collaboration among multiple platforms, a daunting task given the lack of a neutral partner, say, similar to SWIFT. Startups in the blockchain space have struggled to navigate these challenges, leading many to exit the market. Overall, while blockchain offers potential, its widespread adoption in the financial industry remains a complex and uncertain journey.
Q COULD YOU SHARE ANY DISCOVERIES FROM YOUR RESEARCH FOR THE BOOK YOU AUTHORED “CHOMPING AT THE BITCOIN”?
The book explores how cryptocurrency challenges our understanding of money›s role in society. Regardless of its future, it prompts us to question the value we assign to currency and the societal structures built around it. Cryptocurrency›s potential success or failure remains uncertain, perhaps in another 20 years we will know, but the most interesting part about writing that book for me was focusing on how society understands and handles money and its societal evolution.
Q WHAT ADVICE WOULD YOU GIVE TO YOUNG PROFESSIONALS LOOKING TO MAKE A MARK IN THE FINTECH INDUSTRY?
Fintech offers a unique opportunity to impact lives positively, as seen in stories like Mr. Zhou, the scooter salesman in Hangzhou. Combining finance with technology creates a dynamic and impactful field. The time to act is now; whether joining existing ventures or launching new ones, the potential for meaningful change is immense. Focus on solving real-world problems.