Piyush Gupta on Growth, Decline & Disruption in Asia 3

Last week, it was all happening at Sibos in Singapore. One of THE most talked about and retweeted events at Sibos 2015 was the opening plenary by Piyush Gupta – the Chief Executive Officer (CEO) of DBS Bank. I wasn’t at Sibos, but the social media buzz around Piyush was such that I felt like I needed to know what the guy was saying. Piyush Gupta delivered a very interesting opening plenary, and the intention of this post is to share with you the top 10 things that i noted as i watched Piyush’s speech.

1. Asia is ALIVE and KICKING

Despite the continued news coverage indicating a general slow down in the Asian economies, the reality is that Asia is nevertheless a flourishing region. Piyush goes a step further and suggests that “we are at the cusp of a…. Asian century”.

Piyush described how in Asia technology, disruption and change is more visible than anywhere else and is actually happening. China was THE recurring example during Piyush’s speech – describing how technology , disruption and change is happening in the country in a accelerated manner,

Piyush Gupta proposes that the battleground of  the (payments and financial) industry and future is being fought in Asia!

2. Notice the “Mega Trends”

Ignore the cycles, and pay more attention to the “mega trends” says Piyush, they reveal more interesting insights:

  • 2000 – Asia (comprised of 10 countries) was 40% of US GDP
  • 2010 – Asia was 70-80% of US GDP
  • 20120 Asia will be 120% of US GDP

Piyush explains how this type of change is not a flash in a the pan! This phenomenon is based on something very unique to Asia. It’s…

3. A Unique Demographic

Asia comprises a third of the worlds land mass, but it contains 50-60% of the world population. The population profile is pretty interesting with the average age in Asia is 28. In the US the average age is 36 and in Europe, 39.

According to Piyush Large numbers of people, particularly of young people naturally creates a dynamism and chemistry that will propel Asia from being a factory of the world to being THE marketplace of the world

Asia is going through its equivalent of the Marshall Plan (the post World War II Europe Recovery Plan). Urbanisation and infrastructure development will together create the second big driver of growth in the region. Consumption demand and affluence in Asia continues to grow, which in turn creates new and evolving opportunities.

4. The Integration of Asia

Piyush explained that there is unlikely to be a European Union type arrangement in Asia, but there will be a coming together of ideas. He referred to this coming together among “private” Asia. That is individuals and consumers in Asia that are coming together very rapidly.

Piyush highlighted how there is a new wave of multi-nationals in Asia, particularly in China and India. He went on to explain how multinationals in Asia were originally a smaller part of a European of North American conglomerate, that is no longer the case. Now the multinationals are from the region and closely integrated to the region. This is facilitating and integrating trade and capital flows in the region.

5. China is changing, but don’t worry…

Piyush Gupta outlined the frequently highlighted media concerns and presented a counter-argument:

The Chinese economy is slowing down, BUT…

  • China growth has decreased from double digit growth to single digit growth. But highlights how 6-7% growth rates are still pretty impressive, especially when compared with other major economies such as Germany
  • China is operating 2 economies:
    • Industrial economy which is growing a modest rates
    • Retail economy, this is the most interesting and enjoying double digit growth – for example:
      • Apple growth in the first 6 months of this year was 75%, making China for the first time a bigger market than the US
      • Nike announced a 45% growth rate in the first 6 months of this year

6. …Transition results in Disruption

  • China is transitioning from a manufacturing to a service based economy and from a administered to a market driven economy.
  • Transition results in disruption. This transition according to Piyush creates challenges in different parts of the economy. In the short term there will be challenges, the medium will be good for China, the region and the world
  • The scale of China’s debt is bad but it is no worse than debt in the US
    • China has 3.5 trillion dollars in reserves has the capacity to abosrb any pains that it may encounter
  • China will continue to be a major force in the region

7. Don’t give up on Asia yet

Piyush Gupta gave the following overview for Asia:

  • Asia has transformed from a current account deficit to a current account surplus
  • External debt to GDP of the crisis 4 countries in 1998 was 67-68%, now it is in the mid-teens
  • Corporate debt has decreased, the banking system is more resilient
  • Asia today is much stronger than it has been in the past
  • The last 35 years have seen several crises: recession (1985), Asian crisis (1997), SARS epidemic (2003), the global financial crisis (2008) — this has to be expected and part and parcel of being an emerging market region” says Piyush

8. A Population of Digital Natives

For me this was the interesting bit, Piyush described Asia as a technology savvy population and here is why (according to Piyush):

  • 50% of worlds internet population is in Asia
  • Indonesia is the number 1 country for Twitter with 15 tweets per second and number 1 country for mobile Facebook users
  • India is the number 2 country for Facebook, and will number 1 by 2017
  • China has 350 million smartphone users, more than the population of US
  • Alibaba has created their version of cyber Monday in Asia, last year they sold the equivalent of $9.4 billion of goods in 1 day, the US e-commerce sales were $2.6 billion – Alibaba did 4 times what the US did on 1 day through their own initiative in China

9. Chinese companies are making a profound impact on the industry

Piyush continued to highlight developments in China, and as he did so the numbers were frankly incredible. Piyush outlined how the most significant changes in the payments space are happening in China:

  • Suggesting that “the biggest payments company in the world has to be AliPay”. AliPay is to Alibaba what Paypal was to Ebay
  • AliPay has 300 million users, with 80 million transactions per day
  • Alibaba has a online money market fund called Yu’ebao, in 8 months it raised $80 billion from 80 million customers
    • In 8 months Yu’ebao became 4th largest money market mutual fund in the world with zero branches, zero distribution platform, it is totally electronic and gained 100 million customer in 1 year
  •  China’s P2P lending industry by the number of players, value and size is bigger than US and UK’s combined
  • Know Your Customer – the Chinese online bank WeBank  uses online voice and facial recognition to do KYC for all bank accounts

Piyush described how Jamie Dimon talked about “Silicon Valley is coming”, Piyush Gupta offered an alternative that “the Chinese are here, not coming”!

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10. Piyush Gupta – The Opportunity for Incumbents

Piyush Gupta finished up by making some interesting comments reflecting on the opportunity for the industry, explaining how things are changing from online to mobile. Piyush highlighted that in the past you physically went to the bank or to to your desktop to access your bank. Now through mobile you take the bank and the functions it provides with you. As a result the relationship changes – when and where the interaction with the bank and payments happen is totally transforming the industry.

Very interestingly Piyush describes how this isn’t disruption, rather it is transformation. Piyush argues this is a important distinction since “disruption assumes the end of the incumbent, transformation assumes the incumbent can make a change”.

Piyush ended up saying how the best people to navigate all of these changes and developments are incumbents. Particularly because people trust banks, the way banks manage risk, and leverage the power of the network – these according to Piyush are key strengths of the industry.


Now there’s food for thought…

3 thoughts on “Piyush Gupta on Growth, Decline & Disruption in Asia

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