Covid-19 has in many ways, irreversibly changed our economies and industries. It’s a faster disruptor than those of us in technology could have ever imagined. And yet, a Catch-22 reality is emerging. Change is inevitable and few in Asia, in my experience, are currently willing to invest in it despite a tragic and compelling event that has been imposed on all of us.

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When a crisis happens, many companies revert to a mode of either stop investing or cut costs. Cutting people has always been a path of least resistance and a reflex in sectors like banking. But what is kept on as “phantom fixed costs” are the bad purchase decisions, the maintenance of outdated legacy systems, the manual rework, the compliance costs and fines due to broken processes. Constantly cutting rather than investing in game-changing technology for the future is a short-term approach that lowers quality and creates higher long-term risks and costs. 

Since January in Asia, investors have sat on their coffers playing a game of “who blinks first,” demanding more traction than ever. Institutions have stopped anything that is non-critical.

Most agree with our focus and market strategy, but few are bold enough to invest meaningfully to digitalise their operations.

See related article: Asia has ‘crypto groove’ – and Korea’s mom and pop shops are helping lead the way

Changing anything to an architecture, even a crippled one, takes time and risk. Spaghetti architectures are the norm. The amount of documentation going into gap analysis, vendor selection, project management, delivery and support maintains a cottage industry of paper pushers.

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Investment in Asia has seen a decline, spelling trouble for fledgeling startups. Photo: Markus Spiske

From our vantage point in Asia, we’ve observed the following major biases impeding meaningful change:

  • Licenses and most likely maintenance fees and other upgrades tie you to a vendor for a long time. Switching to another vendor might be perceived to be more expensive than most any technological debt.
  • There is no way around accepting that with any new systems, particularly built by fintech, there will be a double spend until the old pipes are ripped apart. Keeping the light on the old set up whilst building the new operating model that will take years to pay off is impossible to justify in a cost-cutting environment.
  • No one wants to pass future benefits to a distant colleague who will be celebrated as an innovating genius when all the decisions and heavy-lifting would have been done by you. Change, especially one that is meaningful, takes time and executives have none.
  • There is a particular suspicion around the survival chances of startups and whether they will be able to support a new kit for the full life of a contract. 
  • In a time of crisis, everyone looks to the past and what is known, even if that means wearing rose-colored glasses. Most ignore their subpar setup because they don’t know its details and can live with it.

What is emerging is an unsettling limbo. Blockchain startups like ours have, for years, been building on ideas of a distant future that has now arrived. Where we experienced real traction before the coronavirus pandemic swept the world, things have gone suddenly very still.  Although the fundamentals as to why and where digitalization underpinned by blockchain haven’t changed, we face a paralyzed audience in a pause mode.

I have spent many years championing a story of enablement as to me, technology has to be useful, usable and more importantly, used. Today, a black swan of a pandemic has highlighted structural inefficiencies within financial institutions and the agility brought by Fintech is more than ever called for to future-proof the nuts and bolts of finance.

I predict we will likely see consolidation, as finding key partners will guarantee the survival of some of the most promising startups in blockchain. 

The future is still uncertain, but for investors and startups alike, it is time to be bold.