Top 5 emerging trends developing in the FinTech industry of ASEAN

By Edil Corneille

The Association of Southeast Asian Nations (ASEAN) has huge potential for the FinTech industry as large parts of the market remains untapped. The profile of the region includes 10 nations that are Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, the Philippines, Singapore, Thailand, and Vietnam, who are geographically clustered together. The FinTech sector in the region has been witnessing new-age technologies benefitting businesses and consumers in a way where access to credit, financial inclusion and digital adoption, among others, has transpired. The increased penetration of mobile phones and internet has paved the way for getting consumers to use FinTech.

Financial institutions are partnering with FinTechs to better serve customers. Open banking has made it possible for customers to benefit from customised financial services. This is possible through application programming interfaces (APIs) that help FinTechs get access to data so that customers are offered with better products. The region has also seen the adoption of artificial intelligence, machine learning, big data, cloud computing, and cybersecurity at much higher levels over the last 5 years. Below are the popular trends that have been witnessed in the region in the space of FinTech.

Blockchain

This distributed ledger technology’s (DLT) implementation in finance is still being explored by institutions and recent developments are regularly announced. Known for its transparency, blockchain is said to be a safer option for key stakeholders. Indonesia has widely embraced blockchain as compared to its counterparts. Thailand is also embracing blockchain as fourteen banks came together to launch the ‘Thailand Blockchain Community Initiative.’

In August, the National Bank of Cambodia (NBC) partnered with Tokyo-based Soramitsu, a blockchain developer expert, to modernise the country’s legacy retail payments with the help of the Hyperledger Iroha blockchain framework. The Cambodian central bank is said to have implemented the first retail payments system in the world using blockchain technology.

Digital Banking

A new set of challenger banks have arisen in the region. These digital-only banks do not have physical branches and banking can be only conducted through online channels. In the Philippines, neobank tonik has received a bank licence and this virtual bank will launch with a full range of banking services including a transactional savings account with a debit card, savings and term deposit accounts, as well as consumer loans this year.

The Monetary Authority of Singapore (MAS) declared 9 digital wholesale banks and 5 full digital banks as being eligible to present their proposals for further scrutiny to get the digital bank licences. Malaysia announced its virtual banking licencing framework in December 2019 where the licences are expected to be awarded in 2021. Thailand is also exploring the possibility of having licences for digital banks.

RegTech

With the ongoing COVID-19 pandemic, the adoption of biometrics, fraud management, KYC and AML technologies have increased to boost security and compliance in finance. An example here is the National Digital Identity (NDI) programme by the Government Technology Agency of Singapore (GovTech). iProov and Toppan Ecquaria have implemented the facial verification solution for GovTech which automatically enables SingPass users to authenticate themselves and prove that they are genuinely present when accessing online government services on computers or at kiosks. Activities such as completing a tax return can now be completed with a simple facial biometric scan, replacing the need to remember passwords.

Lending

Countries in ASEAN are reaching out to the unbanked and underbanked segments to enable them in availing access to credit. FinTech has made it possible to reach out to these sections digitally where traditionally it was not possible. GoBear, a Singapore-based financial services platform, has partnered with German company Mambu, which is a cloud banking platform, and Singapore’s credit-scoring FinTech – CredoLab. Mambu’s composable banking solution will form the core system in GoBear’s lending architecture to expand in the Philippines in 2020, with additional markets to follow.

Digital lending has also seen support from regional development institutions such as the Asian Development Bank, with the push for micro-lending and financial inclusion. Aligned technology areas that are key for this include analytics-driven alternative credit scoring. New York-based Venio, the mobile application providing ‘nano-credit’ facilities to consumers in emerging markets, is offering easy-to-access credit facilities to unbanked consumers in the Philippines.

Remittances

Many of the ASEAN countries have a large diaspora of the working population who need to send money internationally to their families and friends. A good example here is Western Union’s collaboration with TrueMoney which benefits Filipinos to receive remittances from all around the world. TrueMoney is a financial services provider in the Philippines. Customers will initially be able to receive money at select TrueMoney locations, easily identifiable by the Western Union signage indicating service availability, and eventually at more than 5,000 locations across the country.