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    “FinTech disruption will usher in social reform”

    Published On: 5 December 2019

    In the latest issue of Insights, Asia House’s thought leadership publication, Geoffrey Prentice, Co-Founder of Oriente and Skype, calls for greater financial and digital inclusion.

    FinTech firms are fast establishing themselves as the benchmark in the provision of financial services. In fact, they have assumed significant stature in the industry already. The FinTech industry in ASEAN is among the fastest growing globally, and forecasts expect the market size to reach between US$70 billion and US$100 billion by 2020. Among the ASEAN countries, Singapore is the leader in this space, followed by Indonesia and Malaysia.

    The factors contributing to this unprecedented growth in FinTech include increasing disposable incomes and greater digitisation. Higher disposable incomes have led to increased demand for higher value products and services (particularly financial instruments) among other services. In only a year from now, for example, consumer spending in the ASEAN region will account for a staggering US$2 trillion. A couple of other important factors are the ubiquity of the mobile phone and the paucity of banking services, particularly outside of the region’s urban centers.

    Attractive new propositions

    New propositions by FinTechs are increasingly attractive to consumers who are underserved by existing financial services providers, and their use will only rise as FinTech awareness grows, consumer concerns fall, and technological advancements, such as open APIs, reduce switching costs. Smita Gupta, Finastra’s Asia Pacific Head of Marketing and Strategy, recently said that “open banking and APIs will open up one of the world’s oldest and most exclusive industries to intense competition and collaboration which aims to give consumers more options and better services.”

    McKinsey’s 2018 Asia Personal Financial Services Survey shows that 30-50 per cent of those in emerging Asian economies who do not use digital banking currently are likely to embrace this technology. This implies that there will be rapid growth in digital banking penetration across the region.


    “The greatest advantage that a FinTech firm has over a traditional bank
    is its ability to grow without expanding its physical footprint.”


    The traditional banking giants typically perceived FinTech firms as competitors initially. However, this perception has been changing towards the acceptance of FinTechs as an indispensable component of banking. As a result, many incumbents are actively exploring their own FinTech initiatives, considering the fact that this route has proven its efficacy in enhancing financial inclusion. But FinTechs possess a few distinct advantages.

    The greatest advantage that a FinTech firm has over a traditional bank is its ability to grow without expanding its physical footprint. In simple terms, an unbanked individual may not even need to physically visit a banking branch to open an account; it can be done so on a smartphone. One example of an incumbent that has extended a similar service is DBS, whose Digibank offering allows prospective customers to open a savings account on their mobile phones using biometric authorisation.

    Disruption of traditional customer relationships

    Established financial services firms face both “unbundling” and “re-bundling” of their propositions resulting in disruption of traditional customer relationships. The role of traditional customer service representatives is fast giving way to Artificial Intelligence (AI), and in this regard FinTechs hold a competitive advantage.

    The incumbents have been playing ‘catch-up’, although one highlight is Bangkok Bank, which has several AI startups working with it, including AntWorks, Pand.ai and Vymo. AntWorks offers data conversion services while Pand.ai basically listens in to human conversations to provide appropriate responses. Meanwhile, Vymo uses AI to better streamline the sales, marketing and after-sales support channels. Collaboration between startups and established firms is perhaps the ideal — and inevitable — outcome of disruption in financial services.


    “Collaboration between startups and established firms is perhaps
    the ideal — and inevitable — outcome of disruption in financial services.”


    Investment and regulatory support will continue to play a role in stabilising the development of the FinTech industry, which will benefit consumers. Take, for example, Oriente. Our FinTech platforms Cashalo in the Philippines and Finmas in Indonesia cater to over three million customers and have helped nearly two million previously ‘credit-invisible’ people create financial identities and build a credit profile. These platforms have posted incredibly high double-digit growth every month since their launch in mid-2018. Today, we’re already building the fastestgrowing O2O (offline-to-online) merchant-consumer network in Southeast Asia.

    Financial inclusion and poverty eradication

    FinTech firms have made swift inroads on account of the efficiencies they extend. Considering emerging Asia’s vast unbanked population, organisations such as Oriente are committed to powering financial inclusion, affording the unbanked population a chance to establish a financial footprint and participate in an increasingly digital economy.

    Greater financial — and digital — inclusion will result in lifting millions out of poverty, and enable them to contribute to regional economic growth.

    While incumbents have largely concentrated their efforts on serving the already-economically-forward and those settled in urban areas, FinTechs are not only disrupting the financial services sector but are also serving as key agents in bringing about social reform through innovative products like nanofinancing and purpose-based digital-credit and lending solutions.

    Ceyla Pazarbasioglu, Vice President, Equitable Growth, Finance and Institutions, World Bank Group, aptly echoed this sentiment recently when she said: “I really think we’re not going to eradicate poverty unless we have financial inclusion.”


    This article is featured in Insights, Issue 3 (November 2019). 

    DOWNLOAD the latest edition now [PDF]