SFF GREEN SHOOTS SERIES: A SPOTLIGHT ON THE ASEAN REGION: THE LATEST DEVELOPMENTS IN FINTECH
April 30, 2020
Our Green Shoots session on 30 April focused on FinTech developments and efforts across ASEAN to support the community through these challenging times. Against the backdrop of COVID-19, promising efforts have started to unfold with continued opportunities and challenges facing the industry. Our leaders from FinTech associations in ASEAN and speaker from the Philippines weighed in on initiatives from their respective markets, learnings from ASEAN and how countries can better collaborate to support FinTech. A big thank you to our speakers, for their insights and advice: Chia Hock Lai (President, Singapore FinTech Association), Mohammad Ridzuan Abdul Aziz (President, FinTech Association of Malaysia), Topp Jirayut Srupsrisopa (Board of Director, Thai FinTech Association), Niki Santo Luhur (Chairman/ Co-Founder, Indonesia FinTech Association) and Maria Gaitanidou (Head of Compliance, Coins.ph). Some highlights from the session:
Our very own FinTech Awards…
To celebrate the way the ecosystem is responding and showing resilience during these challenging times, we closed the session with our very own FinTech Awards to recognise some of the FinTechs and successful pivots seen in the market. Here are our speakers’ nominations, across 3 categories:
1) Most resilient founder
Ridzuan Aziz (Malaysia): Mehedi Hasan, Founder of MyCash Online. Mehedi started to build a digital platform for migrant workers' needs in Malaysia and quickly expanded to Singapore and Australia. He went through various obstacles and challenges, as he is originally from Bangladesh.
Topp Jirayut Srupsrisopa (Thailand): I would say the Founder of 2C2P, Aung Kyaw Moe. In earlier days – he sold his car to keep the company afloat. He has been running the company for 17 years and 2C2P is today the largest FinTech in Thailand.
2) A FinTech that has successfully pivoted their model during COVID-19
Ridzuan Aziz (Malaysia): Policy Street. Policy Street pivoted from travel insurance to personal and corporate coverage insurance, as well as being able to successfully fund raise - during the COVID-19 pandemic.
Maria Gaitanidou (Thailand): UnionBank. They have been able to pivot with FinTech and were able to adjust their working model very quickly.
Niki Luhur (Indonesia): There’s been a number, and it’s not just FinTech. In e-commerce some are pivoting their businesses to create masks like the Razer example. In Indonesia there’s quite a number of e-commerce retailers and people in adjacent lines of business that have taken upon themselves to create protective equipment and give them away. And launched equity-funded programmes as well to be able to push it out especially to vulnerable parts of the population. I think they deserve a shout out for their hard work.
3) Best response from a FinTech / corporate during COVID-19?
Chia Hock Lai (Singapore): From the private sector, I would say AMTD. They have announced a $50 million AMTD-ASEAN Solidarity Fund to support eligible ASEAN-based FinTech companies through these challenging times. SFA is working with AMTD and we have exciting news to share in the coming weeks - that will benefit not only Singapore but the region. Stay tuned!
Ridzuan: From the private sector, Razer. They set up a face mask manufacturing line which aims to produce around 5 million masks a month to help with the COVID-19 situation. From the private sector, the Malaysia Digital Economy Corporation (MDEC) – for its role in organising and leading Malaysia’s digital economy forward. They have been instrumental in creating awareness of the importance of digitalization – which is not only critical now, but also post-COVID-19.
We ran our first poll
Poll: Which verticals in FinTech seem to be holding up well in the current climate?
- Our attendees top vote went to domestic mobile payments, followed by remittances and cybersecurity.
Our Speakers’ Advice to FinTechs
We asked our speakers to share their advice to FinTechs that are seeking to expand in the respective ASEAN markets:
Niki Santo Luhur, Chairman/ Co-Founder, Indonesia FinTech Association
I would like to share this quote by Larry Clark – “Crises present us with unique conditions that allow innovators to think and move more freely to create rapid, impactful change.”. There are many communities getting together in this moment of crisis – and this demonstrates a theme of solidarity. If more people come in with that impact at heart first – you might be surprised at the amount of collaborations and potential to create new partnerships. And that’s where just engaging with the community and coming with a clear vision of what impact you can bring, might foster a lot more innovation and collaboration in the community than you may have planned. So I think there is a lot of opportunity today to innovate, even in a challenging environment. Never waste a crisis. There are a lot of opportunities as well.
Mohammad Ridzuan Abdul Aziz, President, FinTech Association of Malaysia
We are coming up with a playbook that would allow FinTechs to have a one stop centre to understand at least 5 key areas if they want to come to Malaysia: Talent, Funding, Runaway, Technology validation, and as Maria said, regulation. These are 5 basic areas they need to understand coming into a market. If you’d like to enter Malaysia, please approach FAOM because we have the playbook for you to understand these key elements. Some companies in this crisis may need to cease operations and move on. That’s the reality of a crisis. But it also presents opportunities. Decisiveness is key for FinTechs.
Maria Gaitanidou, Head of Compliance, Coins.ph
Specifically for FinTechs, I think the most important advice revolves around regulation, and understanding the regulatory framework (of the market). If you are looking to do something unique that has not been done before, this would be welcome. I would advise engaging the regulator in advance and understanding what could be done differently, in light of different restrictions. Ensure that you can respond to consumer demand. I’m sure this is advice you commonly hear: but ensuring you have enough runway and coming up with different plans and business continuity potential profiles are important as we don’t exactly know how upcoming months will play out. Consider the different scenarios the government is thinking about, in relation to relaxing current lockdown and how this affects your operations – including the protection and security of your teams. These are some of the key things to plan in advance before you enter the market or set up your operations.
Other resources from the session
- Q&A with Speakers: check out our speakers’ responses to your burning questions, below.
- If you missed the session or like a replay, view this on our YouTube channel here. Do follow us for more videos!
- Want more? Check out upcoming Green Shoots sessions on our SFF website here.
Let us get through this together and be stronger, when the green shoots start to appear.
Q&A with Speakers
Question: As we embrace the new normal what are some of the key initiatives the FinTech industry is taking to support customers and businesses?
Ridzuan Aziz (Malaysia): The new normal will be a low touch economy. It will be around public and private partnerships based on a low-touch economy; the government looking at how digitalisation will help with achieving the same results but approaching it in a different manner; and bank and non-bank institutions unifying processes (eg. KYC process, digital ID).
Question: SEA governments are talking about collaborating and supporting each other during this challenging time. Is it a good time to push for a single ASEAN FinTech framework soon? Secondly, how about creating a platform to connect FinTech players in the region for potential collaboration or M&A?
Chia Hock Lai (Singapore): It is definitely a good idea to put FinTech as a ASEAN priority especially in the realms of financial inclusion and cross-border payments e.g. A standardised ASEAN QR code, but this will require that most ASEAN countries to agree which might not be easy as every ASEAN country has their own priorities.
Many FinTechs will have to adapt quickly during this time. At the ASEAN level, a good platform would be the API Exchange (APIX) platform - a non-profit platform available to FinTechs all over the world beyond ASEAN. Many FinTechs now need to adapt to do sales digitally and this is a platform that will allow them to find potential customers and FIs to do sales with them.
Ridzuan Aziz (Malaysia): In my view, this is an optimal time to push for a collaborative discussion leading to the establishment of a single ASEAN Fintech Framework. We already have an informal communication platform – hence a formal structure is needed to facilitate short, medium and long-term strategy planning and action implementations for all members. The collaborative structure would be one of the key components to facilitate digital economy blueprint based on the new-norm. We could initiate the build-up by focusing on partnership and market access as the starting points.
Topp Jirayut Srupsrisopa (Thailand): A single ASEAN FinTech framework is a necessary path forward if FinTech’s opportunities are to be fully realised but a post-crisis synchronization/alignment may demand great efforts. We always want the latitude to experiment and innovate without the weight of stifling regulation - which then significantly varies from jurisdiction to jurisdiction.
In order to keep pace with the rapid advancement, an online platform will aid in ensuring equal cooperative involvement among innovators, incumbents and institutions, especially that investment and M&A deals are increasingly at the forefront of FinTech strategy and asset managers/financial institutions are becoming more proactive in their approach to FinTech.
Question: I felt this panel was pretty helpful to see shared insights from Fintech Associations across the ASEAN region. Are there plans for a future joint platform, collaborations or ways in which the FinTechs can connect with Fintech Associations, both individually and as a whole (for regional implementation/expansion) after this webinar?
Chia Hock Lai (Singapore): There is an informal group called ASEAN FinTech Network started by SFA in 2017, but it has not been active as every associations has their own priorities. But this could be something to review again this year.
Ridzuan Aziz (Malaysia): In my view, we are eager to have a common ASEAN FinTech platform that has a proper structure (i.e. when mandate from respective government) yet independent to chart our own path in developing the FinTech industry and contributing to the progress of digital economy of each country and collectively via ASEAN.
Question: How do you think technology can help banks and businesses get back on their feet, and up and running? Do you see changes to regulatory policies to support stakeholders with these initiatives?
Chia Hock Lai (Singapore): COVID-19 has compelled many banks and businesses to accelerate their digitalisation efforts, given a likely prolonged no/low touch environment for the next 12 to 18 months. And the best way to acquire technology is not to build from scratch but to work with startups with ready tech offerings. Among the initiatives in the support package by MAS announced on 8th Apr 2020 is a Digital Acceleration Grant to encourage smaller FIs (with not more than 200 pax headcount) to undertake industry pilots on digitalisation and 80% co-funding for using digital tools.
Niki Luhur (Indonesia): The Indonesian government has been very progressive around reforming policy to support the growth of its digital economy, including FinTech. “Light touch” and “safe harbor” principles are the directions provided by President Jokowi. Of course, it will take some time to adjust for regulators to adjust to this more progressive stance, but we see positive changes and movement towards a “market conduct” approach. AFTECH is working closely with regulators to help provide insights and recommendations around how we can shape industry standards and principles to follow the policy direction from the regulators. AFTECH hopes to provide valuable advice and help policies go through an industrial test before implementation.
Ridzuan Aziz (Malaysia): Banks and businesses need to change their mindset and accept digitalization as the way forward. The important part of the mindset shift is to agree to collaborate with FinTech players and pivot their business model to be more collaborative – with focus on customers as the main stakeholder. Consequently, regulatory changes would also need to have similar focus (i.e. customers as the key stakeholder) and be unbiased about the types of entities that should be allowed to deliver those services – as long as the key principles of complying with the rules and effective risks management are in place and being practiced always.
Topp Jirayut Srupsrisopa (Thailand): FinTech is not just about opening up new growth channels or products (although FinTech does provide significant growth opportunities), but also (and, arguably, more so) about using technology to create business platforms and market infrastructure which are faster, more efficient, robust and more secure; to reach more customers with greater ease, less expense and in a more engaging way.
There would definitely be changes as existing obligations and upcoming legislation apply to new technologies. Developing an appropriate regulatory framework for FinTech is no easy task. Regulation is a big challenge when technology is moving so quickly and developing across so many different jurisdictions. There has to be a delicate balance between robust regulation and fostering innovation.
Question: Do you think the APEC Cross Border Privacy Rules (CBPR) would take centerstage in ensuring free flow of processes and data across the ASEAN region and probably be a part of an overall ASEAN FinTech regulatory framework?
Niki Luhur (Indonesia): Currently APEC CBPR is being accommodated in Indonesian Personal Data Protection draft bill in parliament. We hope the Indonesian PDP Act will be passed into law this year.
Ridzuan Aziz (Malaysia): The CBPR could only take place only if ASEAN members duly agreed on a common regulatory and infrastructure (key components) to facilitate such huge ambition. Unlike the EU where the key components are already in place, this would need G to G effort for it to be implemented and various ministry-level discussions to take place to form a common understanding between members. As for us at the Fintech Association of Malaysia, we are supportive if this initiative and willing to take the lead, where necessary.
Question: Even before the COVID-19 pandemic, the common criticism towards traditional financial institutions is the 'lopsidedness' in terms of credit access for micro, small and medium enterprises as opposed to that of larger enterprises. What are the roles/strategies you think the FinTechs in ASEAN should play, especially in the recovery phase from this pandemic?
Chia Hock Lai (Singapore): While FinTechs might have the tech (e.g. in the use of alternative data to do credit assessment), unfortunately most of them might not be as well capitalised to provide credit access at scale. Perhaps the middle-ground is for them to provide the tech platform for government-backed credits for SMEs.
Niki Luhur (Indonesia): FinTechs in ASEAN have an opportunity to help provide scaled reach towards MSME. Serving this market segment is challenging using conventional approaches. Currently, I believe there will be a big opportunity for FinTech companies to collaborate with governments in providing COVID-19 related government relief programs. Perhaps by focusing on solving concrete and urgent COVID-19 problems, there will be some breakthroughs in helping develop new collaboration between public and private sectors.
Ridzuan Aziz (Malaysia): Due to the regulatory requirements and focus on return to shareholders – most FIs would be risk averse in relation to providing credit access. Given such virtue, current business model and legacy issues – incumbent FIs could not pivot quickly to response to the sudden surge of credit needs, even by their existing customers under the current circumstance.
On positive side, the pandemic and lock down imposed by various governments brought to light the urgency for the pivotal components of the economy to be digitalised (due to social distancing, risk of infection, delivery of essential services/goods) from end-to-end, including the supply chain. Thus, we at the Fintech associations are keen to provide the governments with input and solutions for these components to be digitalised, connected securely and pivoted – to ensure that essential services/goods are delivered faster, with better information and measurability.
Topp Jirayut Srupsrisopa (Thailand): FinTech has always been improving financial services to address consumer's increasing sophistication. The shift towards digital products and services (accelerated by the virus) - FinTechs will form the foundation of a new normal economy.
Digital channels are becoming the primary point of access for payments for the mass population in both online and offline services. In Thailand, PromptPay transactions rose 93% (average 11M per day) during March. Multiple technologies poised to drive the next wave of financial services innovation are converging in maturity.
Institutions accept the need to reinvent the way technology’s used and developed while FinTech providers recognize that payments is only a small part of what institutions do. The idea of collaboration is very much a two-way street. For example: By linking disconnected players in supply chain payments - from buyers, suppliers, to banks, businesses will not only better manage their liquidity, but also have a better opportunity to access working capital.
A platform that connects buyers and suppliers can provide full visibility on where things get stuck and helps businesses optimize workflows. Access to real-time payments (RTP) could enable companies to access payment delivery statuses and settlement information and, thus, better manage their cash cycle.
Question: Question to Niki- In terms of data localisation regulations in Indonesia, is there any reservation from banks/FIs to use cloud based solution for FinTech and cyber applications and focus is only for on-prime based solutions? Do you see more cloud based solutions post COVID-19?
Niki Luhur (Indonesia): There has been progress to allow for more cloud based applications, and for the general tech industry to leverage foreign cloud computing service providers. Having said that, I do believe that the financial regulators will want to ensure that data security, data privacy, and data sovereignty policies are implemented and well socialized before relaxing on share data processing requirements. It really comes down to the sensitivity of the data being processed. There are tightening measures around Personal Data Protection. In addition, many cloud computing service providers are setting up on shore infrastructure and operations in Indonesia, so there will be an easier way to find a middle ground in the near term.
Question: Niki: How do you see the future of API based open banking in Indonesia?
Niki Luhur (Indonesia): There is currently a working group at AFTECH (Indonesia Fintech Association) that is beginning to focus on API Based Open Banking in Indonesia. The current regulators are open minded towards this direction, and I believe there is a good potential to collaborate to start shaping what that may look like. For example, the current direction is leaning towards pushing asset side open banking first. Focusing on asset side is faster, will help close the MSME financing gap, and drive financial inclusion. Having said that, there are concerns around privacy that need to be addressed. Open Banking is part of Bank Indonesia’s Payment System Blueprint 2025. Please see the publication here.
Question: Do you see blockchain being able to play a part for small and medium bank loans, Shariah products or for for ESG initiatives re green instruments to tap into untapped markets?
Chia Hock Lai (Singapore): Blockchain could play a critical role where there is significant information asymmetry e.g. financing to tier 2 or 3 players in supply chain finance.
Ridzuan Aziz (Malaysia): Yes of course.
Question: In the current scenario, is Blockchain helping the FinTech in a better way? Like Niki just pointed, is fraud detection and control being handled well by this upcoming technology?
Ridzuan Aziz (Malaysia): Yes, it has the potential to do as suggested. However, the mindset of the policy makers needs to be changed first for them to be convinced that BC could be utilised securely, with scale and with cost effectiveness.
Topp Jirayut Srupsrisopa (Thailand): Blockchain is one of many transformative new technologies that will shape future financial services infrastructure and should be seen as part of a toolbox. Its application will differ by use case, each leveraging the technology in different ways for a diverse range of benefits.
The infrastructure must be capable of sharing information among all market participants. It builds upon a single version of the truth to provide transparency for historical and real‐time transactions.
Question: Would bilateral trade agreements such as the Digital Economy Partnership Agreement and the Digital Economy Agreement help in accelerating Fintech adoption during this crisis? Would other ASEAN members participate in such trade arrangement?
Ridzuan Aziz (Malaysia): Such suggestion could only take place only if ASEAN members duly agreed on a common regulatory and infrastructure (key components) to facilitate this huge ambition. Unlike the EU where the key components are already in place, this would need G to G effort for it to be implemented and various ministry-level discussions to take place to form a common understanding between members. As for us at the FinTech Association of Malaysia, we are supportive of this initiative and are willing to take the lead, where necessary.
Question: Do you think P2P lending can work in digital form, and is there a chance that it may be abused by illegal moneylenders AKA loansharks? Also, the licensed moneylenders are now still working on very much paper based, face to face approach, can it become digital while still ensuring the security and safety for both lenders and borrowers?
Ridzuan Aziz (Malaysia): It has been implemented in many ASEAN countries and the financial regulators are issuing licenses in other to manage various risks including money laundering, terrorist financing and scams.
Question: What do you think that FinTech players should do to break-down barriers of adoption of technology with the end user (financial institutions, consumers, business).
Chia Hock Lai (Singapore): A strong industry association can help a lot in connecting the various stakeholders in the ecosystem in a trusted manner include providing education and awareness at scale, instead of being undertaken by any single FinTech company e.g. Singapore’s PayNow is actively promoted by the Association of Banks in Singapore (ABS) and has been very effective.
Ridzuan Aziz (Malaysia): In Malaysia, we issue a digital playbook for various stakeholders to understand various aspects of the ecosystem and where they fit. It also provide other relevant information on risks, regulations, market access, funding and links to other stakeholders to facilitate communication for better understanding.