Put people first to get fintech right in Asia

As the Year of the Rooster gives way to the Year of the Dog, fintech remains very much in the news and on investors' minds.

From blockchain to bitcoin, ethereum and other cryptocurrencies, and initial coin offerings that allocate "tokens" as a new means of crowdfunding capital, the language and disruptions buffeting the mainstream banking and financial services industry can seem overwhelming.

But beyond the multimillion-dollar, headline-grabbing investments and acquisitions, what does financial technology actually mean for the people of Asia? Across the region, fintech deals continue to make waves. And while much of the venture capital in Asia has predominantly flowed into China, particularly among a handful of large tech companies, other countries also are seeking to position themselves as fintech hubs, says Mr Jackson Mueller, associate director at the Milken Institute's Centre for Financial Markets.

Multimillion-dollar investments were reported last year in Hong Kong in "digital wallet operator" TNG FinTech Group, in India in online lending platform Capital Float and in South Korea's second-largest cryptocurrency exchange, Korbit.

In Indonesia, motorbike delivery and ride-sharing app Go-Jek is now officially a "unicorn" - a tech start-up valued at more than US$1 billion (S$1.3 billion). With Go-Jek's acquisition of payment portals Kartuku and Midtrans, and savings and lending network Mapan, the company is not only poised to be a digital payments leader, but also is in a position to influence the shape and scope of the fintech landscape in Asean's largest economy.

According to Bloomberg, Go-Jek and the three firms collectively now process almost US$5 billion of debit-card, credit-card and digital-wallet transactions for their customers, service providers and merchants. The growing interest in fintech's potential across Asia beyond China was made clear at Singapore's Fintech Festival last year. The conference in November was attended by over 30,000 people focused on sharing or learning more about fintech developments from companies large and small.

An awards programme supported by the Monetary Authority of Singapore and the Association of Banks in Singapore recognised "digital disruptors" Blocko, Spark Systems, AGDelta, Flywire and six other companies for implementing innovative financial technology solutions.

For Asia's brick-and-mortar financial institutions, the ongoing rise of fintech poses challenges to existing business models as well as opportunities to reach new customers. For policymakers and entrepreneurs, the benefits of addressing the digital divide and of harnessing the power of fintech can seem clear-cut in their combined ability to increase the level of access to capital and financial inclusion.

Across much of South-east Asia, the unmet need for basic banking services is significant. Only 27 per cent of the region's 600 million inhabitants had a bank account in 2016, according to consulting firm KPMG. In emerging economies such as Cambodia, only 5 per cent of the population have access to formal banking services. This level of the "unbanked" has negative repercussions for the region.

With little to no access to formal banking services, too many people in Asia go without the basic protections of a savings account, and may well face relatively higher costs for sending or receiving money. This, in a region where remittances were valued at US$236 billion in 2016, according to the World Bank. "Having access to basic financial services can reduce hunger, increase education and generally improve the quality of life," said Queen Máxima of the Netherlands, the United Nations Secretary-General's Special Advocate for Inclusive Finance for Development, in her speech at the fintech event in Singapore.

Our view too is that fintech is a disruption to be embraced. And we are not alone. Venture capitalist and fintech influencer Spiros Margaris said: "I am convinced that fintech's greatest achievement will be not just helping the unbanked, but also the underbanked - individuals who have insufficient access to financial services - to live a better life."

A 2017 study conducted by the Asian Development Bank and consulting firms Oliver Wyman and MicroSave found that opening the door to financial services to the unbanked could increase the gross domestic product of the Philippines and Indonesia by as much as 3 per cent and Cambodia's by 6 per cent.

Yet, the sustained benefits of fintech will be realised only if a proper ecosystem is created and maintained - one that addresses concerns of regulators while benefiting innovators and, most importantly, consumers.

Narrowing the digital divide also will continue to be a fundamental need, with increased mobile-phone ownership and Internet penetration being key factors in spurring consumer adoption of mobile financial services. Indeed, the true measure of success for fintech should not be deal size or quantity but in expanded horizons. True success is when fintech helps once-poor farming communities access funds to bring their crops to market, or helps small shopkeepers to grow bigger, or provides seed money for a young entrepreneur ready to turn a great idea into a concrete reality.

Beyond the fintech hype and jargon, let's not forget the human element of financial technology in the year ahead. In South-east Asia and across the Asia-Pacific region, assessments of fintech must go beyond counting fortunes made and businesses disrupted or created, but also include a measure of people helped.

 • Mr Curtis S. Chin, a former US ambassador to the Asian Development Bank, is managing director of advisory firm RiverPeak Group. Mr Jose B. Collazo is a South-east Asian analyst with RiverPeak Group.

A version of this article appeared in the print edition of The Straits Times on February 10, 2018, with the headline 'Put people first to get fintech right in Asia'. Print Edition | Subscribe