Fintech collaboration will foster financial inclusion and sustainability
The development of fintech in ASEAN has not only reshaped banking – producing a more affordable, convenient, accessible experience for customers – it is also transforming society and creating new opportunities for governments, businesses and individuals.
Certainly, the adoption and success of digital banking across ASEAN in recent years have been rapid, and like so many industries, it has been boosted by the pandemic-driven acceleration of digitalisation. A recent Standard Chartered report on post-COVID-19 spending habits showed that around 80 per cent of respondents across Indonesia, Malaysia and Singapore think their countries will eventually go cashless.1 Yet these nations will only be able to realise a cash-free society if ASEAN has a comprehensive ecosystem for digital financial services.
In order for ASEAN to completely capture the opportunities from this new era of financial services, the region needs to prioritise sustainable strategies that advance financial inclusion and literacy across business and society, according to panellists at a recent roundtable hosted by the ASEAN Business Advisory Council.
“The strategic priorities of ASEAN in 2021 are recovery, digitalisation, and sustainability, and fintech plays an essential role in sustainable economic recovery and development. Fintech will open up new opportunities for economies around the world in general, and the ASEAN economy in particular – both for economic development, and environmental protection by promoting green growth,” said Nguyen Kim Anh, Deputy Governor of the State Bank of Vietnam at the ASEAN Business & Investment Roundtable 2021.
New technology requires a fresh approach
One way in which fintech has created a more sustainable financial system is by improving access to banking services for traditionally underserved groups such as small and medium enterprises (SMEs) or remote communities. Take Indonesia where the fintech industry arranged US$5 billion of loans to SMEs in 2020, an increase of almost 30 per cent on the year before.2 Meanwhile, the proportion of unbanked and underbanked segments in the Philippines is expected to be cut in half by 2025, to 20 per cent of the population.3
Yet, there is still much more that needs to be done. For example, there needs to be a shift away from a one-size-fits-all approach when it comes to product development, according to Sopnendu Mohanty, Chief Fintech Officer at the Monetary Authority of Singapore.
“The fintech story in ASEAN and globally has been how to make financial services accessible to people. However, we have a wider segment whose needs are quite unique and we need to design a very different kind of product for them. This is where banks, regulators, policymakers and market infrastructure, including fintech, have to come together to design new products for this expanded sector,” he explained.
Placing education at the forefront of fintech
However, to achieve true financial inclusion, it’s important that improved education goes hand-in-hand with better access, advised roundtable panellists.
“A lot of the time we try to address the supply side of financial inclusion, but we haven’t addressed the demand side, which is the people. Once they have access to cheap and easy funding, do they know how to manage it? That is where financial literacy can help,” said Dr. Serey Chea, Assistant Governor and Director General of Central Banking, National Bank of Cambodia (NBC).
Not only will increased education help companies and individuals better manage their money, but improving financial inclusion for the poorest socio-economic groups, and micro, small, and medium enterprises could increase GDP by between 9 per cent and 14 per cent in large economies like Indonesia and the Philippines, according to research.4
Efforts to improve financial literacy are already underway across ASEAN. For instance, Cambodia has begun to embed financial literacy into the general education programme for children in primary and secondary school.5 Meanwhile, in April 2021 Brunei published its Financial Literacy Competency Framework. Aimed at primary school students it explores different financial topics while identifying the knowledge, skills, attitude, motivation and behaviour for different age groups.6
Notably, one positive side effect of improving financial education would be to reduce instances of fraud and data theft, as highlighted by Kelvin Tan, Global Lead, nexus, Standard Chartered.
“There needs to be a concerted collaboration between regulators and governments to educate individuals in terms of how they should and shouldn’t behave. The overwhelming majority of fraud or scams generally emanate from consumer or business behaviour such as sharing password or setting passwords that are easy to guess such as ‘1234567’,” he said.
Collaboration is the key to success
The fintech sector is known for its innovation and many of the financial products that are taken for granted today, such as e-wallets, QR code payments and peer-to-peer lending, were pioneered by the industry. However, this originality creates challenges for regulators who need to balance stewardship of the financial industry while creating an environment where innovation can flourish.
While many ASEAN countries have set up regulatory sandboxes which allow companies to test out innovative new products and services before launching them to the wider market, regulatory officials on the roundtable said working in partnership with banks and fintechs is the key to a successful approach.
“For us as regulators, we try to be open-minded. In Cambodia, we first observe what is going on, then we have a very active dialogue with the private sector, and finally we try to come up with regulations that protect users,” said NBC’s Dr. Chea.
As ASEAN continues to develop its digital economy, collaboration between regulators, banks and fintechs will be vital to improve financial literacy and create an inclusive and sustainable future for all.
2 Adrian Gunadi, Founder & CEO of Investree, Asean Business & Invetsment Roundtable 2021, Fintech and Financial Literacy, 30 August 2021, https://www.youtube.com/watch?v=hgUhlSJEIEg
3 IDC, Fintech and Digital Banking 2025, Asia Pacific, Second Edition, February 2021
5 https://www.nbc.org.kh/english/news_and_events/news_info.php?id=375
6 https://www.bruneinewsgazette.com/launching-of-brunei-darussalam-literacy-competency-framework/