ASEAN Fintech
ASEAN Fintech
ASEAN Fintech
Summary
1. A growing number of fintech-related businesses are emerging in Southeast Asia, reflecting
increased interest as part of the global fintech (financial technology) boom. The Internet and
smartphones are spreading rapidly in Southeast Asia, and many of these new businesses are uti-
lizing these technologies to find solutions to the region’s financial problems.
2. Many of the technologies and business models adopted by fintech businesses in South-
east Asia were not developed in the region, but instead imported from developed countries and
China. While using these technologies and business models, Southeast Asian fintech companies
are also retaining some traditional methods to create hybrid business models that combine both
high-tech and low-tech approaches, which from the perspective of developed countries seem un-
suited to the digital age. This situation reflects the fact that digital and non-digital fields have not
developed side by side in Southeast Asia, as they have in many developed countries.
3. These characteristics are seen in the following examples of typical fintech businesses in
Southeast Asia.
(1) Mobile payment services: These can be used even by people who have no bank accounts.
Money can be loaded into accounts in mobile devices by paying cash to affiliated retailers
and other outlets in the local community.
(2) Services that allow cash transfers using only mobile phone numbers: Singapore and Thai-
land are both engaged in national initiatives in this area as part of their efforts to create
domestic infrastructure for electronic payments.
(3) Mobile overseas money transfer services: These services evolved to meet the needs of a
region in which large numbers of people travel overseas to work. They are promoted as
being easier, cheaper, and faster than conventional systems.
(4) Lending services based on the use of alternative data: These businesses collect and ana-
lyze digital footprints and use this information to compensate for or provide an alternative
to underdeveloped credit information systems.
4. One area which is leading the fintech boom in Southeast Asia is mobile payments. Compe-
tition has intensified in this area due to a large influx of companies into the market. The Chinese
companies Alibaba and Tencent are expected to step up their presence in the market sooner or
later. Local companies, such as the powerful ride-hailing startups Go-Jek and Grab, are mean-
while positioning themselves strategically to take leading positions across the entire electronic
payment service sector in Southeast Asia.
5. Fintech businesses are also attracting attention from Southeast Asian governments, which
want to ensure the sound development of fintech as a way to develop and enhance the finan-
cial systems of their countries. There are especially high hopes toward the role of fintech in the
achievement of financial inclusiveness and the creation of a cashless society.
6. Many hurdles will need to be overcome before fintech businesses can become firmly estab-
lished in Southeast Asia and contribute to the solution of the region’s financial problems. What
is most important is to ensure the reliability of fintech businesses. That will require both public
and private initiatives, including the creation of mechanisms and rules, the establishment of se-
curity measures, and awareness-raising activities for users.
Fig. 1 A
ttributes of the Main Types of Fintech Companies in Southeast Asia
(Survey of 75 Companies)
By Country By Sector
Bitcoin/Block-chain
8
Indonesia
12
For personal
investors
Comparison of
Thailand 11
financial products
19
15
Notes: The 75 fintech companies were selected on the basis of funds raised, cross-border business expansion, and other factors
(e.g., market leadership, business model innovation, links with large corporations). They include both existing and emerging
companies.
Source: Techsauce, RUAMKID, Southeast Asia’s Top 75 Fintech Companies Report 2017, February 2017
Notes: The 75 fintech companies were selected on the basis of funds raised, cross-border business expansion, and other factors
(e.g., market leadership, business model innovation, links with large corporations). They include both existing and emerging
companies.
Source: Techsauce, RUAMKID, Southeast Asia’s Top 75 Fintech Companies Report 2017, February 2017
80 80 80 80
60 60 60 60
40 40 40 40
20 20 20 20
0 0 0 0
Informal SMEs Informal SMEs Informal SMEs Informal SMEs
Finance not needed Finance needed but not accessible Finance obtained but insufficient Financing needs met
Notes: Informal enterprise: An enterprise not registered with a local government or tax department, or a self-employed person.
SME: Enterprises with 5-250 employees.
Source: IFC Enterprise Finance Gap Database (2011 data)
Fig. 6 P
ercentages of Workers Paid Fig. 7 Percentage of Social Security
in Cash in Southeast Asian Beneficiaries Paid in Cash in
Countries Southeast Asian Countries
(%) (%)
80 40
70 35
60 30
50 25
40 20
30 15
20 10
10 5
0 0
Indonesia Philippines Vietnam Thailand Malaysia Singapore Japan Indonesia Thailand Malaysia Singapore Japan
(reference) (reference)
Notes: Percentage of wage-earners paid only in cash (2017 Notes: Percentage of social security beneficiaries paid
figures). only in cash (2017 figures).
Source: World Bank Global Financial Inclusion databank Source: World Bank Global Financial Inclusion databank
Indonesia Thailand
(%) (%)
Bank transfers
9
Credit cards
21
Credit cards
25
Cash-on-delivery
Cash-on-delivery
79
66
Philippines Singapore
(%) Cash-on- (%)
delivery
1
Bank transfers
41 Cash-on-
delivery
49 Credit cards
99
Credit cards
10
Notes: Based on the results of an interview survey with EC companies in each country about methods used to obtain payment after
the sale of physical goods, excluding ticket purchases, game charges, etc.
Source: ecommerceIQ, Southeast Asia Payment Methods Data: Cash-on delivery up, despite onslaught of fintech, March 29, 2017
Fig. 9 M
ost Common Payment not previously possible? An analysis of issues in
Methods Used by Southeast
Asian Consumers Southeast Asia’s financial environment provides
(Percentages Indicating “Cash” the following answers to this question.
in Survey Responses) First, fintech has transformed mobile devices,
(%) such as smartphones, into portable ATMs, allow-
80 ing users to access basic financial services without
70 75
needing to go to bank branches or ATMs. In ad-
73
60
70 dition, it is now possible to use mobile devices to
make payments, both online and face-to-face. The
50
funds that can be used for these mobile payments
40 is no longer limited to money tied up in bank ac-
43
30 counts and credit cards, thanks to the emergence
of electronic money, which can be used even by
20 25
people who have no bank accounts or credit cards.
10 With QR code payments(16), accepting electronic
0 payments has become possible at low costs, mak-
Philippines Indonesia Thailand Singapore China
(reference)
ing this method attractive to retailers that handle
small-ticket items, such as street vendors.
Source: PayPal, Digital Payments: Thinking beyond Trans-
actions, August 2017 At the same time, fintech has made it possible
Typical example
Fintech service
Provider Country Remarks
M_Service JSC Also available to people without
(1) Mobile payment services MoMo Vietnam
(HQ: Vietnam) bank accounts
Nine major banks Led by the Association of Banks in
PayNow (DBS, OCBC, UOB, Singapore Singapore and Monetary Authority
Money transfers using a etc.) of Singapore
(2)
mobile phone number
Led by Thai Banking Association
PromptPay All banks in Thailand Thailand
and Bank of Thailand
Designed to allow Philippine
Overseas remittance service Toast Me Pte Ltd. Singapore, Hong
(3) Toast workers in Singapore and Hong
via mobile devices (HQ: Singapore) Kong, Philippines
Kong to send money home
Over 15 countries,
Based on smartphone usage data,
Lenddo Pte Ltd. including the
(4) Lending using alternative data LenddoScore social network usage histories,
(HQ: Singapore) Philippines, Thailand,
etc.
and Indonesia
May 2014 Alibaba agrees to buy 10.35% of postal giant Singapore Post and enter into a strategic partnership to improve
delivery networks for items sold on its platform.
November 2015 Alibaba invests in Series-C funding for Singaporean start-up M-Daq, which enables companies to process overseas
transactions cheaply.
April 2016 Alibaba invests $1 billion in Lazada, a major e-commerce company based in Singapore, and acquires management
control rights.
• Lazada was established in Germany by Rocket Internet in 2011.
• It has developed business operations in Indonesia, Malaysia, the Philippines, Singapore, Thailand, and Vietnam.
October 2016 Alibaba increases its stake in Singapore Post to 14.4% through an additional investment.
November 2016 Ant Financial announces the acquisition of a 20% shareholding in the online payment company Ascend Money
(Thailand) with the option to acquire a further 10%. It also agrees to form a strategic partnership.
• Ant Financial is the financial wing of Alibaba.
• The Ascend Group, to which Ascend Money is affiliated, was spun off from True Corporation (a member of the
CP Group), a major telecoms carrier in Thailand, in 2015. It is now affiliated to True’s parent company, CP Group.
• The target customers for Ascend Money are online payment users and consumers who have no banking
accounts.
November 2016 Lazada acquires RedMart, an online food and household goods retailer in Singapore.
• Established in 2011, RedMart has developed its business in Singapore.
February 2017 Ant Financial invests in Globe Fintech Innovations (Mynt) and enters into a strategic partnership.
• Mynt is a finance company affiliated to Globe Telecom, a major telecoms carrier in the Philippines.
April 2017 Ant Financial merges with the HelloPay Group, which operates a payment platform on Lazada.
• HelloPay is renamed “Alipay”.
April 2017 Ant Financial enters into a partnership with Elang Mahkota Teknologi (Emtek), Indonesia’s second-ranked media
company.
• The companies plan to provide a payment platform based on the BlackBerry social messaging system.
June 2017 Alibaba undertakes a further investment of approximately $1 billion in Lazada, increasing its shareholding from 51%
to 83%.
June 2017 Alibaba announces that it will launch Tmall World, a Chinese-language e-commerce site serving Singapore,
Malaysia, Hong Kong, and Taiwan.
July 2017 Ant Financial enters into a partnership with Touch’n Go, a subsidiary of CIMB, a major Malaysian bank.
• Touch’n Go provides prepaid payment cards.
August 2017 Ant Financial forms a partnership with the Singaporean company Fave.
• Fave provides discounts for real-world outlets, such as restaurants, fitness centers, and beauty parlors.
• Chinese tourists who use Alipay are now eligible for discounts.
August 2017 Alibaba invests $1.1 billion in Tokopedia (Indonesia) and becomes a minority shareholder.
• Established in 2009, Tokopedia is Indonesia’s biggest e-commerce platform.
Southeast Asia. Alibaba also has focused on the from online payments to face-to-face payments,
steady growth in the number of Chinese visitors to electronic payment services in Southeast Asia
Southeast Asia and is working on creating an en- could also expand into mobile payment services
vironment in which they can use Alipay in brick- through a transition from face-to-face payments to
and-mortar stores as they do in China. online payments. As noted earlier in this article,
this is because the scale of online payments is still
small, and services that allow mobile payments to
(2) Entry of Ride-Hailing Start-ups be used in face-to-face transactions are being in-
troduced one after another.
There has been particular interest in the mobile
In China, mobile payment services first began payment services provided by the ride-hailing ser-
to spread through e-commerce but have since vice companies Go-Jek and Grab. Go-Jek is based
started to be used in face-to-face transactions in in Indonesia, Southeast Asia’s biggest country
brick-and-mortar stores, following the introduc- in terms of population, while Grab has its head-
tion of QR codes. In addition to this transition quarters in Malaysia and is expanding its business
Malaysia
Dec. 2011 Formulation of the Financial Sector Blueprint 2020 as a vision for financial sector in 2020
• Increase in the number of electronic payments per person from 44 in 2010 to 200
Feb. 2015 Announcement of regulations for investment-type crowd funding by Securities Commission Malaysia
April 2016 Announcement of regulations for P2P lending by Securities Commission Malaysia
June 2016 Establishment of the Financial Technology Enabler Group (FTEG) within the Malaysian central bank
• Support for innovation that contributes to improvement in the quality, efficiency, and accessibility of financial services
• Formulation and strengthening of regulatory policies to promote innovation in the financial sector
Oct. 2016 Introduction of a regulatory sandbox by FTEG
Thailand
May 2015 Announcement of regulations relating to crowd funding by the Securities and Exchange Commission of Thailand
Dec. 2015 Approval of an e-payment master plan by the Thai cabinet and Ministry of Finance
2016- Progressive introduction of regulatory sandboxes for securities, derivatives, KYC, etc., by the Securities and Exchange
Commission of Thailand
Dec. 2016 Introduction of regulatory sandboxes by Bank of Thailand
Jan. 2017 Launch of the PromptPay C2C electronic money transfer service
May 2017 Introduction of regulatory sandboxes by the Thai Insurance Commission
Indonesia
Aug. 2014 Launch of the “National Non-Cash Movement” by Bank Negara Indonesia
• An initiative to encourage people to use non-cash payment methods
Nov. 2016 Establishment of a specialist unit (the Fintech Office) within Bank Negara Indonesia
• Risk assessment and mitigation, fintech-related surveys
Nov. 2016 Introduction of regulatory sandboxes by Bank Negara Indonesia
Dec. 2016 Announcement of P2P lending regulations by the Financial Services Authority
• Introduction of registration system
June 2017 Establishment of the FinTech Advisory Forum by the Financial Services Authority
• Establishment of strategic direction for the development of the fintech industry
Philippines
Dec. 2015 Announcement of a framework for a “National Retail Payment System” by Bangko Sentral ng Pilipinas
• A framework of standards for retail payments in the Philippines, and management regulations and policies
• Designed to promote a society that is less dependent on cash
Jan. 2017 Bangko Sentral ng Pilipinas approval for banks to provide services to their customers through cash agencies (Circular
940)
Feb. 2017 Announcement by Bangko Sentral ng Pilipinas of regulations concerning money transfers by non-banks, including
e-money issuers, and money transfer platform providers (Circular 942)
Feb. 2017 Announcement by Bangko Sentral ng Pilipinas of regulations concerning virtual currencies (Circular 944)
March 2017 Announcement by Bangko Sentral ng Pilipinas of regulations to allow the use of technology instead of face-to-face
contacts for KYC processes when banks commence transactions with new customers (Circular 950)
March 2017 Announcement by Bangko Sentral ng Pilipinas of guidelines concerning social media risk management (Circular 949)
Vietnam
Dec. 2014 Recognition of e-wallets as payment services by the State Bank of Vietnam (Circular 39)
Jan. 2017 Announcement by the Vietnamese government of a plan to make Vietnam cashless by 2020
• Installation of card readers in all supermarkets, shopping malls, and retail stores
• 70% of water, electric power and telecommunications utilities accepting card payments or online payments
• Increase in the percentage of the 15-and-older population with bank accounts to at least 70%
March 2017 Establishment of the SBV Steering Committee on FinTech by the State Bank of Vietnam
• Acceleration of the development of fintech companies under government guidelines
Payments • Payment regulations, which were previously divided into two categories according to the type of payment
business (Note) have been integrated into activity-based regulations based on a single license.
• This step was taken in response to fintech-related ambiguities and complexities concerning payment business
categories.
Cloud services • Guidelines have been created for the use of cloud services by financial institutions.
• Formulated in response to an increase in the use of cloud services by financial institutions, these guidelines
clarify the risks involved and the obligations and responsibilities of financial institutions.
Financial advice • To facilitate participation in online financial advisory services (robot advisors), the requirements for participation
in the financial advisory have been eased compared with those that apply to conventional financial advisory
services, subject to certain safeguards.
• This will allow investors to benefit from low-cost investment advice.
Insurance • Insurance companies are now allowed to provide all types of life insurance online without advice.
• Guidelines have been formulated concerning safeguards relating to the online sale of life insurance products.
Regulatory • In November 2016, MAS announced guidelines concerning regulatory sandboxes for fintech.
sandboxes • These allow eligible companies to trial innovative financial services for a specific period in a relaxed regulatory
environment, subject to certain limits.
Cyber security • Cyber security measures have been strengthened in recognition of the need for reliable cyber security to
encourage the use of new technology and innovative services.
• In September 2017, the Cyber Security Advisory Panel was formed. The panel consists of international experts
on cyber-security.
• In October 2017, a Chief Cyber Security Officer was appointed within the MAS.
Notes: The Payment Systems Oversight Act and the Money-changing and Remittance Business Act.
Source: Monetary Authority of Singapore, “Proposed Activity-based Payments Framework and Establishment of a National Pay-
ments Council,” (consultation paper P009-2016), August 2016
Monetary Authority of Singapore, “MAS Issues New Guidelines on Outsourcing Risk Management; Introduces Guidance
on Cloud Services,” (media release), July 2016
Monetary Authority of Singapore, “Facilitating the Provision of Digital Advisory Services,” (media release), June 7, 2017
Monetary Authority of Singapore, “Guidelines on the Online Distribution of Life Policies with no Advice,” March 31, 2017
Monetary Authority of Singapore, “Fintech Regulatory Sandbox Guidelines,” November 2016
Provision of • Looking Glass@MAS was opened in August 2016 as fintech innovation laboratory.
environments for • Lattice 80 was opened in November 2016 as a hub for fintech start-ups.
collaboration and
experimentation
Electronic • In July 2017, the Association of Banks in Singapore, with the cooperation of MAS, introduce the PayNow service,
payment which allows funds to be transferred between individuals’ bank accounts using mobile telephone numbers or
infrastructure national ID (or alien registration) numbers.
• The service can be used by linking an account in any of the nine banks participating in the scheme with a
telephone number or national ID number.
• The service can be used free of charge on a 24/365 basis and allows funds to be transferred almost instantly.
• It meets the needs of customers who want to transfer funds simply and efficiently.
State-owned • The MyInfo e-government personal information management service is being extended to the financial sector
KYC businesses to improve the efficiency of KYC processes (Note) by allowing the use of personal data collected by the
government.
• The aim is to make banks’ KYC processes less burdensome.
Blockchain • In collaboration with R3, which administers the Blockchain Consortium, MAS, the Singapore Exchange, and a
infrastructure for consortium of banks are working toward proof of concept for the use of blockchain technology in cross-border
inter-bank cross- inter-bank payments in foreign currencies.
border payments • This initiative is part of the blockchain inter-bank payment project (Project Ubin). Phase 1 (completed) focused
on domestic inter-bank payments. The target from Phase 2 onwards will be cross-border payments.
• Using cash as security, banks will acquire digital currency issued by MAS for use in transfers between banks.
• This system is expected to involve less time and cost and provide greater resilience than the existing system of
transfers through correspondent banks under centralized management.
Open API • Financial institutions will be encouraged to develop and adopt API with as much openness as possible.
• MAS and the Association of Banks in Singapore have jointly published the “Finance-as-a-Service API Playbook”
as guidelines for the use of open API by financial institutions.
Notes: KYC (“know your customer”) refers to the customer identity verification procedures that financial institutions are required to
carry out when opening new accounts.
Source: Monetary Authority of Singapore, “Singapore’s FinTech Journey—Where We Are, What is Next—Speech by Mr. Ravi Me-
non, Managing Director, Monetary Authority of Singapore, at Singapore FinTech Festival - FinTech Conference on 16 No-
vember 2016,” November 16, 2016
The Association of Banks in Singapore, PayNow website (https://abs.org.sg/consumer-banking/pay-now))
Indonesia
“National Strategy for Financial Inclusion Fostering Economic Growth and Accelerating Poverty Reduction” (2012)
—Main fintech-related references—
“Technology can enable some of the most important bottlenecks to be overcome and increase the supply of financial services.”
Philippines
“National Strategy for Financial Inclusion” (2015)
—Main fintech-related references—
“Use of technology and other innovations to reach the financially excluded”
Myanmar
“Financial Inclusion Roadmap 2014-2020” (2013)
—Main fintech-related references—
“Development of electronic payments will require the installation of essential payment, clearing and settlement infrastructure. This
must remain a priority for the government.”
“Mobile devices are expected to play a greater role in providing financial services to the people.”
1.PromptPay
○ Fivetypes of registration ID: ① national ID number, ② bank account number, ③ mobile
phone number, ④ mobile wallet ID, ⑤email address
Payment system infrastructure ○ Reduction of limitations of existing system, expansion of business opportunities in a wide
range of areas
○ Improved convenience for the people, businesses, and the government
2. Expansion of card use
3. eTax
5. Promotion, incentives
○ Promotion of e-payments by all government agencies through public education
Promotion of e-payments ○ Provision of incentives to use to e-payments instead of cash or checks in the public
sector
Source: Bank of Thailand, “Payment Systems Report 2015”, 2016
viability as the scale of activities expands. It will There is also deep-rooted anxiety about the securi-
take time to determine whether these businesses ty of online payment systems. To overcome these
are truly sustainable. barriers, service providers will need to earn the
Moreover, whether potential users of these new trust of users. This will require efforts by both the
financial services will become active users is hard private sector and governments, including (1) the
to predict. While strong dissatisfaction with the creation of mechanisms that allow potential users
current state of financial services will certainly to try out new systems and assess their usability,
motivate people to use the new services, it is not (2) the establishment of both voluntary rules and
easy to change long-standing customs and prac- laws / regulations, as well as security measures, to
tices. In finance, as in any other field, new things ensure customer protection and the soundness of
tend to be viewed with unease and suspicion. transactions, and (3) educational activities to en-
9. International Financial Corporation, Enterprise Finance 15. At 19.96%, the Japanese figure is the highest among the
Gap Database (2011 data). countries surveyed.
10. Bangko Sentral ng Pilipinas, National Baseline Survey 16. With this payment method, payment is completed by
on Financial Inclusion, 2015. scanning a QR code with a smartphone. Shops can store
QR codes on smartphones or similar devices, or print
them on cardboads, and allow customers to scan them
using a smartphone app. Alternatively, customers can
11. NetHope, The Case for Branchless Banking in Thousand install an app on their own smartphones to display a QR
Islands, Indonesia, January 30, 2014 code identifying their bank accounts. The shop can then
(http://solutionscenter.nethope.org/blog/view/the-case- use a smartphone or dedicated device to scan this QR
for-branchless-banking-in-thousand-islands-indonesia). code.
19. References include the MoMo website (https://momo. 26. Secure Socket Layer—A protocol used to encrypt data
vn/). transmitted over the Internet.
20. M_Service initially modeled its service on the GCash 27. Association of Banks in Singapore, PayNow website
service provided by Globe Telecom in the Philippines (https://abs.org.sg/consumer-banking/pay-now)
from 2004. It began to provide mobile payment services
based on the SIM card system under a partnership with
VinaPhone, a major mobile telecoms carrier. However,
this limited the customer base to VinaPhone subscribers 28. Other options include bank deposit account numbers,
and involved troublesome processes for customers, such mobile wallet IDs, and email addresses.
as updating. For these reasons, the company began to use
its own mobile payment app in 2014. (Follow the Leader
in Vietnam, Inc. South Asia, August 3, 2017, http://inc-
asean.com/editor-picks/follow-leader-vietnam/). 29. Transfer charges are 2 baht (about ¥7) for amounts over
5,000 baht (about ¥17,000) and up to 30,000 baht (about
¥100,000), 5 baht (about ¥17) for amounts over 30,000
baht and up to 100,000 baht (about ¥340,000), and 10
21. How a fintech outgrew banks in the mobile wallet mar- baht (about ¥34) for amounts over 100,000 baht.
ket in Vietnam, The Asian Banker, May 11, 2017 (http://
www.theasianbanker.com/updates-and-articles/how-a-
fintech-outgrew-banks-in-the-mobile-wallet-market-in-
vietnam). 30. Monetary Authority of Singapore, Payments Council sets
up taskforce to develop common QR code for Singapore,
(news release), August 29, 2017
(English)
4. Asian Development Bank and Oliver Wyman [2017],
“Accelerating Financial Inclusion in South-East Asia
with Digital Finance”