With technological advancement and the rise of fintech players, the financial landscape across Asia has undergone a significant transformation over the last decade. Home to fast-growing income levels and the largest share of the world’s unbanked population, Asia presents a huge opportunity to those who are able to deliver value-added solutions. Stemming from the recent Money 20/20 event held in Singapore, the following are three key trends that are reshaping financial services in Asia.
The future is in cross border
Cross-border payments remain a pain point for businesses and individuals due to the slow speed, high cost and lack of transparency. However, with technological innovation at play, the cross-border payments landscape is poised for evolution.
IBM launched IBM Blockchain World Wire, a blockchain network for financial institutions to settle cross-border payments at low cost and in real-time. With new payment rails, it eliminates the need for intermediaries and thus enables businesses and consumers to conduct frictionless and low-cost cross-border transactions.
While WeChat has been following Chinese tourists’ footprints to facilitate in-store WeChat payments overseas, it has also developed remittance services in Hong Kong. We Remit enables Filipino in Hong Kong to remit money at a low cost to the Philippines through the WeChat mobile app. We Remit saves users the hassle of queuing up for hours at remittance centres and paying an extra HKD150 to HKD200 in remittance fees.
The cross-border landscape in Asia has been traditionally challenging due to differing standards and fragmentation across multiple players. However, as technology advances, interoperable cross-border payment rails will aim to drive seamless payment flows.
Super apps entering the lending and insurance space
According to Euromonitor International’s Digital Consumer Industry Insights Survey fielded in September 2018, respondents said that improving the customer journey and user experience was the most important commerce-specific development in the coming 12 months.
Michelle Evans, Head of Digital Consumer at Euromonitor International, spoke about how it is imperative for brands to reinvent the customer journey as consumers crave value-added experiences. Super apps are examples of how technology has redefined the way consumers live, eat and pay. These all-in-one apps like WeChat, Grab and Go-Jek, offer lifestyle services like ride-hailing, food delivery and financial services.
Grab recently announced that it plans to offer microloans to small businesses and has also partnered with China’s ZhongAn Online to offer digital insurance in Southeast Asia. Go-Jek has also been providing its drivers with housing and education loans in Indonesia. Founder and CEO of Trusting Social, Nguyen Nguyen, highlighted that “the traditional way of underwriting - looking at demographic data and repayment history data - is a very biased view of humans”.
Super apps are able to assess a customer’s creditworthiness through geo-location, purchasing and payment behaviour. Digitising financial services will enable the unbanked and underbanked to gain access to financial services that were previously limited to traditional financial institutions.
Driving innovation through open banking
Open banking enables third-party developers to build applications around financial institutions through the use of APIs. Financial institutions that embrace open banking are able to remain agile and maximise operating efficiency. China’s first digital bank, WeBank, has benefited from open banking - processing at least 10 times more transactions than an incumbent bank in a day.
Establishing partnerships with high traffic platforms and embracing new technologies has enabled WeBank to achieve the scale that it enjoys today. Evidently, open collaboration and innovation is the key to fostering financial inclusion.
The entrance of digital disruptors has undoubtedly transformed the financial landscape over the past decade. While the innovators of the future will face a different set of challenges, businesses will need to constantly reinvent themselves to meet customer needs.
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