April 1, 2019 – Two weeks ago, I was privileged to attend Money 20/20 in Singapore, which is one of the largest fintech events in the Asia Pacific region. This three-day event organized close to 200 speakers comprising of industry leaders (like Air Asia’s Tony Fernandez, who is now joining the fintech craze through Big Pay, and Reuben Lai of Grab Financial), rising superstars, challengers, startups, and even regulators, in the fintech industry. Topics such as cross-border payments, blockchain, artificial intelligence, open banking, regulatory challenges, among others, were discussed by the speakers.
The organizers divided the event into 6 unique stages, where simultaneous panel discussions, interviews, or talks were held about some of the more interesting questions in fintech and the speakers’ insights about their business model, the competition, and the industry, among others. These 6 stages are the Main Stage, Business Model World, Tech Platform, Regulation Realm, Innovator Zone, and the Champion’s podium. Since it was impossible to attend all these events, I made a very brief outline of some of the most important takeaways from the speakers (with some of my comments infused in the process) I had the chance to listen to.
Personal data is more important than ever. Any company that is able to leverage the data in its possession to be able to provide what the customer wants and needs even before they ask for it has an unquestionable edge over the competition. While personal data is important, only very few however expressly mentioned the emerging data privacy legal landscape as a major concern. From a legal/regulatory perspective, this is certainly something to watch out for.
The Southeast Asian region is expected to become one of the biggest markets in the next decade. But, major challenges lie ahead before one may penetrate this emerging market, including the number of islands in this region, the differences in language, culture and legal and regulatory frameworks in the several jurisdictions comprising the region, the peculiarities of the wants and needs of a particular segment of the market, among many others. In which case, while one may draw inspiration from the business models of successful tech companies, at the end of the day, the devil is in the details and thus actual execution of one’s business plan is key.
Maneuvering through the different legal landscape/regulatory frameworks across the region and finding the right legal and business partnerships in a particular territory are two of the most important things that fintech companies wanting to expand in the Southeast Asian region should focus on. Failing to completely and accurately understand the market, both on the business and legal/regulatory fronts, may prove to be very costly in the long run. Recall Uber’s exit from Southeast Asia?
Collaboration between existing financial institutions and fintech companies would continue to be the trend, but the former may soon find themselves running for their money if they continue to ignore the changing business landscape. At present, the shift to providing a digital and mobile customer experience is rapidly taking place. The fintech companies’ agility to meet the previously unmet needs of the customer and to understand and take advantage of the changing customer profile is something that the brick-and-mortar financial companies must watch out for if they wish to remain relevant in the long run. In the Philippines, Unionbank is taking the lead role in this space.
The internet economy is still very far from living up to its potential of transforming the economic lives of many. While online commerce has grown 1500 times since 1995, the percentage of global e-commerce is very much minimally shared by developing economies, like the Philippines. Thus, a call for “collaborative disruption” is being made to accelerate the growth of e-commerce globally. To be sure, the country’s e-commerce law, passed in June 2000, contributed to such growth.
Cryptocurrency “is not there yet” in the payment space. On a side note, there has been a lot of expectation of the possible use cases of blockchain technology beyond the world of payments and credit, which is what, generally speaking, fintech is more commonly associated with. It should be noted too that crypto, due to its history and potential for illicit activities, is probably more “seriously” looked at, from a regulation perspective, compared with the other fintech areas.
Open banking is coming to Asia and it is starting in China. While open banking is normally understood in tech jargon as Application Programming Interface (API), open banking also means being “open to innovation.” As a side note, in Europe, the Payment Service Directive 2 (PSD2) already began to apply last year (13 January 2018), ushering in a new era of open banking in that part of the globe. In simple terms, in open banking, bank customers will be able to share access to their financial data with non-bank third parties through open APIs and the third parties will be able to integrate their services with those of a bank to create a better consumer experience. While the concept has just been introduced in China by Webank, the way the fintech industry is developing in Southeast Asia means that open banking is going to be an important component towards greater financial education and awareness. In the Philippines, that has to be coupled with the necessary policies and infrastructure to accelerate adoption of a new technology that has the potential towards greater financial inclusion.
On that note, the Head of the Inclusive Finance Advocacy Staff of the Bangko Sentral ng Pilipinas, Pia Roman Tayag, highlighted the Bangko Sentral ng Pilipinas’ (BSP) key approaches to fintech, which make the Philippines a very good destination for fintech companies. First is openness to innovation. This approach allows the BSP to understand how exactly a particular financial innovation works, and which in turn enables it to recognize the risks involved in the process and craft ways on how to manage said risks. Second is being proactive in enabling innovation through policies and enabling infrastructures, which include, among others, the recently passed Philippine ID System. Third, and lastly, is by balancing financial innovations with the BSP’s policy objectives. Under this approach, the BSP determines whether a particular financial innovation promotes greater financial inclusion, or whether there is sufficient customer protection, or whether financial integrity is sufficiently established, among others.
This article contribution first appeared on BitPinas: Fintech’s Money 20/20: Forging business and legal/regulatory partnerships
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