Digital finance can accelerate access to financial services in Southeast Asia; business leaders pushing for regulators to facilitate the use of fintech.

 

FINANCIAL technology (fintech) is expected to be an important part of cooperation in ASEAN as the regional trade bloc seeks out new and innovative solutions to solve problems of financial inclusion. The Asian Development Bank (ADB) noted in a 2017 report that digital finance can accelerate access to financial services in Southeast Asia.

 

ADB further suggested that addressing financial exclusion could increase gross domestic product (GDP) by 9-14 percent, even in relatively large economies such as Indonesia and the Philippines. The potential boost to GDP is as high as 32 per cent in Cambodia.

 

"Making the most of this opportunity could help influence the future shape of the financial services industry, particularly in smaller markets such as Cambodia and Myanmar, where only a small percentage of the current needs for financial services are met by formal providers," the bank said.

 

Mr. Ravi Menon, Monetary Authority of

Singapore (MAS) managing director said that business leaders have also made a strong pitch for regulators to facilitate the use of fintech. Much of the focus on financial inclusion has been on lifting people out of poverty by introducing them to financial services.

 

 

A recent McKinsey report made a similar point, saying that mobile banking can be a lifeline, saying "It brings the benefits of financial services to those who currently lack access, and thus enables them to take initial steps towards healthier financial lives."

 

It also warned that regulations meant to spur inclusion can significantly shift the business dynamics of mobile banking players. For example, caps on fees can make the mobile banking business an unsustainable endeavor, particularly for smaller firms. While such caps are intended to make services affordable to poorer users, they hinder profitability and make growing the customer base more

difficult.

 

Asian Financial Innovation Network

In 2017, International Finance Corporation (IFC), a member of the World Bank Group, and MAS signed a memorandum of cooperation to establish and develop the ASEAN Financial Innovation Network (AFIN).

 

This initiative emerged from discussions between IFC, MAS and the ASEAN Bankers Association on the sidelines of the Singapore Fintech Festival in 2016.

 

AFIN is a regional network that aims to match ASEAN financial institutions with fintech firms to develop solutions to spur financial inclusion in the region.

 

Under the partnership, MAS and World Bank's IFC will set up an industry 'sandbox' to offer cloud-based testing to financial players.

 

Banks and fintech can develop, test and refine digital finance and inclusion solutions.

 

They will also be able to distribute their services to financial institutions in multiple jurisdictions. The AFIN is set to pilot its platform by the fourth quarter of 2018.