Fintech 2.0: Revolutionising Southeast Asia Financial Services Ecosystem

By Hans De Back, Managing Partner, Finch Capital and Irmansyah Putera, Investment Manager, Finch Capital

Hans De Back, Managing Partner, Finch Capital

Hans De Back has over 13 years international entrepreneurial experience across multiple high-tech industries including mobile and consumer internet. Hans possesses operational experience that spans all stages of a start-up and he has held positions ranging from founder and investor to senior executive for operations. Hans De Back is a builder by nature with a strong hands-on mentality

What is fintech?

Fintech, a short term for financial technology has been one of the hottest buzzwords in the sphere of Southeast Asia business landscape lately. Back when fintech first emerged in the 20th century, it was referred to as the back end technology of established financial institutions. However, since the advent of internet and mobile smartphone revolution, fintech is mostly associated with digital consumer finance products such as payment (GoPay, OVO, Dana) and P2P lending & deposit(Kredivo, Koinworks) in Southeast Asia. These products haven’t even finished scratching the tip of the iceberg when you consider its potential impact for businesses whether financial incumbents or emerging fintech startups. The financial service ecosystem is changing rapidly because fintech has the potential to grow exponentially by penetrating various industries and use cases, as long as it introduces innovation in how individual and business conduct transaction.

How is fintech impacting business in Southeast Asia?

Not only boosting efficiency in all stages of financial value creation for existing consumers, it forces financial institutions to reimagine alternative business models and introduce innovative products and services to the currently under banked population in Southeast Asia, amounting to 73% of the region’s population according to KPMG.

Irmansyah Putera, Investment Manager, Finch Capital

Indonesia - the country with highest no. of people in Southeast Asia only has 49% of its population banked into its financial ecosystem, leaving a huge untapped fintech opportunities for those who are able to seize it. The rest of the ASEAN-5, those with fastest growing economies in the region are left competing to catch-up to Indonesia for the title of next most attractive fintech market in the region.

Analysing the statistics, the next holy grail for Southeast Asia financial business is clearly laid: financial inclusion for those under banked populations. The ultimate question is how and who will end up winning. With increasing accessibility of affordable smartphone and the rate of internet penetration for the region stands at about 58%, those who are able to dispatch fintech services through mobile such as e-wallet savings, access to funding for SME, P2P mobile payment, cross-border remittance, basic data analytics through mobile PoS are primed to win the region, while overthrowing financial incumbents in power. The future is bright as more advanced services such as insurance, investment and personal finance will also able to be upsold once the user base is acquired.

Looking at available options

Banks are at a crossroad: choose to collaborate, invest in fintech startups or go and execute from the ground up. There is no time to stand still. If they don’t start digitizing their offering and win these unbanked cohort, they are risking themselves to be usurped by these newcomers, hungry for growth and significant share of the market. There are examples shown in Indonesia where Bank Mandiri starts embracing open banking concept by opening up its API for e-money system and setting up venture fund (Mandiri Capital) to invest in startups, similar to what is done by BCA and BRI. In the end, with emerging technologies setting a new bar for personalisation and value add, all stakeholders can be sure that rapid innovation in fintech will produce more positive than negative outcome whichever parties take charge of the throne.