Four digital banking trends transforming ASEAN

In West Java, rural fishmongers now have a new way to sell their catch - an online marketplace. Through the Digital Village programme, which targets rural communities, local businesses get a boost online.

This was made possible by innovation in digital banking and mobile payment services. All over ASEAN, financial service institutions (FSIs), central banks and fintech companies are devising new ways to provide services to customers that need it most, and overcoming gaps in access with digital.

Here are four digital banking trends that are making a difference in the region:

1. Customisable digital banking

The ‘bank of one’ is more in reach than ever - and a state-owned bank in Thailand is exploring what that means today. “Have you ever thought of, if you can decide your own product, instead of the bank deciding for you?” says Boonson Jenchaimahakoon, First Senior Executive Vice President (Information Technology Group) of the Government Savings Bank (GSB).

Banks around the world are witnessing how their customers are demanding a more personalised, seamless and user-centric digital experience. Similar to how they transact with Amazon or other ecommerce websites, for instance, customers today want banks to provide products, services and financial advice at the right time and in a manner that suits their lifestyles most.

He explains that GSB is going to “revamp the core banking system” to allow customers to configure their own banking products - savings plans, for instance. “We may have a standard pattern, but you can customise everything according to your needs.” The launch is planned for this year, he continues.

On a broader level, McKinsey research shows how 60 percent of customers in emerging Asian countries are more willing to share their data with their banks in return for customised offers. These data could be invaluable to banks, helping them to develop a better understanding of their existing and prospective customers, the report said.

2. Open source enabling scalability

Open source now underpins much of the fintech and digital banking innovation that goes on in this region - and in government too. In Indonesia, for instance, the Directorate General of Treasury was facing issues with scaling up its financial reporting and management system, SAKTI.

Scalability is important in a country of Indonesia’s size. Ali Hanafiah, Deputy Director of Treasury External Information Systems, expects a pool of at least 300,000 users in the coming years as “we are hoping that by the end of 2022, all line ministries will be using SAKTI.”

Open source software helped the DG of Treasury to quickly and effectively scale up the system on its cloud environment. It was also cost-effective: “With the same amount of money, I can get like five times more resources, I think,” says Hanafiah.

Echoing Hanafiah’s thoughts, IDC’s Araneta notes how open source innovation enables scalability, rapid procurement, and on-demand provisioning of resources, to name a few. These capabilities are integral to providing a modern, seamless digital banking experience. They are only possible if banks and fintech companies work together on “frameworks of Agile Innovation”, he explains, which are “not tied to a specific technology or architectural view”.

3. Fintech companies serving the unbanked

In ASEAN, many countries still face challenges with unbanked populations. Around 80 percent of the people in Indonesia, the Philippines, and Vietnam, and 30 percent in Malaysia and Thailand, are unbanked, according to the World Bank.

Michael Araneta, Associate Vice-President for IDC Financial Insights, shares how there is a huge opportunity here for fintech companies to serve the financial needs of these groups. “There is lack of niche propositions in ASEAN banks – something that fintechs can help fill,” he says, noting how these banks tend to be “built to be a bank for all”.

The first step for fintech companies is to use digital as a means to properly engage with their unbanked customers. This means “actually responding to the needs of customers and not assuming those needs from the perspective of banks themselves”, Araneta says.

However, fintech companies in this region may still face barriers to building effective services for the unbanked. For instance, “the lack of skills to implement an effective solution to serve unique requirements of ASEAN customers”, Araneta explains.

4. Platformisation

Similarly, the Monetary Authority of Singapore (MAS) is taking steps to become more open source in its approach to digital banking and fintech innovation. The phenomenon of platformisation, a growing trend in governments, is key here.

In 2018, MAS and partners launched an API exchange platform, APIX, at the Singapore Fintech Festival. It is a cloud-based global FinTech marketplace and regulatory sandbox, serving as a space for FSIs to work closely with the fintech community and allowing collaborative experiments across borders. Much like GovTech’s Platform-as-a-Service, NECTAR, APIX was designed to provide resources to anyone, in both private and public sectors, to build new services together.

“If we get it right, it will be the largest global, multi-jurisdiction platform, where technology solutions are being developed and experimented in a collaborative way. I think unprecedented in a sense,” Chief FinTech Officer Sopnendu Mohanty recently told GovInsider. “If we get it right, it is going to change the way people work with technology service providers.” He added how platforms such as APIX are “changing the game when we think about innovation”.

The bottom line? Digital banking and fintech innovation are poised to help ASEAN overcome many defining challenges, and bring more convenience and ease into people’s lives - from the millennial urbanite to the village farmer.