A NEW wave of digital evolution is expected to shake up the status quo in the financial sector and fintech is poised to bring about a sea change in emerging economies. South-east Asia is one region with immense potential for growth in financial services due to its large unbanked population; countries like Indonesia, Thailand and Vietnam are still using cash only for about 99 per cent of transactions, and many people have no access to financial services such as banking, credit and savings.
Some 64 per cent of the population in Indonesia is not served by any financial institution, while Thailand and Vietnam have an unbanked population of around 70 per cent each. Conversely, the region is experiencing a digital transformation that has led to high rates of mobile phone adoption (including both feature phones and smartphones) - 126 per cent in Indonesia, 122 per cent in Thailand and 152 per cent in Vietnam. This presents an opportunity to change the way these populations manage their monies; but before this can be leveraged, improving financial literacy and access to the right technology must be a cornerstone in facilitating financial inclusion.
Financially excluded communities are deprived of both knowledge and the means to save, transfer and borrow money securely. Raising consumers' awareness of the benefits and risks of financial services is the first step to financial inclusion.
Education around financial services should demonstrate how the services can improve the financial well-being of individuals, including money management knowledge, and ultimately establish a more prevalent use of financial products and services. It is only through a deeper understanding that consumers will be empowered to make sound financial decisions, paramount for consumer protection and financial stability.
Some businesses are already ahead of the pack in driving this change. Financial institutions Citibank and Maybank incorporate financial education as part of their corporate social responsibility programmes aimed at improving the financial literacy of less advantaged communities. In Vietnam, Experian has invested in iCare Benefits, a social enterprise, providing employees a programme that runs financial education and literacy courses conducted by industry experts. iCare Benefits also provides employees access to products that improve their quality of life.
BOOSTING SMARTPHONE ADOPTION
The other key component of financial inclusion is technology adoption. While mobile penetration remains high in South-east Asia, not everyone has access to a new generation smartphone that provides access to digital financial services. These people are unable to access digital financial services such as mobile wallets, mobile money loans, mobile payments and m-commerce on their feature (non-smart) phones. Facilitating migration from feature phones to 3G/4G-enabled smartphones is then imperative.
Telcos and financial institutions can collaborate to enable ownership of smartphones through the use of data analytics. Experian, for instance, connects telcos and financial institutions to facilitate the adoption of digital financial services through the use of data analytics and micro-analytics. Experian analyses data provided by telcos, such as payment and mobile phone history, to develop initial customer credit profiles. These credit profiles are in turn used by financial institutions as a basis in offering micro-loans to phone subscribers. Based on repayment history, Experian generates a credit score for financial institutions to increase lending on a gradual basis and offer other credit services, such as handset financing, to their customers. This process makes smartphones more affordable for customers, and helps financial institutions predict future behaviours to mitigate lending risks.
The data sets derived from telcos and financial institutions also provide insights into consumers' needs and adoption behaviours, which is paramount to shaping relevant and accessible financial products and services.
The opportunity to support the unbanked does not stop with the aforementioned industries. Service providers such as insurance, healthcare and educational institutions can also play a key role in raising the socio- economic standards of emerging countries.
Financial exclusion must first be addressed before businesses and consumers enjoy the benefits of the fintech transformation. Within South-east Asia, Singapore, a widely recognised financial hub with a financially and digitally astute population, can play a catalytic role in accelerating this socio-economic progress. Many financial institutions and technology companies have located their regional headquarters in the city-state, amassing a wealth of data. Most recently, regulators at the Monetary Authority of Singapore (MAS) have shown their forward-looking mindset and commitment to building the fintech sector with the publication of the Fintech "Regulatory Sandbox" Guidelines. Clearly, Singapore makes an ideal platform for companies to boost the region's financial literacy and digital accessibility, both of which are key drivers for financial inclusion.