FinTech startups play a significant role in the e-commerce space in Southeast Asia. The region’s population is mostly ‘unbanked’ with only 27% of its adult population owning accounts. With the lack of access to financial services, the rise of e-commerce, and mobile adaptation in the region, FinTech companies are bridging this gap through the extensive use of mobile payment solutions. The market adaptation to these solutions has resulted in a rapid change in financial transactions. With the convenience and accessibility it offers, FinTech startups are well-positioned to dominate the industry in Southeast Asia.
How P2P lending and banks are leading fintech innovation
Just like the e-commerce industry in the region, the FinTech market is among the fastest growing in the world, with estimated market growth reaching between $70 to $100 billion USD by 2020. Banks are now seeing the opportunities and possibilities of this trend and have started to embrace technology, sharing their resources to develop practical solutions and connecting promising startups to investors.
OCBC’s the open vault
Singapore and Malaysia-based OCBC introduced The Open Vault with the aim to redefine banking through co-innovation. The company is launching their annual ‘TOV Innovation Challenge’, where they invite FinTech startups for a 12-week challenge to develop solutions addressing issues put forth by the eight business units in OCBC (Oversea-Chinese Banking Corporation). Selected startups then will collaborate with their respective business units to co-develop contextualised proof-of-concept and test solutions. After the challenge, the startups can accelerate their product to a full rollout and may be invited to enter long-term commercial agreements with OCBC.
The Open Vault programme also opened for non-FinTech startups that are introducing solutions beyond banking; opening the opportunity to use the OCBC Bank’s data sandbox to experiment with real consumer data and swiftly present a solution to the market. The Open Vault also gives startups access to the API store – a sandbox-testing platform, where they can tap into additional data gathered from FinTech to more lifestyle-type industries to help create new solutions.
Recently, OCBC adopted the use of Artificial Intelligence (AI) to increase productivity and improve the quality of the auditing process. The use of AI solutions helps to better detect trading anomalies through the use of machine learning algorithms.
As new risk trends and anomalies continue to emerge for activities in the dynamic global markets, there is a pressing need for us to proactively and accurately identify and respond to them in an efficient and effective way.
OCBC’s head of Group Audit, Ms. Goh Chin Yee
SC ventures FinTech bridge
Standard Chartered recently launched the SC Ventures Fintech Bridge – a new portal to connect promising FinTech startups to the bank’s internal community. Similar to OCBC’s ‘TOV Innovation Challenge’, SC Ventures Fintech Bridge aims to find the best FinTech companies by presenting existing challenges they are looking to solve. FinTechs can then propose a product as a solution, and an interested business sponsor can fund their efforts. The program also offers startups the opportunity to test-proof solutions globally and, in return, earn the possibility of future investment.
SC Ventures Fintech Bridge also opened its doors to any FinTech startup with existing products that may present tech solutions that can help banks. If approved, the startups are put to work with the appropriate business team in a collaborative manner.
Through SC Ventures Fintech Bridge, Standard Chartered is solving its challenges and offering direct connections for collaboration and future partnerships, helping startups increase in scale and their possibility of securing lucrative investment. The program has four commitments: direct contact with the right people, quick matchmaking of startups and bank, guaranteed funding for proof of concepts (PoCs), and exposure to markets where startups have the opportunity to test themselves within the bank’s connected network. The program is set not only to drive innovation but also to co-create solutions in the banking space.
The technology challenge for AI when it comes to security
FinTech startups are redefining the finance industry. At first, it came as competition and disruption to the traditional banking system, but the banks are now seeing FinTech innovators as enablers and partners in creating better services and solutions. Fintech is becoming more relevant to banking institutions with the promise of improving services, decreasing costs, and maximising efficiencies with the use of emerging technologies like artificial intelligence, machine learning, and blockchain. Financial institutions are taking advantage of the market reach they already have and which most startups lack. For their part, FinTech startups are bringing solutions to the table. For FinTech companies, these banks offer more significant funding, data access, and market reach to scale business.
To make the FinTech and bank partnerships successful, banks will need to restructure their long internal processes and espouse new solutions. They will also need to embrace innovation and think more like a tech company.
Banks will continue to evaluate emerging trends and assess which changes they need to adopt. FinTech, on the other hand, will continue to bring new challenges and new opportunities.
With the potential growth opportunities in the FinTech industry, banks will be seen either buying these startups or partnering with them. In recent years, several banks have already increased their investments in FinTech, aiming to gain early access to the technology.