2017 is expected to become a ground-breaking year for fintech players in emerging Asia, with the markets of Malaysia, Indonesia, Thailand and Singapore (MINTS), providing a major push for the industry. In the region, fintech players offer new approaches to keep themselves relevant in light of consumers’ needs while tapping opportunities to increase financial inclusion with mobile, flexible and customer-oriented features.

Much is at stake for businesses across Southeast Asia. Fintech not only represents much-needed innovation for the financial services sector, but may well be the best chance of addressing a significant credit gap of close to US$300 billion per annum experienced by more than 200 million micro, small and medium enterprises (MSME) across the region. With close to 45 percent of the regional credit gap faced by more than 50 million MSMEs in Indonesia alone, the country has the most to gain from the successful development of fintech.

While fintech is already a massive industry in China and other parts of Asia, the continent is steadily laying out a solid foundation for future growth.

According to a study conducted by the Cambridge Centre for Alternative Finance, China is already the world’s largest online alternative finance market, registering $102 billion in transaction value throughout 2015. In Southeast Asia, the 2015 transaction value was estimated to be approximately $47 million, generated by 30 surveyed fintech operators.

The survey also revealed a heavy skew toward MINTS markets with over 90 percent of both the transaction volume and operator surveyed population attributable to these four countries. Also noteworthy is that the 2015 report pre-dates various regulations introduced across the region to facilitate the growth of the fintech industry.

Fintech is foreseen to produce significant and immediate impacts for MSMEs. The adoption of the latest advanced technology allows fintech operators to be much faster and more cost efficient than many existing financial service providers.

For example, crowdfunding platform Crowdo is able to process working capital loan applications in a few hours without compromising on credit quality using its proprietary risk assessment model.

Another people-to-people (P2P) lending platform, Amartha, is also able to reach out to unbanked communities by developing psychometric approaches and credit scoring technologies that allow unbanked clients to become credit-worthy loan recipients.

In an increasingly fast and competitive environment, this is a game changer for many MSMEs who either have limited access to financial services or cannot afford to wait a few months for the traditional bank application process.

Given its potential, it is encouraging to see various ways the MINTS markets are building their fintech industries.

A trailblazer market, Malaysia was the first country in Southeast Asia to set up fintech regulations back to 2015, namely policies on equity crowdfunding (online securities investments), or ECF, and officially registered six operators, including Crowdo.

Meanwhile, Indonesia, due to its immense MSME market and massive credit gap, has the most opportunity to benefit from fintech. The Financial Services Authority (OJK), considering input from local fintech players, recently announced a new regulatory framework for the fintech industry.

Once a regional frontrunner, Thailand now seems to be taking a prudent yet more holistic approach. The Securities and Exchange Commission of Thailand has already announced a competitive framework for ECF, while Bank of Thailand is setting up a regulatory sandbox for fintech to test innovative new products. However, the absence of licensed operators and the urgency to develop both regulatory and industry competencies will become major challenges for the country’s fintech industry.

Lastly, Singapore is taking a distinctly different strategy in a bid to establish itself as a smart financial hub. The Monetary Authority of Singapore (MAS) has pledged more than S$225 million ($160.8 million) for the
development of the fintech industry. I have also signed memorandums of understanding with local polytechnics to promote skills development in fintech. The MAS has maintained its speed and has already issued multiple P2P lending and ECF licenses.

It is truly encouraging to witness the journey of the fintech industry toward its aspired goal of impacting broader economic growth in Southeast Asia. While there are many moving pieces, such as the need for competitive regulatory frameworks and continuous development of professional fintech operators, the region is off to a robust start.

The common idea across the region now is to maintain that thrust through close coordination between regulators and the private sector to ensure the industry reaches its inflection point as soon as possible.

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The writer is a member of the Indonesian FinTech Association and the CEO of Crowdo.

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