F

rom blockchain to cryptocurrencies such as bitcoin and ethereum, as well as Initial Coin Offerings that allocate “tokens” as a new means of crowdfunding capital, the language and disruptions buffeting the mainstream banking and financial services industry can seem overwhelming.

But broadly defined, “fintech” — shorthand for the technologies delivering innovations as well as new challenges and opportunities to the once-staid banking and finance sectors — is also enabling the rise of new companies and transformative businesses.

One shining Southeast Asian example is motorbike delivery and ride-hailing app and company Go-Jek, now a “unicorn” — a tech start-up valued at more than US$1 billion.

With Go-Jek’s acquisition of payment portals Kartuku and Midtrans, and savings and lending network Mapan, the company is poised not only to be a digital payments leader, but also is in a position to influence the shape and scope of the fintech landscape in Indonesia.

Whether in Jakarta or Beijing, the benefits of addressing the digital divide and of harnessing the power of fintech should be clear-cut. Both can increase the level of access to capital and financial inclusion.

Yet, debate across Asia surrounds the most appropriate business models, regulatory frameworks and means to align fintech practitioners, investors and beneficiaries. That’s certainly a view that will be shared here in Thailand as the Milken Institute co-hosts a “Future of Finance” roundtable with Thailand’s central bank (this March 30), and at the 21st annual Milken Institute Global Conference starting in late April in Los Angeles.

Just as businesses and consumers overcame fears and concerns about the advent of disruptions wrought by ATMs, fear of technology’s impact on an evolving finance industry should not hold back change. Fintech is a disruption to be embraced.  

As digital pioneer Taizo Son comments, “We are strong believers in the power of digital transformation evoked by token economies and fintech innovation,” said Son, investor and founder of Mistletoe, a hub for startups and overall entrepreneurial ecosystems. Taizo is the youngest brother of another tech pioneer, Softbank’s Masayoshi Son.

 “However, such technologies also hold the potential to promote the already widening income gap in our society,” said Taizo Son. “As entrepreneurs and architects of innovation we need to be aware of the important role we play in building a society that remains empathic and inclusive to all people in this era of increasingly autonomous technology.”

Indeed, at a time of growing inequality, how to ensure a positive, meaningful impact from fintech on the people of Indonesia and throughout Asia?

 Across the Indo-Pacific region, with mainland China attracting the lion’s share of venture capital investments, fintech deals continue to make news. Multimillion-dollar investment deals were reported last year in India into online lending platform Capital Float, in Hong Kong into “digital wallet operator” TNG Fintech Group, and in South Korea into that nation’s second-largest cryptocurrency exchange, Korbit.

  Across much of Southeast Asia only 27 percent of the region’s 600 million inhabitants had a bank account in 2016, according to consulting firm KPMG. And herein lies opportunity to find meaning and impact through fintech.

The 2017 Accelerating Financial Inclusion in Southeast Asia with Digital Finance study by the Asian Development Bank and consulting firms Oliver Wyman and MicroSave, found that opening the door to financial services to the unbanked could increase GDP of the Philippines and Indonesia by as much as 3 percent and Cambodia’s by 6 percent.

 In emerging economies such as Cambodia, only 5 percent of the population have access to formal banking services.

 With little to no access to formal banking services, too many people in Asia go without the basic protections of a savings account, and also may well face relatively higher costs for sending or receiving money.  This, in a region where remittances were valued at $236 billion in 2016, according to the World Bank.

 “Having access to basic financial services can reduce hunger, increase education and generally improve the quality of life,” said Queen Máxima of the Netherlands, United Nations Secretary-General’s Special Advocate for Inclusive Finance for Development, at the Singapore Fintech Festival 2017.

 Yet, the sustained benefits of fintech will only be realized if a proper ecosystem is created and maintained — one that addresses concerns of regulators while benefiting innovators and most importantly, consumers. Narrowing the digital divide also will continued to be a fundamental need, with increased mobile phone ownership and internet penetration key factors in spurring consumer adoption of mobile financial services.

 Indeed, the true measure of success for fintech in Indonesia and elsewhere should not be deal size or quantity but in expanded horizons. True success is when fintech helps once-poor farming communities access funds to bring their crops to market, or helps small shopkeepers to grow bigger, or provides seed money for a young entrepreneur ready to turn a great idea into a concrete reality.

 Assessments of fintech must go beyond counting fortunes made and businesses disrupted or created, but also include a measure of people helped.
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Curtis S. Chin, a former US ambassador to the Asian Development Bank, is managing director of advisory firm RiverPeak Group, LLC and Asia Fellow at the Milken Institute.  Jose B. Collazo, a Southeast Asian analyst, is an associate with RiverPeak Group, LLC.