Big banks had it good for a long time. There was little competition or disruption. Banking was a captive market that provided generous profits.
Fast forward to now, and things couldn’t be more different. New market entrants have made headway by offering targeted solutions with better servicing to both retail consumers and businesses.
This disruption is happening almost everywhere -- but fintech innovation in Southeast Asia has been particularly acute. And it has led to a customer service renaissance in this region’s long-underdeveloped banking sector.
Let’s take a look at just ten examples of the swathes of fintech innovations in Southeast Asia.
All throughout Southeast Asia, digital banking is taking hold.
CIMB, a Malaysian bank, has launched a fully digital bank in Vietnam. Throughout all of its subsidiaries, CIMB says 95% of customer transactions are through the digital and self-service platforms.
Also in Vietnam, Timo, a digital banking platform, offers a multitude of services on one platform.
In Indonesia, meanwhile, BTPN has launched a bold digital transformation strategy with its Jenius digital/mobile banking app solution.
Southeast Asian consumers, specifically younger ones, are moving towards digital first services. And the region’s banks are following suit.
Artificial intelligence (AI) and machine learning for security
The trend toward AI and machine learning,the underlying process that makes AI systems work, in banking isn’t concentrated solely in the West. Southeast Asian banks have seized on the developments of AI and machine learning, too: in particular, their applications for security.
Cybercrime is an emerging concern in the increasingly digitalised and rapidly growing economies of Southeast Asia. The region is also experiencing a yawning cybersecurity skills gap, with a staffing shortfall of 2.14 million.
That’s why Asian banks have turned to AI and machine learning to combat financial crime. AI can monitor suspicious transactions, and through machine learning will recognise patterns that can slip past a human observer.
OCBC Bank in Singapore is piloting two AI programmes that will detect anomalies found during trading activity audits. What used to take days or weeks is now cut down to just a couple of hours.
Blockchain letters of guarantee
Kbank in Thailand has digitised its Letter of Guarantee process using IBM’s proprietary blockchain. This makes KBank’s Letter of Guarantee process entirely paperless.
More importantly, though: it makes it more secure, transparent and customer-friendly. That’s because all of the information is put into a secure online ledger, readily accessible by both customer and bank.
The transparency provided by blockchain will also help eliminate digital fraud because the blockchain is constantly reconciled and can only be updated when verified by both parties or users.
Chatbots have been a centrepiece of fintech innovation in Southeast Asia. Numerous big banks in the region, like Singapore’s DBS, OCBC and UOB, have rolled out virtual customer service assistants.
DBS Bank, in particular, has led the way, with numerous different assistants used to help clients access banking services seamlessly.
Chatbots use robotics and AI to create a new customer service experience without the need for a customer service agent on the other end.
Facebook Messenger transactions
But it’s not just about bots, it’s about the platform as well. DBS Bank’s virtual assistant is housed within Facebook Messenger. Indeed, the Facebook Messenger service has become a platform leader in chatbots: there are more than 30,000 chatbots on Facebook.
Using the DBS assistant, customers can check their account balance, transfer funds and make card payments by chatting with the chatbot in the app.
This is an important step. As DBS’s head of consumer banking, Jeremy Soo, noted, consumers today have app fatigue and have become resistant to downloading new mobile apps.
“If instant messaging is the way forward for people to communicate”, he says, “then we need to help businesses find a way to engage their customers on such platforms simply, seamlessly and invisibly”.
Machine learning advisory services
We know that across the world, consumers are increasingly comfortable with using chatbots in commercial transactions. Over 60% are willing to communicate this way with various businesses and brands.
The Singaporean bank OCBC has seized on this momentum and introduced an algorithm-based robo-advisory service for its wealth management arm.
OCBC Roboinvest is an all-in-one platform that helps clients to manage investments without having to interact with a human financial consultant. The service aims to make investment more accessible to younger, less wealthy investors.
The platform uses machine learning algorithms to monitor each portfolio automatically and it rebalances assets if there the market or the economy changes. Customers approve the changes by email, no contact with a human advisor required.
Thumbprint and contactless ATMs
In 2016, UOB rolled out a new generation of contactless ATMs. Using Apple Pay or Android Wallets, customers hold their phones to the contactless reader and verify their identities with their thumbprints.
The innovation matches a growing trend in smartphone usage in Southeast Asia. Internet use on smartphones has swollen by 21% in the two years between 2015 and 2017.
UOB’s own statistics show mobile contactless payments made on UOB cards have grown by more than 20 times between 2015 and 2017, illustrating a consumer preference for contactless transactions.
Machine learning for debt collectors
Machine learning is all about pattern recognition. With digital banking, it uses data to spot trends in defaulting loans and refine early response processes.
But in Southeast Asia, where digital transformation is still in its infancy and field collections are still common, AI can also have a powerful impact.
AI and machine learning can help agents plan intelligent routes that prioritise the collections that are more likely to be successful. This likelihood is calculated based on information such as what day (and what time of day) a debtor generally pays, and an overview of their repayment history.
Instant issuance of cards
Instant card issuance is another fintech innovation in South East Asia. UOB and Malaysia’s RH Bank both offer instant digital credit card issuance.
Customers can apply for new credit cards digitally and receive them within minutes. RH Bank specifically promises “within ten minutes”.
This allows credit cardholders to take advantage of promotions specific to a credit card they don’t currently hold, or replace a lost credit card on the spot.
Peer to Peer Lending
Asia, and Southeast Asia in particular, has experienced a boom in P2P lending platforms. P2P lenders are essentially online services that match lenders with borrowers.
In Indonesia, around 30 P2P platforms have extended 2.6 trillion rupiahs (approximately $183 million) in loans as of 2018.
Regulators have welcomed the innovation as well. Indonesia has been plagued by sluggish bank lending and the fintech disruptors enable small businesses to access capital.
P2P lending has helped to alleviate a financing shortfall estimated at more than $73 billion in the country.
Regulatory technology, or reg tech as it’s more commonly called, has made headway all around the world. Reg tech companies help financial institutions cope with myriad regulatory challenges.
From regulatory reporting and risk management, know-your-customer (KYC) and onboarding, to compliance monitoring and fraud detection - instead of via lawyers and consultants, it’s all done online.
Singapore has seen substantial growth in this area. With their ‘smart nation’ initiatives, Singaporean banks are being driven towards digital-first policies.
There have been developments in more emerging markets, too. BearingPoint, a reg tech startup, has rolled out a tool in Indonesia that automates tax reporting.
Although innovation takes many forms, there is one constant: whether you’re a time poor, young professional in London or Ho Chi Minh City, the last thing you want is long lines and old school banking.
Modern life is jam packed, filled with child care, work and social responsibilities. For a long time, customers had little choice but to put up with intransigent banks.
Those days are over. Fintech companies have altered the banking industry, implanting customer service at its heart. The fintech innovation in South East Asia is just another example of this trend in action.