A customer checks the Pi Pay application on her phone last May in Phnom Penh’s City Mall. Heng Chivoan
by Curtis S. Chin and Jose B Collazo
Cambodia might not come to mind when shaping a list of fintech hubs, but across Southeast Asia, the benefits of addressing the digital divide and of harnessing the power of fintech should be clear-cut. Taken together, both of these steps can increase the level of access to capital and financial inclusion – critical needs in developing Asia.
Yet, from blockchain to cryptocurrencies such as bitcoin and Ethereum, as well as initial coin offerings or ICOs 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.
Broadly defined, “fintech” – shorthand for the technologies that are 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.
That’s certainly a view that will be shared and discussed here in Thailand as the Milken Institute co-hosts a “Future of Finance” roundtable with Thailand’s central bank on Friday, and at the 21st annual Milken Institute Global Conference starting in late April in Los Angeles.
One shining Southeast Asian example of fintech in motion is motorbike delivery and ridesharing app and company Go-Jek, now officially a “unicorn” – a tech startup valued at more than $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.
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.
This is echoed in comments to us from digital pioneer Taizo Son.
“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 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 do we ensure a positive, meaningful impact from fintech on the people of Cambodia and Asia?
The unmet need for basic banking services is significant 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, conducted 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 the 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. This level of “unbanked” has negative repercussions for the region.
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, the UN secretary-general’s special advocate for inclusive finance for development, in her speech to attendees at the Singapore Fintech Festival 2017.
“I am convinced that fintech’s greatest achievement will be not just helping the unbanked, but also the underbanked – individuals who have insufficient access to financial services – to live a better life,” adds venture capitalist and fintech influencer Spiros Margaris.
Yet, the sustained benefits of fintech will only be realised 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 will also continue 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 Cambodia 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.
Beyond the fintech hype and jargon, the human element of financial technology should not be forgotten in Cambodia as this nation too moves forward. Future assessments of fintech must go beyond counting fortunes made and businesses disrupted or created, but also include a measure of everyday Cambodians being helped.
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. Follow them on Twitter at @CurtisSChin and @JoseBCollazo.
