Southeast Asia has one of the biggest and fastest-growing FinTech markets globally. “The expected market growth is estimated to be between $70 billion and $100 billion by 2020, outpacing the likes of the U.S., U.K. and China,” wrote Julie Muhn, Senior Research Analyst at Finovate.

The region is home to at least 290 million unbanked–almost half of the region’s population. According to data by the World Bank Findex, only 18 percent of the region has access to formal credit, while the digital-ready portion of this population is around 37 percent.

According to a study by the Asian Development Bank, increased financial inclusivity could raise GDP by 9 to 14 percent. “While digital finance alone cannot entirely close the gaps in financial inclusion, the estimated cumulative effect of digitally-driven acceleration in financial inclusion could boost GDP by 2% to 3% in markets like Indonesia and the Philippines, and 6% in Cambodia,” the study reads.

FinTech does not only address financial inclusion, however. There is also big potential in disrupting financial services for business and institutional users. This includes optimizing financial transactions and wealth management for business and consumers.

The rise of neobanks

FinTech has given rise to digital banks, which have recently gained the attention of regulators as a viable means to improve financial access. As opposed to traditional banking licenses that come with high captialization and physical infrastructure requirements, digital banking licenses allow the providers to offer services in a virtual or branch-free environment.

In Singapore, for example, the Monetary Authority of Singapore (MAS) has granted licenses to at least four digital banks, including a group led by Grab and Singtel.

Andrea Baronchelli, Co-Founder & CEO, Aspire
Andrea Baronchelli, Co-Founder & CEO, Aspire

According to Andrea Baronchelli, Co-Founder and Chief Executive Officer at Aspire, digital banks also provide a shift in perspective when it comes to financial services. “More and more digital native businesses are shifting to Fintech for experiential and reliability improvements rather than because the products are fundamentally different,” he shared in an interview with TechNode Global.

A winner at the ORIGIN Innovation Awards 2020, Aspire provides business owners in Southeast Asia with the financial tools to solve their cashflow management and working capital needs. “Our ambition is to reinvent the concept of banking and create an and to end financing OS for businesses,” Baronchelli has said, adding that business clients are increasingly opting for one-stop-shop in terms of their financial needs. “Aggregation and bundling of financial business products is increasingly requested by our clients.”

He told TechNode Global that digital banks are addressing the need of enterprises of all sizes by simplifying access to financial services:

“This opportunity is driven by high dissatisfaction towards current service offering:

  • Waiting in line at a bank branch to open an account–70 percent of banking interactions are still done only via a branch. This leads to high waste of time/energy.
  • Terrible software, not built for modern businesses–software development in 90 percent of the cases is outsourced by incumbents which leads to poor flexibility to market needs.
  • Expensive, with hefty fees and minimum deposits–business banking is known to be expensive. Most banks charge hefty RM, minimum deposits and fall below fees.”

As a new-generation business bank, Aspire provides clients with a customer-centric approach that lets them open an account in as quickly as five minutes. The app also provides a way to add and manage users, and it provides 100 percent transparency regarding all fees charged.

With a focus on customer service, Baronchelli said that Aspire always responds to queries from its business users. “By always being readily available for our customers and solving their queries, it generates positive word-of-mouth for our business. We also have a feature called ‘ask for a feature’ where people submit their requests as they go through their day-to-day.”

Optimizing wealth management and investing

Asia is particularly known for being a saving economy rather than an investing one. In consumer banking, at least–the majority of the population saves rather than invests. This is mostly due to a lack of access to financial services geared toward investments.

Michele Ferrario, CEO, StashAway
Michele Ferrario, CEO, StashAway

“In summary, in most Asia Pacific (APAC) countries, people with less than $1 Million have no cost-effective solution to invest intelligently. In Asia, 46 percent of financial wealth is held in bank deposits, compared to 14 percent in North America,” Michele Ferrario, Chief Executive Officer of StashAway, told TechNode Global.

A winner at the ORIGIN Innovation Awards 2020, StashAway is a MAS-licensed online investment management company. It was the first robo-advisor to obtain a full capital-markets services license (CMS) from MAS, and it was also the first digital wealth manager to obtain a digital investment management license for fund management from the Securities Commission in Malaysia.

Most consumers are managing their wealth sub-optimally, Ferrario said. There is a scarcity of simple and affordable options to learn about diversified investing and wealth creation.

“In APAC, a large segment of individuals does not receive unbiased financial advice, but rather sits at the end of a very expensive sales channel for very broad and basic products. This is the segment of ‘Mass-Affluent,’ or individuals with $100,000 to $1 million in financial wealth, and own 47 percent of APAC Ex-China financial wealth, for a total of $12 trillion.”

He adds that this segment is currently served through “premier banking” while independent financial advisors mostly focus on selling life insurance products because these are the most lucrative for them.

“Financial Institutions currently serve this segment through ‘Premier Banking’ (e.g., DBS Treasure, CitiGold, HSBC Premier, etc.), assigning a Relationship Manager who is incentivized to sell high-fees products such as Unit Trusts and Life Insurance, without taking into consideration the actual needs and preferences of the customer, or without even trying to build balanced portfolios with appropriate risk exposure,” he said.

“Independent financial advisors have a similar incentive structure, and mostly focus on selling Life Insurance products, the most lucrative for the distribution channel. The last option available to customers is to invest directly in securities through a brokerage platform, without receiving any advice and paying a fee-per-transaction; unless the amounts invested for each security is significant, the costs of trading become very high.”

StashAway focuses on a direct B2C approach, thus being customer-centric in its approach to wealth management. “We empower our customers to reach their financial goals sooner by making investing more accessible and enjoyable,” said Ferrario.

This includes taking into account customers’ investment goals and risk appetite. “Unlike your usual financial planner who would recommend investments based on very basic parameters (eg: a broad split between debt and equity), StashAway’s proprietary investment framework monitors a customer’s investment goals and continuously optimizes the portfolio based on evolving macro trends across multiple assets classes,” he added.

Due to the digital nature of its platform, StashAway did not have to make drastic adjustments to its service to continue servicing customers during the pandemic. It was recognized by the World Economic Forum as a Technology Pioneer for making a difference in the financial industry through technology. In January this year, the company has reached at least $1 billion in assets under management.

“It is more important than ever for firms to establish new ways and processes to service their clients in the new normal, post-COVID,” said Ferrario.

“People are starting to be aware of the advantages of a technology-driven wealth management offering … The key drivers are the returns of our portfolios and the acknowledgment from investors that you no longer must rely on high fee, impersonalized products pushed by the banks. You can now get a very sophisticated investing product at a fraction of the course with a track record of returns behind it,” he concluded.

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