Open finance startups are shaping the future of payments in Southeast Asia

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“Banking the unbanked” has long been a catchphrase in the fintech industry in Southeast Asia, a region that is home to 290 million people who are not part of the conventional banking system. In response, tech unicorns such as Grab and GoTo, along with fintech developers, financial institutions and local governments have reimagined the way financial services are offered.

Fintech products have spread widely over the past couple of years. Consumer e-wallet usage jumped 45% from the pre-pandemic period. In particular, the volume of electronic wallet transactions is expected to increase by more than 200% by 2025, according to a report by Google, Temasek and Bain & Company.

Although cash is not going away anytime soon, the rapid growth of digital payments underpins a fundamental shift in the region. Open finance solutions are driving the region towards the next stage of financial inclusion.

“Open finance refers to technology products and policies that enable customers to access financial services from qualified third-party providers. It’s the infrastructure, technology and data standards that allow consumers to link their bank accounts to your GrabPay wallet,” explained Todd Schweitzer, founder and CEO of Indonesia-based open finance developer Brankas. KRASIA.

Consent-based data sharing underpins open finance, so startups like Brankas can develop APIs for tech companies or financial institutions to access user data, and most importantly, create a variety of products. related to fintech that can meet the needs of everyone, including the unbanked and underbanked. consumers.

Todd Schweitzer, founder and CEO of Indonesia-based crowdfunding developer Brankas. Photo courtesy of Brankas.

Brankas, which landed $20 million in a Series B funding round led by Insignia Ventures Partners on Jan. 5, is one of the fintech startups making it easy to share financial data. Founded in 2016, one of the company’s unique value propositions is its partnerships with area banks.

With the new capital, the company is set to deepen its market reach by partnering with digital banks and fintech companies in Vietnam and Bangladesh. So far, the firm has worked with more than 40 financial institutions and 100 technology companies, with operations in Indonesia, the Philippines and Thailand.

Fintech startups thrive

Other open finance startups including Hong Kong-based Finverse, Singapore-based Finantier, and Indonesia-based Brick. All were founded in 2020, when there were many speed bumps in the regional economy.

“During the pandemic, I was talking to Gojek drivers in Jakarta. They were telling me how hard it was for them to get loans to buy a bike to ride for Gojek. I asked why they didn’t go to a bank or fintech companies [for loans], and they said the bank and fintech companies won’t help them because they don’t have a credit history,” said Keng Low, co-founder of Finantier. KASIA.

Finantier landed a seven-figure seed investment led by East Ventures and Global Founders Capital in June 2021. Photo courtesy of Finantier.

To solve the problems, Finantier offers credit scoring, account aggregation that allows businesses to create customer profiles from financial and non-financial sources, and payment initiation solutions that enable money transfers through licensed payment gateways.

The company differentiates itself from its competitors by focusing beyond banks. In December 2021, it was officially recognized by the Indonesian Financial Services Authority, OJK, as a digital financial innovation provider in the credit rating category.

“Competition is something we thought about early on. E-wallets and banks do not want to become open funding providers because of the complexity involved. We connect to telcos, e-commerce companies, and mobile wallets, which sets us apart from other players,” Low said.

Unlike Brankas and Brick, which operate on a pay-as-you-go model, Finantier offers a product as a service (PaaS), which Low says gives Finantier an edge over other startups in the industry. Unlike other companies in the same field, the company does not charge any setup fees and does not earn any revenue from transactions.

For Gavin Tan, CEO and co-founder of The Brick, however, the competition isn’t really an issue. “We should think of APIs as a modern infrastructure that allows fintech platforms to be launched in a much simpler, faster and cheaper way. The pace of upcoming fintech startups is 5x compared to three years ago, with APIs providing the infrastructure,” he said.

Does regulation follow innovation?

Although the fintech industry is thriving, regulators have been unable to fully address new developments. So far, only Indonesia, the Philippines, Singapore and Thailand have released their open finance frameworks, outlining key initiatives such as regulation and data infrastructure, according to a report by Brankas and Integra Partners.

The Brick received an undisclosed amount of seed funding in March 2021 from investors including 1982 Ventures and Antler. Photo courtesy of Brick.

“The number one challenge is the lack of awareness in the market. Regulators are still learning and designing open finance regulation in their country. But there are no detailed regulations yet,” Schweitzer said.

In Indonesia, for example, the Ministry of Information Technology and parliament are in talks to revise the Personal Data Protection Bill, which is expected to define data ownership rights in the country. However, it is unclear when the bill will pass, per local publication Voice of Indonesia.

Although users are expected to have full control of their own data in open financial frameworks, financial institutions will continue to control customer financial data, such as account balances, mortgages, and credit history. “Generally in Southeast Asia, we will see that data is not really shared in a useful way. Financial data is not shared reliably, that is why people cannot access financial services,” said added Tan.

But the founders of Brankas, Bricks and Finantier remain optimistic about open finance and are strengthening their regional presence. The market is huge – digital payments, including e-wallet and account-to-account payments, accounted for just 24% of total payments volume in 2021, while cash was used for 59% of volume, according to the report from Google. , Temasek and Bain & Company.

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