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Championing fintech innovation in ASEAN

Julia Walker
Julia Walker
Head of Market Development, Risk, Asia-Pacific, Refinitiv

Fintech innovation in ASEAN requires pro-market policies and increased collaboration between regulators, financial institutions and start-ups. Our recent ASEAN Regulatory Summit examined the role of technology and public-private partnerships in helping to advance both financial inclusion and the fight against financial crime.


  1. Cross-industry collaboration and public-private partnerships between regulators, banks and technology companies are key drivers behind fintech innovation in ASEAN.
  2. Despite an increasing number of fintech initiatives spearheaded by regulators in ASEAN, many in the financial sector still see the regulatory environment as an inhibitor and not an enabler of fintech innovation in the region.
  3. Attendees at the 5th ASEAN Regulatory Summit said that data localization rules present a real threat to fintech innovation in ASEAN and globally.

Fintech innovation in ASEAN is transforming financial services.

Not only are banks able to streamline services that were previously labor intensive and costly, but customers can now access digital services that are faster and more convenient than conventional products and services.

To make sure these new offerings are appropriate for customers, and to ensure that financial institutions comply with KYC, AML and CFT rules, regulators are undertaking an equally active role in both encouraging and supervising industry innovation.

Approaches to this issue vary greatly between jurisdictions in the region.

Some, like Singapore, Indonesia and the Philippines are pro-innovation, introducing policies that encourage fintech innovation within light-touch developmental environments. Others, however, are not as encouraging.

A poll conducted at the 2019 Refinitiv ASEAN Regulatory Summit found regulation to be the single biggest roadblock fintech start-ups face.

Despite the efforts of some regulators in the region to create thriving ecosystems for fintech innovation, swathes of the market still see regulation as an inhibitor and not an enabler.

What is the single biggest roadblock that ASEAN fintech start-ups face?

Compliance as a ‘differentiator’

It’s not all bad, according to Jonathan Scott-Lee, Chief Information Security Officer, Virtual Bank at Standard Chartered Bank.

By establishing robust compliance frameworks, Scott-Lee argues, financial firms can showcase their back office strengths, and position themselves as safe organizations to bank and invest with.

Jonathan Scott-Lee, Standard Chartered Bank; Ser-Jin Lee, Grab Financial Group; Genevieve Noakes, Transferwise; Triyono, OJK; Jeff Paine, Asia Internet Coalition. Championing fintech innovation in ASEAN
Jonathan Scott-Lee, Standard Chartered Bank; Ser-Jin Lee, Grab Financial Group; Genevieve Noakes, Transferwise; Triyono, OJK; Jeff Paine, Asia Internet Coalition

“Regulation can be used as a differentiator, showing that your governance is sturdy and that you have a track record of managing money,” said Scott-Lee.

“Regulators are proxy for the customers they look after, who want to know that their money is safe and free from financial crime.”

Clarity is vital. When regulations are articulated clearly, they provide an enabling environment for fintech to flourish.

Scott-Lee cites his experience working with the Hong Kong Monetary Authority (HKMA) for Standard Chartered’s newly established virtual bank. Clarity on issues such as security and privacy, among other matters, has enabled the firm to implement the most appropriate controls.

Created as a separate entity to the bank’s physical branch network, the project has avoided the use of legacy systems, and is leveraging cutting-edge regtech innovation to streamline compliance.

Engagement with regulators

Dialogue between Scott-Lee’s firm and HKMA during the application process enabled the bank to identify and tackle common compliance and data security challenges early on. Its virtual bank license was issued in March 2019.

When asked what governments must do to create an ideal policy environment for fintech innovation, attendees at the ASEAN Regulatory Summit favored regular engagement with regulators, supported by formal industry consultations.

Attendees were less enthusiastic about the deployment of regulatory sandboxes and other mechanisms to test the market, or the use of government incentives to spur the adoption of fintech in the financial sector.

What can governments do to create an ideal policy environment for fintech to thrive in ASEAN? Championing fintech innovation in ASEAN

Two-way dialogue with regulators has been crucial in allowing international money transfer provider TransferWise to expand to Asia.

Genevieve Noakes, the firm’s Compliance Lead for APAC, attested that the engagement process is as much about the market sharing ideas and concerns with authorities, as it is for regulators like the Monetary Authority of Singapore to discuss their vision and expectations for the industry.

The coming together of both entities, Noakes said, enables regulatory and compliance challenges to be openly addressed, and in many cases overcome.

Partnerships boost fintech innovation

While relationships between regulators and participants are pivotal to reaping the benefits of fintech innovation, partnerships between various market actors are equally as important, according to Ser-Jin Lee, Regional Head of Compliance and Government Relations at Grab Financial Group.

Partnerships with banks have helped grow the Southeast Asia-based technology and ride-sharing company’s e-payments app across eight ASEAN markets.

Lee rebukes the commonly voiced view of banks being in direct competition with fintechs and technology giants such as Apple or Alibaba.

Instead, he considers close industry collaboration as being positive for consumers, who would benefit from the complementary offerings of the various market players, as well as increased access to financial services.

“Seventy percent of the region remains unbanked,” Lee said. “Together we can do more to meet the needs of Asia’s rising middle-class.”

Echoing Noakes and Lee’s emphasis on the importance of cross-industry or public-private partnerships, a recent Refinitiv global industry report found that 86 percent of financial institutions believe that the benefits of sharing information within such a partnership organization outweigh its risks, especially in the fight against financial crime.

Watch: How will data and data analytics transform the financial services industry?

Cross-border data flows

For ASEAN to make the best of the latest fintech innovation, ideas and information must move freely across borders.

Yet restrictions prohibiting cross-border data flows remain in some jurisdictions. Attendees at the ASEAN Regulatory Summit overwhelmingly agreed that data localization presents a threat to fintech’s growth across the region.

Is data localization a threat to fintech's growth. Championing fintech innovation in ASEAN

Triyono, Executive Director of the Digital Finance Innovation Group at Indonesia’s Financial Services Authority (OJK), acknowledged the negative impact these rules have on the market.

While the removal of these policies is unlikely in the short-term, financial services regulators from across the region are nonetheless seeking to greater align their policies, and are upping their support for fintech innovation through various initiatives.

In line with OJK’s ‘light touch, safe harbor’ policy, Triyono explained, the regulator created a new program to enable fintech entities to operate in a more enabling regulatory environment.

By removing statutory requirements that were burdensome and irrelevant to small organizations, OJK has since nurtured a vibrant fintech ecosystem that is currently worth about US$2.35 billion.

In addition, the financial regulator launched its complaint center, where consumers can file grievances against financial institutions online. “We will continue to work with the market, to help develop innovative solutions that make finance cheaper and accessible for all,” Triyono added.

For more information on the issues highlighted in this blog, download our 2019 ASEAN Regulatory Summit industry report.