This is the uncut interview with UOB for the 2019 Fintech in ASEAN report. You can read the full, official report here, which also features insights from Payfazz’s Hendra Kwik and Finhay’s Huy Nghiem.

Q: What are the opportunities you see present in ASEAN today? Any specifics for individual ASEAN markets in the area of FinTech?

A: When it comes to Southeast Asia, fintechs are enablers on two fronts — the big players and the unbanked. 

First, fintechs provide asset-light and low-cost alternatives for unicorn marketplaces like Traveloka and Bukalapak, global tech giants like Alibaba and Amazon, and even incumbent financial institutions to meet the needs of their vast customer bases. This ranges from cross-border payment gateways to insurance distribution platforms, and the competition is about having the best data to secure partnerships or acquisitions. 

Second, fintechs deliver financial services to the unbanked, who still comprise the vast majority of the regional population. From remittances to SME financing, companies in this space are taking on creative approaches to drive market adoption of digital platforms. Payfazz, for example, works with merchants across Indonesia to essentially become the archipelago’s SAM machines — channels for Indonesians to access loans, savings deposits, among other services.

Q: How should FinTech firms approach the following 5 key areas of challenge when expanding across ASEAN or into a specific ASEAN market? What advice would you provide these FinTech firms in these areas? The 5 key areas are:

1) Customer adoption – for both B2B and B2C FinTech firms, 2) Regulations, 3) Infrastructure – i.e. human talent, connectivity, 4) New competition – from TechFins like AliPay or new super apps like Grab & Go-Jek, 5) Funding runway

A: All of these challenges come down to creating a local moat in each market the company is in. Expansion begins with creating defensible positions. This serves as a foundation from which to scale, and sets up the firm for opportunities to secure longer runway. An effective local moat is built on access to data, product, and partnerships. 

Where the data is and how it can be accessed determines the go-to market strategy for fintechs, and how the firm will navigate infrastructure gaps. In the case of Indonesian fintech AwanTunai, they realized that the best approach for them to reduce the risk of lending to unbanked microSMEs in Indonesia is working with suppliers who have merchant transaction data. 

Creating a product easily accessible to users is essential to driving adoption. How complicated is the KYC process? How convenient is it for them to send remittances from one currency to another? 

Having access to data and an accessible product builds towards the right partnerships. Going back to AwanTunai, building a compelling case for productive loans to microSMEs brought over more financing partners to join them. In a region where there is variability across markets when it comes to regulation, forming the right partnerships with local banks and financing institutions gets a foot in the door, and makes it harder for other feet (competitors) to get in. 

Q: As an investor in early stage companies, how do you assess if the FinTech firm has what it takes to scale in and/or across ASEAN?

A: Scaling a fintech across Southeast Asia means constant innovation. If the fintech is a payments gateway, how can they grow from that? If the platform initially aggregated insurance options, how else can users better get insurance? What kind of financial services will be available to users in the next five years? Founders need to keep asking themselves how much better their product or platform can be for their users. When it comes to the direction of this innovation, access to data, available technologies, and market environments (regulation, partners) chart out the path to take, but founders should be unstoppable regardless.