This week’s episode has returning guest Tianwei Liu, Deputy CEO of Southeast Asia fintech group Fazz, the company behind stablecoin issuer StraitsX. In 2023’s Singapore Fintech Festival, StraitsX received in-principle approval by the MAS for the issuance of XSGD and XUSD, opening up opportunities we cover in this first half of our call with the seasoned fintech entrepreneur.
(05:06) Impact on StraitsX;
(08:43) Impact on Singapore and ASEAN Economies;
(12:24) Impact on Merchants and Business Finance;
(21:54) Impact on Embedded Finance;
(26:04) Subscribe and stay tuned for part 2;
TLDR / LinkedIn Post
4 impacts of StraitsX’s in-principle approval by MAS for the issuance of XSGD and XUSD
(1) For Fazz as an ASEAN fintech group: building on five years of pioneering blockchain transactions to unlock
“It’s almost four or five years since we launched XSGD, and close to 8 billion XSGD has been transacted on-chain…These are real transactions that people have started using…it gives us the confidence that this is going to be a regulated industry. This is going to be something that’s the right step in the direction as a payment infrastructure for this part of the world…and beyond the Singapore dollars, the licenses also mean to say…we are now able to issue G10 currency stablecoins out of Singapore with this new license regime and XUSD, which is what we’re gonna be focusing our effort on in the coming years.”
(2) For Singapore and ASEAN: More mainstream adoption with increased credibility and trust from regulators and institutions
“And that’s where regulation is very clear that this is going to be something that’s going to be more mainstream…It brings about the credibility that using this kind of medium to facilitate innovation in payment is the way that regulators around the world should be looking at this both domestically and especially for cross-border payment…Then it allows service providers like us and other players to be able to confidently say that what we are doing is regulated and we are doing this according to the standards needed both on the AML control side, as well on custody and the way that we safeguard the user’s funds.”
(3) For merchants and end-consumers: The same transactions, except faster, cheaper, and more interoperable thanks to blockchain technology (we cover the case of StraitsX collaborating with Grabpay and Alipay)
“We can think about how to make this purpose-bound money, the most purposeful and compliant by design, so that it can only be used for [specific] goods and services. So the ML risk and the compliance risk can be ring-fenced and properly controlled. And then the settlement will be able to be instantaneous. And then the FX ability of the blockchain…can actually happen at a microtransaction level.”
(4) For payments industry: Moving forward momentum of innovation (that comes in stages)
“There’s so many things you can do, but in [a certain] order…it must be first, be able to increase the acceptance and make sure that it’s as seamless as possible without drop off rate. Then you go into costs. Can I make sure my cost is as low as possible, especially for cross border…Then the innovation, which is free game for a lot of guys to come in.”
About our guest
Tianwei Liu is the Deputy Group CEO of Fazz and Co-founder of StraitsX. Fazz is a regional fintech group offering an ecosystem of financial services for businesses, especially the underserved. The group consists of Fazz Agen (previously Payfazz), which offers financial services to the underbanked and unbanked population in rural Indonesia, and Fazz Business (previously Xfers), a fintech API company, and StraitsX, a digital asset infrastructure platform, the latter two which Tianwei co-founded.
Fazz Agen leverages its network of agents to distribute bill payments and enable domestic remittances. It also built a POS-based payment system used by small merchants, a consumer lending arm, and a payment-as-a-service API. It empowers the livelihoods of more than 300,000 agents distributing to over 80 million end-users across Indonesia. The group has evolved to include a lending platform and a digital assets platform.
Prior to Xfers and Fazz, Tianwei has had more than a decade as a software engineer and entrepreneur. He started his career working on developer tools at WIMM Labs, a start-up that built the world’s first Android-based smartwatches. After WIMM Labs’ acquisition by Google, Tianwei worked at Amazon Lab126 from May 2012 to June 2015, building the big data ingestion infrastructure that allows for real-time processing and analytics of the health status of all Kindles devices used daily by Amazon’s customers. Tianwei holds a Bachelor of Engineering (Computer Engineering) in 2011 from the National University of Singapore. Tianwei also spent a year working at Silicon Valley while studying at Stanford University under the NUS Overseas College (NOC) Programme.
The content of this podcast is for informational purposes only, should not be taken as legal, tax, or business advice or be used to evaluate any investment or security, and is not directed at any investors or potential investors in any Insignia Ventures fund.
Paulo: For this episode, we actually have a returning guest. For long-time listeners, you probably remember the person here in the video with me.
He’s none other than Tianwei Liu, who is the deputy group CEO of Fazz, a Regional FinTech that’s focusing a lot on developing FinTech infrastructure. Also, doing a lot for rural Indonesia as well with one of the largest agent networks, providing financial services there in rural Indonesia as well.
So our last conversation with Fazz was actually with Tianwei, also back in 2021 or 2022, so it’s been a while. We, at the time, did talk a lot about the merger between the partnering together between Xfers and Payfazz, into Fazz group, we also talked about blockchain, a lot of the excitement around that at the time, and I think for Fazz, that has definitely been a continued initiative and we’ll talk a little bit more about the more recent news, and I think it’ll be, it’s definitely a good time to really showcase a lot of catch up and then showcase a lot of what Fazz and particularly StraitsX has been up to recently.
So before I get into the news, I just wanted to check in with Tianwei. How are you doing? It’s been a while.
Tianwei: Hey, hi everyone. My name is, and thank you, Paulo, for having me here again today. It’s been quite a while. It’s been, I didn’t know, it’s almost been two years since we last chatted, and congratulations.
Season six already. Wow. Quite a bit of things have been happening. I think sometimes time flies, and we just really get very busy. Thank you for having me back again here. As a start of a new year, we’re excited, and there’s a lot more things to do this year as well.
Paulo: Yeah, we definitely had the pleasure of really documenting Fazz’s journey from the very beginning. I think we can pretty much write a whole, I don’t know, biography of Fazz at this point. But the story is far from over, right?
Tianwei: Yeah, there are going to be a lot of war stories to talk about on Monday, but yeah, you just document it first.
Impact of StraitsX’s Stablecoin Regulatory Milestone on the Company
Paulo: And speaking of stories, I think the latest chapter has been, recently in SFF, Singapore Fintech Festival, Ravi Menon, Managing Director for the Monetary Authority of Singapore, announced, among other things, that StraitsX is one of those that have received an in-principle approval for the issuance of two digital currencies, XSGD and XUSD, under MAS’s new regulatory framework around stablecoins.
This has been covered in the news a lot, but I wanted to take this opportunity to actually ask you, Tianwei, what does this mean for, what are the implications, first for StraitsX and Fazz as a fintech group?
Tianwei: We’re deeply honored. I think this is one of the major milestones that we have been working very hard on, the stablecoin project, and the entire StraitsX [brand]. It started as a side project, a passion project for a lot of us at Fazz.
It was about, almost four years, maybe people don’t really know. We started a project, StraitsX, sometime in 2019. StraitsX has always been just part of Xfers, which is the original company that merged into Fazz, which I founded.
And it’s always been part of us. It’s just a product line that we decided to call StraitsX because we wanted to clearly differentiate some of the offerings to our clients.
We’re very honored to be among the first to be acknowledged by the MAS to comply with the upcoming stablecoin regulation. I think it’s a huge shout-out and milestone achievement to the team and everyone that has been involved. And it has been a great relationship that we have with the regulators, with the MAS, working every step of the way.
I actually remember the days in 2019 when I first reached out to the folks at MAS and told them that we have a need for stablecoin and we think that this is an industry that’s interesting. We had a passion for it, we wanted to build it.
…Regulators in Singapore, they’ll be very frank — “We do not understand enough of this” — Even today, if anyone tells you they’re experts — I never want to say that I’m an expert — I’m just a student of this whole thing. We’re really at a bleeding edge here.
And they first admit that they don’t understand enough, but we will be given the honor to have a chance that they allow us to proceed based on our existing license regime of e-money, because we have an e-money license for Fazz in Singapore.
And that’s how we launched the stablecoin project in 2019 from that, with multiple iterations to get into this stage. There was a launch of payment service act, there was an MPI license given to us for DBT, which is supposed to be the way it is for transacting of this kind of assets to the day that, just in November, that we are going to be granted in-principle approval for early compliance for the upcoming Stablecoin Regime Framework, which we have contributed quite a bit with MAS on.
It underscores the strong reputation and responsibility I always feel that MAS and us have to basically be the digital asset provider for this.
It is also an attestation to our record. Folks might not know this, but it’s almost four or five years since we launched XSGD. And close to 8 billion XSGD has been transacted on-chain, right? And these are data that you can see publicly. You can’t hide it, nor can you actually mask it up. These are real transactions that people have started using.
It’s beyond our [expectations] initially how this has come along. And more importantly, it gives us the confidence that this is going to be a regulated industry. This is going to be something that’s the right step in the direction as a payment infrastructure for this part of the world and potentially the future.
And beyond the Singapore dollars, the licenses also mean to say that we are not just talking about a Singaporean dollar stablecoin or Indonesian rupiah stablecoin, which is XIDR, which we launched about two years ago.
We are now able to issue G10 currency stablecoins out of Singapore with this new license regime and XUSD, which is what we’re gonna be focusing our effort on in the coming years. We’ll be launching more, which is super exciting for us as a company, to be able to do more.
Impact of StraitsX’s Stablecoin Regulatory Milestone on Singapore and ASEAN Economies
Paulo: One key takeaway from this whole story is that especially for those who are not as familiar with StraitsX’s story, this didn’t just come out of the blue.
I really appreciate how you just lined up that whole, all those different licenses and regulatory milestones that you achieved prior to actually even getting this IPA, and how, because it’s still an IPA for an upcoming framework, there’s still a lot more work to be done, as you mentioned.
That leads me into the next question on the implications. So what does this now mean for the region? Obviously, it could still be too early to say, but like how has this fired up the team and fired you up for what’s ahead?
Tianwei: I think it’s just the first huge step, and all of this itself is the recognition of being a fully regulated, transparent, and trusted stablecoin issuer out of this point.
I think that we have been working on this journey for the last 4, 5, 6 years. You can see how the industry’s elements have changed.
The next big step, which is just done with some of the things that MAS announced, is getting MAS, such a reputable regulatory agency, to actually put their stamp on this, to say that they also see the same future in the use cases of this, which is definitely great for the industry.
And Singapore being a beacon, at least in this part of the world, when it comes to regulation, helps to drive and makes more regulators take a more interesting look at this.
It means that the banks and major financial institutions will be able to then have their compliance framework take on this in a much more acceptable way.
It’s not that they are not supporting innovation; regulation must catch up because they are ultimately put in custody of the funds of the clients. They have to do things the compliance way.
We are at the forefront. We can’t do it with ourselves as well, but they have a lower risk appetite compared to us in terms of the ability to innovate on those things.
And that’s where regulation is very clear that this is going to be something that’s going to be more mainstream. We’ll help potentially be the catalyst that will push this thing over to the next tipping point where more adoption can happen.
It brings about the credibility that using this kind of medium to facilitate innovation in payment is the way that regulators around the world should be looking at this both domestically and especially for cross-border payment.
Then it allows service providers like us and other players to be able to confidently say that what we are doing is regulated and we are doing this according to the standards needed both on the AML control side, as well on custody and the way that we safeguard the user’s funds.
Before that it’s like a wild, wild west and it’s self-regulated. At least now, there is a very clear regime that you can point to from a reputable financial agency that is regulating this to tell you that, “Hey, this is the best practice. And this is the expectation. And if you actually stick to this and actually get the licenses, this is what it means, right?”
I had some conversation with MAS in the early days that what they were looking for was to basically put on a gold sticker to tell people that this is what they envision a good regulated stablecoin will be used for payment in the future. They want to give that stamp of approval to let everyone else know the differentiation.
Because even in this world of stablecoins, the market cap is US$130 billion or so. There are many stablecoin issuers out there. And everybody will tell you that they’re compliant. Everybody will tell you they’re going to be safe.
What [the MAS is] hoping to achieve in some of these is really just give you a gold sticker and let the consumer and let the financial institution know that this is going to be the recognized standard. Again, you still have to practice your own risk assessment. But at least this has more or less told you that a certain bar has been achieved by certain products.
Impact of StraitsX’s Stablecoin Regulatory Milestone on Merchants and Business Finance
Paulo: Yeah. I think really setting the bar and setting the standards is important. Yeah. And obviously. I think sometimes it can be hard to understand from a short-term perspective, but really looking at it long-term, regulation does need to come in and has to catch up at some point. And it’s good to see that momentum happening for, especially for StraitsX.
I wanted for you to also maybe paint a picture for us, what this means for the merchants that you guys work with. You earlier mentioned that 8 billion transactions have already been done since 2021 with XSGD.
You can paint a picture of what this means on the ground for customers and maybe lead also to the next topic of our conversation, which is some of the collaboration that you’re doing with Ant Group and Grab, and supporting cross-border payments with XSGD.
Tianwei: When we started this project in 2019, there were a few things that we had.
First and foremost, a lot of us here are big believers. We’re engineers. Technology is at the heart [of what we do]. We’re trying to solve problems. And we see that the blockchain solution does have merit. And there are things that can be done that traditional centralized systems cannot do. And that’s why we have been very focused on telling people, we are interested in the application side of stablecoins.
I want to repeat again, stablecoin is stable. There’s no speculative nature. You cannot buy this thing and hope that it grows 10x. It doesn’t work like that…you can’t expect this to grow 10x over the next year, unless the Singaporean dollar goes 10x. So that is a bit different, but the use cases here are more towards real-world applications.
What problem can it solve that traditional centralized solutions cannot do? And when we put on that hat, then we need to really start comparing and thinking about what is the trade-off here. Nothing comes for free.
Centralization has been around for the last — I don’t know how long — and [is in] most of the solutions that we are used to. It works very well. It works very efficiently. And if you are willing to give up on that and say you want to be decentralized, there are benefits…but there’s a trade-off.
The trade-off is that it’s going to be a lot more expensive to run and maintain, and then infrastructure is expensive. There’s a hurdle to overcome. Then we need to then focus on what we are trying to solve here. What is the benefit that it actually brings in?
And if you look at how stablecoin evolved over the last five, six years, our initial thesis when we first started that why we want to do this is that we saw the potential around the programmability, the distributed nature of things, and innovation can happen at a micro level.
But we think that we have some of the elements for success.
First and foremost, we think that we have the ability to make this regulated because we were by then an MPI license holder, we have e money license, we have run regulated business before, and we think that we have potentially the ability to make sure that, first and foremost, this is not going to be illegal, we will not be shut down overnight.
I have been telling guys that that’s super important for us. Compliance is always on the first line of everyone’s thoughts. Are we doing these things the proper way?
So the next [reason] that we think that we will be successful is because of the payment infrastructure that over the last almost 10 years now we have built up from the ground up — payment infrastructure to accept payments from the banks, solutions for bank transfer capability, etc.
Actually, it is actually even more important than the first one. The first is just being compliant and a lot of companies will tell you they are regulated and there’s compliance, but that does not immediately translate to banking relationships. It doesn’t mean to say that, “I can form a company and launch a stablecoin and then expect that I’m going to get all the bank accounts to get all the rails and payment gateway that you have.”
That’s a huge gap in between the two of them. So because we have those things, being a payment company was a key reason why we think that this thesis would work.
But then the third piece is the ecosystem. You need an ecosystem to really make this. You have the solution, you have compliance, who is going to use this? Our initial thought is that Web3, the blockchain space — we served that time in the early days as a payment gateway for a lot of these exchanges and fintech companies.
And that’s how the initial scale of XSGD actually came [about]. We have a lot of adoption from our Web3 clients. But we very soon over the last few years realized one thing which is, yes, this is definitely a high growth segment of the economy. Things are moving. I’m very excited about what can happen over there. But at the same time, it’s not mainstream enough.
The size of the market, just looking at blockchain and Web3 companies, is not big enough…We really need to think about how to get this back to the consumer, for my mom and dad to actually use this, which is something I was talking about [before].
The vision here is that we are focusing on this, making sure that the whole entire technology disappears behind the scenes. The customers should be just taking out their phone and just clicking on a button and it works. Payments should work as payments.
You just really just want to pay for that bill. You’re not going to be asking the guy, if I can use crypto and all these things. That will work for a certain portion of people. But I believe 90 percent of most people just want to scan and pay and get out of the restaurant or whatever place they’re at.
And that’s been the primary focus. And that’s where things have been evolving over the last two, three years.
And we’re very excited to talk about some of the things we’re doing with Ant Group and Grab. Last year, Grab made a major announcement that they are launching a Web3 wallet. I hope you have tried it out. They’re working very closely with us. We’re very honored to be able to partner with Grab on this.
They actually spent a lot of time thinking about the user experience, building up a so-called Web3 capability wallet within the Grab app so that a normal retail consumer that has a Grab and uses Grab can easily get access to Web3. They can create a non-custody wallet.
For the folks that actually don’t know, the Web3 wallet inside Grab is actually non-custody. But the technology did disappear. They just quickly click, answer a few questions. They have a Web3 wallet that can interact directly with the blockchain.
You can send an NFT, which in the first iteration of it, we have worked with them on purpose-bound money that allows people to have a digital Singaporean dollar voucher backed by XSGD stablecoin. And that’s the only asset that you can now hold on the Web3 wallet.
And we use it to showcase a voucher-based payment system. Last year’s trial covered about 200 merchants. You can buy these vouchers on Grabpay, hold it, and actually send it to a friend and actually make purchases at over 200 participating outlets.
My favorite is Kawaii bubble tea. You can still do that today. You can use it to buy a physical merchant product and experience. Of course, it’s still not as streamlined as we wanted it to be, but…to the merchant, this is just Grabpay.
They don’t even understand anything about blockchain or any other e-wallet. Somebody is just trying to use Grab to make payment. And the teller instantaneously gives the feedback that, “Hey, [payment] received. Just give them the bubble tea that they wanted.”
So that itself is a taste of the direction that we’re heading in. It has pretty good reception across the merchants and also the tech side is finally catching up. We think we can actually do something that is going to be even more mainstream.
And that’s what we’re discussing with Alipay, Grab and Ant Group. Hopefully that’s the next generation of solution that we want to support them with, specifically in cross-border payment. We want to be able to enable Grab or Alipay, Alipay Plus users, when they come to Singapore, simply scan an SG QR code, scan a GrabQR, and just make payment.
And to them, no blockchain is involved. All they need to know is they scan a QR code, enter the same dollar value that the cashier tells them to enter, and they make payment. But at the back end of it, this is where the blockchain and the settlement side can really come in.
We can think about how to make this purpose-bound money, the most purposeful and compliant by design so that it can only be used for goods and services. So the ML risk and the compliance risk can be ring-fenced and properly controlled. And then the settlement will be able to be instantaneous. And then the FX ability of the blockchain…can actually happen at a microtransaction level. And that’s what we’re hoping to get done this year.
Paulo: And I think really that atomic settlement, which has been, I think one of the five visions or goals of MAS as well for a long time now, is actually in the process of being done through this.
And I think looking at it from a consumer side, as you mentioned, nothing should really be different. But at the same time, from the merchant side with settlement especially and FX, as you mentioned, that is where a lot of the stark difference can be seen compared to say, if you use non-blockchain technologies.
Tianwei: I think that’s key. The whole idea here, if we are successful, neither the merchant or the consumer will know anything about blockchain. That is actually the true end goal here. They just need to know that suddenly it’s faster and more accessible.
The main problem is also accessibility. The Alipay user right now can just make payment at Grab merchants. They scan, and they pay, and they’re happy with their goods. To the merchant, they don’t have to onboard a new acquirer.
They don’t have to say, “Oh, I need to sign up with Alipay, or I’m just doing GrabPay.” Somebody’s making GrabPay to me, I’m doing it. I think that’s the essence of it.
Then with all the technology, the assets, the speedy settlements, all baked to the backend innovation side is what we’re trying to achieve.
We will be successful and we’ll be celebrating if no one knows that it’s using blockchain or crypto or XSGD, all they need to know is that I’m scanning, I’m making payment, I move on with my life. That’s the end goal here.
Impact of StraitsX’s Stablecoin Regulatory Milestone on Embedded Finance
Paulo: I was curious to know what was the implication also for integrations as well, especially now with a lot more ecommerce platforms or marketplaces wanting to integrate financial services or even SaaS platforms as well, integrating financial services into their stack.
What is the picture that you see for that and in terms of what you guys are doing with XSGD and StraitsX?
Tianwei: I think from a commerce perspective, payment is a basic fundamental need. And if you are a commerce or marketplace or e-commerce online, you want to have something that’s as seamless and as easy for your customers as possible.
Shopping cart abandonment is a big metric that everyone looks at. If the customers can’t make the payment, they’re about to buy something, they’re frustrated. You lost all your so-called CAC. You want them to be able to clear. So that is always the top line.
It’s always more important than the cost that for most of these merchants out there, they just want a seamless experience. They want their customers to be happy, buy the product and just move on.
So that is where the last mile of this is where I talk about. The merchants do not want to onboard a new system. Give them something that the customers can just pay with and move on. That’s something that we will need to first fundamentally focus our effort on solving, which you were describing earlier on.
After that, then it will come about the secondary stuff to think, how about rewards point systems, voucher point systems, which are some of the stuff that we’ve been talking about from a purpose-bound money perspective and the ability to put in programmability that, “Hey, if you make this purchase, the next time you come back, this voucher automatically we can reapply after certain use cases.”
What if this voucher is now interoperable? You can use this voucher across multiple different platforms? And this voucher will just stay with you as long as you make the purchase. And no one has to spend too much time on governance. The blockchain contract will actually take care of the voucher governance by design. Those are the things that the next order of thinking will be about.
But that is the end game.You start off with, can I increase the payment throughput? Can I make sure that more people can make payments? The Alipay guys will be thinking, can I make Alipay be accepted at more places? But an alternative for the merchant in your case is that, can I accept more payments for my clients without having to do any work? I just want more people to make payments for me.
So at a restaurant that’s supported by Grab right now that previously does not accept Alipay, there’s another new payment method, but without doing any work because it’s still a Grab merchant, it’s still a Grabpay, and I just expanded my custom payment options. So that’s the first priority.
The next priority that we’re thinking about is the cost. Is this expensive? How much more do I have to pay for this? And is it something that is acceptable and they help me reduce my cost? That’s something I want to use.
Then you think about the final order: what kind of innovation can you do now? Can I get the customers to convert and come back again? Is that kind of voucher system that I can think of them that after this purchase will come back? That’s how they will probably think of their tier ranking.
We are now primarily focused on the first two first, where I think that there’s a lot of space to innovate for the third piece with the programmable nature of the blockchain. And that’s great news about — I talk about decentralization programmability — This is something that a lot of startups, the next generation can be created to think about innovation they can do around that space where previously there’s a walled garden.
It’s all locked up. Grabpay is great. I love using it, but then if I want to do something with Grabpay, I need to figure out how to negotiate with them, get the API and everything. Now you can, as a startup, just innovate around that space and do something interesting when this infrastructure is over there.
Paulo: So throughput and the cost aspects first. And then it really opens things up for the application side. We could just go on talking about all these other programmable stuff, even things like insurance, invoice financing, etc.