The newly minted Asian Financial Innovation Network (AFIN) will create a marketplace where fintechs and Southeast Asian banks can mingle and strike up a relationship.
Okay, so the Tinder metaphor doesn’t capture the scope of this project. But with the guidance and support from the Monetary Authority of Singapore and the International Finance Corporation (the private-sector lending arm of the World Bank Group), AFIN was formally set up by the ASEAN Bankers Association (ABA), and is now in the process of building a sandbox in which ABA members will be able to test and adopt fintech companies’ services.
Matchmaker, matchmaker, make me a match
Ivan Mortimer-Schutts, a digital payments expert at IFC who is working on behalf of AFIN’s stakeholders to set it up, says the sandbox will provide a bulletin-board service for third- and fourth-tier banks in ASEAN countries.
These banks are at risk of being left behind by the digital revolution. ASEAN countries are too fragmented for many fintech companies to flourish on their own, while smaller banks lack the resources to work with them or develop their own solutions. MAS, meanwhile, has been keen to export Singaporean fintech across borders, to enable good digital business models to achieve scale.
“We see companies like Alibaba or Grab filling the spaces where traditional finance isn’t working,” Mortimer-Schutts told DigFin. At the same time, IFC and the World Bank have an agenda to help banks accelerate their adoption of fintech, but this has been done bilaterally, one at a time, which is slow and cumbersome.
He said: “We were looking at ways to scale our business, help fintech companies find banks to work with, and help smaller banks in Southeast Asia benefit from this market revolution.”
Find me a find
The IFC, through working with banks in the region and the World Bank's regulatory network, found a champion in MAS. They asked ABA to sponsor the project, to ensure real buy-in from the region’s banks. ABA is itself an amalgamation of national bank associations, which in turn usually coordinate with their local regulators.
“What began as a dialogue between fintechs and banks turned into discussions among central-bank governors,” said Rachel Freeman, IFC's Hong Kong-based advisory manager for financial institutions in Asia.
Companies like Alibaba and Grab are filling the spaces where traditional finance isn't working
IFC and World Bank officials, with MAS and ABA, spent 2017 canvassing central banks in most ASEAN countries, to get their support for the idea. The sandbox was officially announced in November at the Singapore Fintech Festival; currently AFIN is selecting a vendor to build the platform, and it plans to be operating with at least seven banks in time for the 2018 version of the Singapore government’s annual fintech powwow.
Catch me a catch
The sandbox is meant to serve multiple purposes, says Mortimer-Schutts. First, it’s a supermarket for banks shopping for fintech solutions they can test, run on cloud computers, and plug into their infrastructure, so smaller banks can compete with internet and e-commerce companies for SME and retail business.
Secondly, AFIN is turning into a place for ASEAN regulators and financial institutions to begin setting standards for fintech, in terms of operations, compliance, data storage, procurement, and customer onboarding.
Along with standards, AFIN could help banks in frontier markets such as Cambodia, Myanmar and Vietnam adopt self-regulatory practices, with regard to digital technology, Schutts says.
It's turned into a discussion among central-bank governors
In the future, AFIN could help banks get access to software developers, or train their staff, or help customers such as merchants embed digital financial services into their operations.
For fintechs, AFIN should let them scale. A given third-tier bank in Southeast Asia would not, by itself, offer a lucrative business. But ABA counts over 400 bank members, so if a fintech enjoys success with one bank, it could quickly win business for the same service among others, enabling tech companies to more easily cross borders in a fragmented region.
It may not be Tinder, but for ASEAN banks and fintechs struggling to achieve regional scale, AFIN could yet become a matchmaker.