While digital finance has helped bring millions across Asia into the economic fold, there is still work left to do, said panellists at the Money 20/20 Asia conference, who shared their lessons learned so far.

A consumer financial services revolution powered by mobile phones, technological innovations and changing consumer mindsets has is bringing in new fintech players from the private sector to markets with large unbanked populations. Digital technologies have become a key enabler for supporting financial inclusion in developing markets in a commercially viable manner, moving financial inclusion beyond payment systems to the provision of credit.

For example, to leave the informal sector the unbanked need credit, but while banks are interested in bringing new customers into the fold, the lack of a robust credit bureau has long held them back. But fintechs are now using non-traditional sources of data, for example behavioural data and social media data, to help customers in places like Indonesia and India build a credit history, which would allow them to access financial services.

Lessons Learned

«Always focus on the consumer and what they really need. In terms of banking services, people need services, but not necessarily need banks,» Soon Sze Meng, Singtel Vice President (International Business), said about the telecommunications company's foray into India, where it has launched its Dash mobile wallet.

«Things have changed. Everyone has a mobile phone, but not a bank account or payment card,» he said, adding that he believes partnerships between telcos and traditional financial institutions will accelerate going forward, given that telcos have the upper hand over banks when it comes to the customer base and connectivity.

Low-Ticket Sizes

Start with low-ticket sizes and short loan durations and build your relationships with customers from there, Sid Jajodia, Global Head of Credit, PayU, advised. He cited PayU's model of allowing customers to order food with one swipe, with payment to be made in the next 15 days. This allows orders to be made quickly, but is also a low-risk loan for the company, and allows customers to build a credit history so they can enter the formal economy, he explained.

Banks Must Collaborate

Zennon Kapron Director, Kapronasia felt that banks have not stayed relevant in these markets, a sentiment that the panellists agreed with. «Think about the consumers and customers. It’s not my father or grandfather that is banking. It’s my kids, and they want to directly access the services when they want it,» he said.

Banks haven’t kept up with how to deliver a good experience in today’s world. If banks don’t evolve, the role for them will just continue to shrink as we move more towards a cashless society, Jadjodia said.

As banks which are not nimble and cannot move as fast as fintechs, collaboration allows them to engage in the innovation journey and connect better with the unbanked or low-income population, Raja Al Mazrouei, Executive Vice President, FinTech Hive, DIFC, said. If not, banks «will just end up accepting deposits from them and that’s it.»

Gaining Trust and Credibility

Fintechs also need to work with banks and financial institutions to gain trust and credibility, Al Mazrouei said. «Partner with financial institutions and telcos, as they are the backbone of delivering such services. Once you partner with credible providers and get their support, you will be able to access these markets,» she advised.