Grab and others see big chance in ASEAN digital banking

JAKARTA — Southeast Asia is home to one of the world’s largest unbanked populations, but the rapidly increasing digitalization of everyday life as a result of COVID-19 means there is a golden opportunity for digital banks and finance in the region, a top Grab Financial Group executive said Tuesday.

Speaking at Nikkei’s Innovative Asia forum in Singapore, Reuben Lai, senior managing director at the financial arm of tech company Grab, said that the pandemic has brought about “unprecedented opportunities” across the region in digital finance, with much “white space” across various sectors from digital payments, lending, insurance and digital banking.

Lai cited the example of a spice seller in Malaysia who Singapore-based Grab helped go online, giving the merchant a virtual store on its on-demand grocery delivery service and tools to accept digital payments. “She ended up thriving opening up a new channel,” he said. “The pandemic has been a huge accelerator across all digital financial services,” he said, adding that those have become indispensable.

According to Fitch Ratings, there are around 290 million unbanked and underserved people in Southeast Asia, a number bigger than the entire population of Indonesia, the world’s fourth-biggest country. It also means that there is a huge untapped market, which tech companies like Grab are keen to exploit.

Grab, a ride-hailing and payments “superapp,” obtained a full digital banking license in Singapore last year — a market where Lai said “40% are underbanked” — pitting it against existing major banks.

Rajeev Kannan, managing executive officer of Japan’s Sumitomo Mitsui Banking Corp., welcomes the emergence of digital players.

“We are going to see more and more competitors, which is actually not bad, because it has helped us become nimble,” Kannan said at the conference. “It also allows us to change the way we do business because entities like Grab are stepping into markets we are already in.”

SMBC, a large traditional financial institution, offers a digital banking service in Indonesia through its subsidiary lender BTPN called Jenius. Kannan said that over the past year, SMBC has “seen a significant ramp up in our digital bank” that now has “2.5 million users” on the platform. The executive added that BTPN is also utilizing the technology of OakNorth, a U.K.-based credit scoring company in which SMBC invested last year.

“We as a global bank cannot be deep diving into the underbanked market, so our model is to use an inorganic strategy, to acquire something that is an existing player… and then integrate to our platform, and create digital banks out of it,” Kannan said.

“For us digital banking is not unique, it is just the question of how we change our strategy from either reducing cost, improving customer experience, creating new ways to do business, creating new products and widening our overall revenue streams,” he added.

So-called fintech opportunities in Southeast Asia are also enticing Chinese players to contemplate entering the market.

“We see Southeast Asia as an opportunity for us,” said Bill Deng, CEO of XTransfer, a Shanghai-based fintech company that helps small and mid-sized Chinese importers and exporters with currency management, collections and other aspects of international transactions.

“We are trying to tap into markets like the Philippines, Indonesia, Thailand, Vietnam,” Deng said. “They have very strong trade ties with China. We are looking at how we can expand our capabilities to serve those exporters and importers in these countries going forward.”