Life in the era of fintech: The evolving story of ASEAN’s banks

Photo:Robert Levy

Fintech startups are disrupting traditional banking across the globe. How are ASEAN’s banks responding to this crisis of obsolescence?

By Preetam Kaushik

Banks across the world are faced with an uncertain future. Their customers are adopting digital technologies at an unprecedented pace. Financial technologies like e-wallets have opened the door to a brave new world of faster, more convenient transactions.

This has led to an explosion of new players in the banking and financial services sector – fintech startups. Thanks to their innovative services, these new companies are growing at a frenetic pace, especially in the Asia-Pacific.

Traditional banks now face a difficult situation. Businesses that do not adapt to the changing needs of their consumers run the risk of falling behind, yielding dominance to innovators and early adopters of cutting-edge technologies. If banks don’t start giving the customers what they crave, those customers will inevitably seek gratification elsewhere. 

Digital leadership is a major focus in banking circles

A recent report by Accenture underscores the importance of digital technology in the future of banking. It looked at 161 traditional banks which had invested varying amounts of capital in digital technologies and innovation.

The report found digital-focused banks were leaner, with lower operating expenses, more rapidly expanding revenues and were more efficient than their less-innovative peers.

This increased cost-efficiency comes at least partly as a result of improved customer satisfaction. According to the latest Deloitte consumer surveys, keeping customers happy has become tougher since the advent of novel technologies and fintech startups.

Digitally focused institutions offer a superior user experience than that of traditional banks, and consumers are starting to get used to that kind of experience. 

Banks and other traditional financial institutions are acutely aware of this threat. According to PricewaterhouseCoopers, a staggering 88% of existing players in the financial services think that at least a part of their business is under threat from new fintech firms.

Why Southeast Asian banks are especially vulnerable

The woes of ASEAN’s banking sector are well documented. Banking penetration hovers at an underwhelming 27%, leaving more than 400 million of the region’s 600 million inhabitants without access to formal banking services.

To further complicate matters, the ASEAN region is emerging as a global hub of fintech innovation. Spurred by high mobile penetration and a fast-growing economy, the region’s fintech startups are transforming the way people carry out financial transactions in their daily lives.

This leaves banks in countries like Indonesia, the Philippines and Malaysia in a precarious position. In the West, established banks only face the threat of losing at least a part of their existing customers to certain fintech services. But across ASEAN, banks face a future where they must compete with more agile fintech startups for new customers.  

Venture capital investments, incubators and accelerators offer banks an entry point to fintech

Leveraging their considerable liquid assets to gain strategic access to fintech innovation is fast becoming the favoured option for many banks in the region.

Source: Crunchbase, Nikkei, CIMB, The Star, Bangkok Post

In Indonesia, the largest state-owned bank, Bank Mandiri, has spent close to US$40 million on venture capital (VC) overtures, funding startups like Amartha (micro-loans), Moka (point of sales tech), and Cashlez (card readers).

Bank Central Asia, the biggest private entity, has invested US$15 million in a VC fund, with some of it going to a startup called KlikACC (online lending). Bank Rakyat is using an external VC firm Bahana Artha Ventura to channel funds to promising fintech startups.

In neighbouring Thailand, Kasrikorn Bank (KBank) has created its own VC arm called K-Vision. With ambitious plans to channel funds into startups both in Thailand as well as the rest of Southeast Asia, it has allocated US$245 million for the fund.

Several banks in Indonesia and Malaysia have created startup incubators on their own in a bid to acquire digital capabilities. CIMB Bank, one of the biggest in Malaysia, has its own incubator programme called Innochallenge, launched in 2015.

Startupbootcamp is another accelerator in Malaysia with funding from the RHB Bank. In Indonesia, Mandiri Bank also runs the Mandiri Business Incubator as a joint venture with Telkom, a major player in the domestic telecommunications industry.

In Thailand, the Bank of Ayudhya has an accelerator called Krungsri Rise to partner with dozens of local tech startups. InnoHub is an accelerator funded by the Bangkok bank.

Collaborating with startups acquire fintech capabilities

The central banks in most major ASEAN economies are calling for increased collaboration and cooperation between fintech startups and traditional banks. Many regional banks have strategic partnerships with some of the bigger fintech players and foreign banks to bridge the “innovation gap” they face.

Malaysian banks like CIMB and HSBC Bank Malaysia are acquiring blockchain capabilities through partnerships with startups like Ripple. CIMB plans to use the technology to enhance its remittance services, while HSBC’s focus is on improving its online B2B finance platform.

RHB Bank is working in collaboration with startup Ringgitplus to enhance its online loan processing capabilities. The partnership will allow RHB customers to use an online chatbot to make the loan application process easier. 

In the Philippines, Rizal Commercial Banking Corp has partnered with Acudeen, a successful local tech startup in a bid to serve the SMEs market. 

Even in the smaller banking market of Vietnam, local banks have strategic partnerships with fintech firms. VIB Bank is working with Weezi Digital, while Vietin Bank is collaborating with a UK startup, Opportunity Network, to connect CEOs to investors. 

The writing is on the wall – fintech is the future

Banks in the ASEAN region have their work cut out when it comes to managing the rise of fintech. Most are proceeding slowly with extreme caution and building partnerships where necessary to explore the adoption of new technologies.

However, a small minority have taken a bolder approach. The CIMB Bank (Malaysia) and Siam Commercial Bank (Thailand) are spending extensively to establish in-house fintech capabilities.

The latter has already earmarked US$1 billion for radical restructuring as part of a “technology investment program.” Their Chief Strategy Officer called it a “do or die” situation.

Siam Bank may be the first bank in the region to take such a step, but it won’t be the last. If successful, the model will likely serve as a template for other banks in the region.

Currently, banks have the freedom to choose how to engage in fintech – but engage they must, and the sooner the better. The omens are clear – fintech will be integral to the future of banking. And banks everywhere would do well to take note. 

About the Author

Preetam Kaushik
Preetam Kaushik is a Mumbai-based journalist covering business, tech and economy. A former freelance Mumbai correspondent for Business Insider India and freelance journalist for, his work has been published by The Times of India, The Huffington Post, Economic Times, WIRED, and World Economic Forum.