The future of fintech: From digital lenders to neobanks

The Business Times – When the pandemic lockdown started in Bangkok, Vin, who runs a small e-commerce store, needed cash to fuel his business growth. As an SME owner, Vin only had two choices – going to unlicensed money lenders that charged exorbitant interest, or risk missing out on business opportunities by applying for a bank loan which takes a while to approve with no guarantee that he can obtain the loan.

After a considerable amount of time spent researching his options, Vin chanced upon an app called SCB Abacus. To his surprise, he managed to obtain a productive loan within 20 minutes at an attractive interest rate. As a result, his business picked up and he has since continued borrowing to improve its working capital.

Such are innovations enabled by fintech to provide novel ways of supplying capital to underserved people like Vin. Fintech companies such as SCB Abacus (Thailand), Fairbanc (Indonesia) and Kissht (India) are examples of how fintechs are innovating and creating new business models addressing an overlooked segment of the population.

The potential for change and scale is immense – more than 70 per cent of South-east Asian consumers are still underbanked or unbanked today. In addition, millions of small and mid-size enterprises (SMEs), which form the economic backbone of the region, still face large funding gaps.

In Asia, digital lending is not new. However we believe South-east Asia and India are entering into the “Third Wave” of digital lending, where the advent and confluence of artificial intelligence, open finance and embedded finance are creating breakthroughs in credit assessment and customer outreach. The “First Wave” was the unregulated era where startups were testing business models, and the “Second Wave” marked the involvement of regulators to provide consumer protection, and productive loans startups began to emerge.

Contrary to popular perception, fintechs in this region are not necessarily disrupting the banks. Instead, they are filling a gap that is left by banks.

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