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Southeast Asia Tech: Asia Fintech Hype, Future of Buy-Now Pay-Later & Micro-Payments

· Show Notes,Clubhouse

"I also admittedly had a little bit of that bias. But I think we've realized two things. Number one, FinTech is not just about payments, it's about a whole host of really, really different things. And number two, it is one of the best ways to monetize, to control and digitize transaction flows in a very shallow market." - Chia Jeng Yang

Jeremy Au: [00:00:00] So for myself, just a quick introduction, Jeremy, built a social enterprise and exited. Built a second company, now at Monk's Hill Ventures, the head of strategic projects looking at Southeast Asia and the regionals growth and so on so forth. Forbes 30 under 30, Harvard MBA, I run a podcast at jeremyau.com where we discuss some additional stuff, and there are going to be extraordinary experts on the FinTech space. Gonna make it spicy, as spicy as we can. So Chia, why don't you go ahead and tell us about yourself and then Keng right? And again, if anybody wants ask questions, just raise your hand.

Chia: [00:00:35] Hey, everyone, I look at early-stage venture across Southeast Asia, India, I also do LP investments mostly in the US now. I'm an Angel Investor before that, operator before that, lawyer and firefighter before that.

Keng: [00:00:49] Yeah, I'm actually here with my co-founder Diego also, he's slowly getting fixed but he's also joining the call. For me, I was in ED and then now I'm just doing a little FinTech. A little open financial investment with my buddy. Diego you want to say something?

Diego: [00:01:03] Hi, guys. Hi, how are you doing?

Jeremy Au: [00:01:05] Awesome. So fun fact, Chia and I have played Left 4 Dead II together several times and Keng as well.   So first up, let's ask the question: is FinTech over hyped? Chia, is your VC approach just totally overhyped?

Chia: [00:01:18] I thought we are doing Southeast Asia startups.

Jeremy Au: [00:01:21] Yeah. Both of them, Southeast Asia and FinTech. How about that intersection?

Chia: [00:01:25] Two very different things. Now FinTech is great, guys. Build FinTech companies. I have a lot of thoughts on the other topic. So we can think in two ways: I definitely don't think FinTech is overhyped, I think it's a great way to make money in shallow markets. I do have some thoughts about how the tech scene in Southeast Asia has developed and how prices have gone on a very interesting trend, etc, etc. But depending on where you want to take this convo, Jeremy.

Jeremy Au: [00:01:49] Let's talk about FinTech first. So what's interesting about it? And then we'll zoom into Southeast Asia.

Chia: [00:01:53] Yeah, so before I joined Saison, I was more of like a marketplace, consumer investor, did a bunch of stuff on that side. And about the time and maybe a year or two when general marketplaces and e-com in general was pretty mature. And so a lot of people were being less and less interested in e-com and marketplaces in general. And so when I joined Saison, like December 19, which was a FinTech buyers fund, we look about 50% of our portfolio is FinTech. But we do a bunch of other stuff. I remember a lot of folks I was talking to at the time was like, "Oh, you're in the FinTech fund, isn't payments done? I thought payments is super boring."

And that was kind of most people's image of what FinTech was. And I also admittedly, when I went in with less of a knowledge of FinTech than I do now, also maybe had a little bit of that bias. But I think we've realized two things. I think number one, FinTech is not just about payments, it's about a whole host of really, really different things. And number two, it is one of the best ways to monetize, to control and digitize transaction flows in a very shallow market.

And so, we see especially in the post-COVID edge, or at least the COVID age, a huge resurgence of FinTech business models and better finance. Everyone's been talking about FinTech. I just found out Stripe is raising a secondary round right now of like $150 billion, it's insane. I definitely don't think it's overhyped. If anything, we're very much beginning to see what the potential of FinTech is in shallow markets. And I'll maybe end with one thing, which is there are few like FinTech experts that I really admire in the US. And one of them is Max Levchin, PayPal mafia, co-founder of Affirm.

And in the interview that he did maybe a month ago, he was basically saying that after he built PayPal, people were telling him oh, FinTech's pretty much done and he didn't want to do another FinTech company. And so he was considering building something else rather than Affirm. And this was 10 years ago. So everyone says FinTech is dead until it's not and then becomes exciting again. Do you see the cycles? And actually, we haven't even really begun that process yet in Southeast Asia. So overall, really bullish.

Jeremy Au: [00:04:02] Awesome. And Keng, what do you think about what Chia just said?

Keng: [00:04:06] I think what Chia said made a lot of sense. What's interesting also is we're talking about this and it coincides with Bezos stepping down. And in a way, if you look at how Amazon has succeeded, it's because it does both things very well, which he does things in the physical world really well; distribution centers, trucks, warehouses. But he also does things online really well. So he has AWS, and that's a monster. And I think FinTech at the end of the day is about people. You touch people's lives when you enable people to improve their well being, enable them to send their kids to school, you enable them to attain their aspirations.

And so FinTech is the kind of space where it's both, you're building bits and bytes. But at the end of the day, it's resulting in concrete things in real life that impact millions of people. So I think to add into Chia's point, I think that's why it's just so significant. And that's why even when I was at East Ventures, a lot of the portfolios that we work with for FinTechs, a lot of the startups that pitch to us were also FinTech.

Jeremy Au: [00:04:59] Awesome. So again, if anybody has time to switch to questions, as well, but if anybody has any questions, just raise your hand and I will add you. Adriel, can we get a question from you? Go for it.

Adriel: [00:05:09] Yeah. Thanks so much for sharing a brief overview of the FinTech landscape. I think something that really caught my attention recently is the rise of buy-now-pay-later FinTech startups. Whether Atome or Hoolah and all that. I'm just wondering whether the creation and the democratization in that sense to bring ordinary consumers is a good thing for the stability of the financial system? I'm not sure how sustainable this debt creation is, and I'm curious to hear your long-term thoughts on this space.

Chia: [00:05:36] That's an excellent question because for context, my parent company is a wholesale debt provider, so they're one of the larger debt providers for FinTechs in the region, building a loan book, or doing any kind of lending, you know who we are. And so we check the debt markets really closely. And one of the things that not many people know is that, for me, one of the signs of a maturing ecosystem is access to credit markets. Because with debt, you can power your growth far better than equity. I've always been a big fan of non-dilutive approaches for founders to build companies, I think that makes a lot of sense, that keeps incentives in place, etc, etc.

And one of the really interesting things about Latin America, which I like to use as a comm for Southeast Asia, is that in Latin America, they also saw this huge boom of startup interest, quite a lot of American capital went into Latin America, they have new bank right now, which is like I think 30 Bil neobank, one of the largest in value neobanks in the world coming out of Brazil. And I just thought that that was super interesting because there was a lot of interest in that area.

But the thing that most people didn't realize was that also on the credit side, so much debt capital came out of the US that return profiles for fixed income in Latin America was actually super depressed, that a lot of the funds that were set up to try to capture this, like Latin America, that opportunity realized that the yields were just not good enough, because so much capital had flowed in there. And that's not what you see for certain markets. I think in India there's still a credit crunch. And as a result, your interest rates are still fairly high.

And similarly for Southeast Asia, and we're still only at the beginning of it, I think, to my limited knowledge that there's like only three to five debt funds that have recently come from the US, to look at Southeast Asia opportunities in the past two years. So to answer your question, Adriel, yeah, absolutely, there's a huge opportunity there, we're really still getting started. Fundamental infrastructure is still being built in Southeast Asia for these credit lines. And so I'm really positive moving forward.

Jeremy Au: [00:07:42] Awesome. And fundamentally, at least my point of view my quick take on this is, at the end of the day people just want to buy now. And yeah, this is an opportunity for people to reach out and get something more than they could have. And I think it's a route to deploy capital or to get loans, but is mediated by the retailers that have some understanding of the consumer, rather than through the incumbent banks. Because the alternative to it is really credit card debt, right?

You can't open a credit card, or your credit card limit is really small, or that the interest rates are really, really high because they can't figure out your credit history equivalent or your debt worthiness or your future income, whatever it is, then this is another route to get some cash to you in advance of that use, yeah. Chia?

Chia: [00:08:28] Oh, yeah, I forgot the question was actually on BNPL. So sorry for that rant. But if there was something else interested.

Keng: [00:08:34] BNPL, completely, I'm super, super, super bullish on it. Even though my parent company is a credit card issuer, I actually think BNPL will completely disrupt credit cards. And I think that's great because it's an option which credit cards has a role to play, but BNPL has less of a predatory brand. And I think that we see consumer behaviors in Australia and the US, adoption rate is just absolutely insane. I think in Australia is like 30% of Australians use a BNPL solution over credit card, and so super bullish on it.

I think the one thing you want to think about if you're sitting in Southeast Asia is, the key here is really much in contribution and so do we have a mature enough ecosystem and who were the stakeholders that actually can afford to do much of contribution aware of it? Et cetera, et cetera. I've been looking at some of the volumes going through some of these BNPL folks in Southeast Asia, and it's actually quite astounding. So yeah, super, super excited.

Jeremy Au: [00:09:35] Go for it Monica.

Monica: [00:09:37] So a couple of things come to mind, I don't know how many of you have been following the UK regulator who's actually stepped in onto the very highly lucrative as well as luxury market around BNPL, which is buy-now-pay-later. I think the recent report actually mentioned that four out of every 10 pounds spent in the UK is actually buy-now-pay-later on specific categories and segments. But what was really interesting was that most users actually don't know that they're signing up for buy-now-pay-later. And more importantly, while this product seems to be looking at serving customers who are underserved in credit, it was actually the 25 to 35 age category which was the largest user of these products.

And while I know and I totally understand the bullish nature of the industry, as well as why this is of specific interest to both fees as well as for products and FinTechs, I think there are some social and ethical dilemmas associated with the product and the overall category. And I'm not sure that it can be handled in a manner that can actually help with reducing the interest rates, therefore democratizing credit, because anybody who is going to be an unregulated lender is going to look at margins. And if the margins are going to be higher in the end consumer is actually going to lose.

So personally, for me, I'm looking at this pace very carefully. And there is a lot of risk associated with it. Coming from a very regulated industry myself, including card issuance, etc. I actually look at this as a little bit of a phenomena which is going to finally settle down into the largest lenders, being the largest merchants offering this product at the point of sale. And every country will have a specific variant. So in India, for example, we have specific variants that have been rolled out by the banks, it doesn't get hyped, because the top five banks have worked with the past providers in order to roll out installments and credit options at first, based on your bank account and other profile details. So it's a very interesting field, I actually think it's going to pan out in various variants, which we haven't thought about before.

Chia: [00:11:36] Yeah. So it's just terminology, right? I think when I talk about BNPL, I'm talking about the equivalent of 0% EMIs. And so I do see where you're coming from. I think what happened in Australia was like Afterpay had a huge amount of backlash when you had late fees, constituting something like 75% of their revenue, rather than the merchant contribution net margins. And so there was huge backlash there. And I would agree that a heavy dependence on late fees is definitely dubious.

But I think what we saw was the transition both because of public pressure, both because of internal confidence and also regulation that you can transition into a business model, where you're more dependent on the merchant contribution rather than the late fees, which I think Afterpay, don't quote me on these numbers, but I think I was looking at the annual report for Afterpay a few months ago, and it was something like 10 to 15% was late fees, and then they shifted that model formula of 75. And so I do believe you could build like an ethically sustainable model with BNPL, 0% EMIs, late fees, etc.

Speaker 7: [00:12:42] Hi, guys, thanks so much for having me. I actually come from FinTech from more of a crypto kind of stable coin and blockchain space. But I actually appreciated this question around the effects on the consumer for this kind of new type of lending. I was looking at an Indo FinTech p2p lender. So they were pitching themselves. I'm also in micro finance, we're giving people who have no credit history the ability to take out a $200 loan that Indonesian banks would never give to them. And I carry that around. And my open-ended question is what exactly is happening on the ground level with these followers? And I think there's obviously always two sides to debt; debt can help people climb up the financial ladder, but it can also hurt. So this is sort of my open-ended question now is I'm moving more into this alternate credit space which clearly are the future.

Speaker 8: [00:13:36] Yeah, I want to chip in here, I'm part of a VC fund, and I'm a venture partner in my VC fund. My fund actually I think is a really attractive space. And we recently actually deployed a deal into the buy-now-pay-later startup that is based in Vietnam. And I think that model really has much less risk. And the key difference between a buy-now-pay-later model versus the traditional credit cards or the terminals is that the first installment with the purchase. So it's like equity or skin in the game has always been a key feature in underwriting the good credits.

So this space is not much different from having the skin in the game. So because of having the skin in the game, which is like 25 to 30% cash payment at the purchase, that actually makes the economics much less lucrative for the fraudsters to commit fraud, or default later on for the consumer, but still having really attractive model for credit-worthy kind of customers. So we think it's really great customer experiences, and super margin as well as really lower risk in this model. So we actually invest in such startups.

Jeremy Au: [00:15:00] Awesome, yeah. I just wanted to also quickly respond to Monica, tied us off, and I think Reshab had a question, just to kind of close out the thread a little bit here is I think at the end of the day, there's always scope for regulation. I think private business has to work together with regulators. And I think at the end of day, is that partnership, and I think we want to have the best and the upside of people being able to access credit that they were not being served by the incumbents. And conversely, of course, make sure that there's no predatory practices as well. And I think it's both self-policing, but as well as policing by the regulators. Now Reshab, I think you had a question. Go ahead.

Reshab: [00:15:37] I'd love to understand the panel's perspective on sort of what do you think is the future of micropayments, especially in emerging economies like Southeast Asia? In India, obviously, we sort of because of the UPI, it's sort of possible but like globally, when I sort of just look at micropayment trends beyond using wallets or you go to PayPal, they charge you a hefty transaction fee. But what do you see as the future? Is there something interesting that we're seeing happening in that space, especially in Southeast Asia?

Chia: [00:16:03] I have a few thoughts in this, but I'm actually super curious to get Keng's thoughts because this lands squarely in your space, right? I think Reshab had a good question about micropayments and the future of micropayments for emerging market, I have a few thoughts but it lands squarely in your space, so I would be super keen to hear what you think about it.

 Keng: [00:16:18] I mean, in terms of micropayments, they are the norm in places like Indonesia, for example. And if you look beyond just Java, and you look at the tier two, tier three, tier four cities, their transactions amounts are really small. And actually, that poses a lot of problems in terms of let's say, even in buy-now-pay-later services. Because if the average order value is low, and then someone takes a cut in this BNPL service, it's very hard to generate any kind of profit margins off of that.

That's why there are some other interesting models that are local to Indonesia, such as the arisan model where it's these communities, they come together every month, or it could be a defined frequency, and then they pull their money together and they help one person buy something. Actually, that's quite interesting and it's pretty unique to Indonesia. I'm not sure if anyone has heard of that before.

Chia: [00:17:09] Yeah, I think a good point from Keng. So to answer your question, Reshab, from my side at least, I've always been fascinated with micropayments, I punted a bit of cash into like Steemit before because I've always been super interested in the intersection between payments, incentives and content creators. And to a large extent wallets was meant to solve this huge problem of low LTV customers trying to transact digitally. And then with the wallet system, you don't have to be reliant on the high fixed cost transaction fees of third-party payment rails.

So in general, like wallets and then there's a few other things out there that are meant to be addressing that. I do you have a general problem with microtransactions in the sense that besides the fact that it's just fundamentally unprofitable, it's really rare to find a sustainable use case that really makes sense for a business model centered around micropayments. And I go back to the one that I was bullish on was micro-content creation. So Steemit, if people don't know, it was like medium on blockchain with crypto incentives for the content creators, which I thought was super interesting.

But there's also this huge problem of to what extent can you really incentivize people the amounts are so small, like the economics just breaks down somewhere. So I want to be super excited about this. I struggle with that Keller use case.

Reshab: [00:18:24] Especially in the case of content, like you said. So like newsletters, for example. You cannot practically be spending $10 a month on 100 newsletters. I'm just waiting for an aggregation platform where you can almost pay-per-post kind of a model. I don't know if you guys see that problem.

Keng: [00:18:41] Let's bring it back to FinTech. I think the value of microtransactions is not the microtransactions itself, but an indicator of the user. So I think that's why KhataBook has spent so much time expanding across India, BukuWarung and BukuKas, is that they see the value in getting all these users to perform these microtransactions on their platform, and they offer a suite of services that surround these microtransactions.

Chia: [00:19:04] Actually, I should know this, it's really stupid. But what's the definition of microtransactions? Because for the MSMEs, those aren't really microtransactions. Those are very decent sized transactions.

Keng: [00:19:15] In the case for some of them, they are talking about they lend one cigarette, they lend a single item that's in terms of like US dollar, we're talking about cents, do you think that counts as microtransactions? 

Chia: [00:19:26] I think definitely anything below, let's call it $5, would be a microtransaction.

Keng: [00:19:31] Then a lot of the MSMEs transactions are all below $5.

 Reshab: [00:19:35] Yeah, I was talking about like sub $1. For example, in India, you have Dream11, where you sort of do sports betting and it's like 10 rupees, which is like one seventh of a dollar or something.

Chia: [00:19:45] Yeah, it's tough, right? My fundamental problem is for domestic payments. Again, to make the economics work, I feel like it has to be tied around a new way of doing things, a new economy, otherwise the economics just don't work out. Even then that's me speculating that it could work out, right? So when it comes down to it, the reason digital microtransactions appeared in India was really a governmental push, demonetization et cetera, et cetera. And so that really pushed things along.

But you'll also note that UPI destroyed many business models. It created a net good for the FinTech economy I think in India, but it was also a reflection of the fact that it's just really, really difficult to try to make money off microtransactions. And to a certain extent, you see the same thing on the crossborder basis. I want to be excited, I want to make sure it works. But there's a part of me that just goes okay, this will happen if the MCPI exports UPI to [inaudible]. Or Singapore government implements PayNow. And so that's kind of where I land.

Jeremy Au: [00:20:44] Yeah, makes a lot of sense. We have Oliver, we're catching up for coffee I think later this week. Oliver, you're at Google Pay. Any thoughts or questions on your mind?

 Oliver: [00:20:53] Hey, guys, nice to meet you all here. Thanks for organizing the room Jeremy, the discussion's been super, super fascinating. And one thing I'm taking away and we've known this for quite some time is it's these big leaps forward in infrastructure that unleashes a lot of the potential in the market. We've seen that with UPI and Aadhaar in India, and to a certain extent buoyed up by falling data costs led by Geo. So I'm super curious, where do you guys see some of those infrastructure shifts happening in Southeast Asia in the next 12 to 24 months? That can be immediately actionable from both a product and investing standpoint.

For example, in the Philippines, we are I think at an inflection point, because the central bank is starting to launch the local version of Aadhaar. And so for those not familiar with Aadhaar, it's basically a national identity system that's like cheap, low-cost, open. And so I think that will unleash a lot of FinTech related products in a country that for so long has been super underbanked, and super buttressed like legacy banking systems. So curious of what other new infrastructure plays are coming up across the region?

Chia: [00:22:12] That's an interesting question. So obviously, there's a bunch of companies out there that are building the backend infra. We invest in oil, they send it out there in Indonesia. But I actually think that again, the main driver has to be the use case. Because if there's no use case really driving that, then the infra is just going to be hanging out there. The problem with a lot of these infra plays, is that it typically tends to be very, very specific to again, a very specific use case they're trying to do.

The Mark Heters of the world, or the Mark Heters of Southeast Asia, like Neom and MatchWorth and all these guys, it's great, right?. And it's going to help to propel digital transactions, but is it going to propel microtransactions necessarily? Not really, there's no real incentive to do so. So you just need a very deep saturation of use cases and infra before we can see that happening or it's just going to be a regulatory push. That's kind of how I see it.

So for me, the better question is, what use cases on the B2B and B2C side are we increasingly going to see coming out. And that's why when we talk about BNPL, when we talk about new backend, B2B, SME systems, that's where I come from and get excited by, if that makes sense of course.

Jeremy Au: [00:23:27] Yeah, I think that's very true Chia. And we also covered this topic a little bit. We talked about this at the last Clubhouse we recorded, the episode is on jeremyau.com/join. At the bottom of the page, we actually have two episodes that touch on predictions for 2021, which is as I shared, a good way to faceplant after 2020. So I think that's something just be aware for everybody. Keng, what do you think about that as well? I mean, you're definitely taking action for 2021, you're directly building a startup, founded it for 2021. Just got seed funded as well. So what do you think?

Keng: [00:24:01] I think it's a really exciting time. We look at the evolution of technology, the first wave was getting people on the web, and then the second wave is people doing stuff on the web. And then I think the third wave you're going to see is an offshoot of people doing stuff in the web, anything that enables transactions on the web. And I think in a lot of ways, I would love to hear what you guys think about that. But a lot of times, I feel like we're still in day one.

So Unix has this thing when you calculate when time starts, it starts in 1970, something like that. But basically, what I'm trying to say is it feels like in terms of startups, we're just in day one, there are so many options. Just for example, when Elon did the Clubhouse room and the next day, the second order effects of it were Agora's stock went up. And these are things you don't think about, but they're all tied together. And so it's very exciting I think, but also very challenging to always try and think from first principles, and then later think of the second and third order effects of things that you see in the market, and how that can impact you and your business.

Jeremy Au: [00:25:02] Yeah, well, Spencer, I think the other trend we're seeing of course is the rise of crypto. I don't know if you want to call it, is adjacent to FinTech, right? I don't even know how to describe it. Do we call it FinTech, cryptotech? Anyway, but Spencer I know that you've been also looking and you've been building a ton of stuff obviously in the space, but also, I mean, you're starting to see something on the adjacent side as well.

Spencer: [00:25:22] Yeah, I think one of the things that Keng earlier touched on that was kind of interesting that maybe I can just give a comment on is about this concept of social investments and how I think there's an adjacent part of FinTech which is about democratizing access to being able to invest. If you look at how many of the tools that we see that are pretty popular in the US, like Robinhood, TD Ameritrade or some of these other platforms, you see that they are really trying to help the regular user, the regular person on the street, to be able to access some of these financial products whether it's a stock, whether it's bonds, or cryptocurrencies for that matter.

And I think companies like Coinbase, companies like Robinhood are all kind of trying to do that, and trying to democratize the access to financial instruments and products for users. So I think there's definitely opportunities in Southeast Asia, in my opinion, for some of these experiences. I think it's still really early. A lot of the products that we see in the market, let's say in Singapore, give us really good access to stocks and financial instruments in SGX and some of the other local exchanges.

But I think there is definitely a lack of education, also lack of access to some of these more global markets, whether it's the US and so on. And I think definitely we can do a lot more. You see companies like StashAway in Singapore that is doing some good job there to help the global advisory and stuff like that. So definitely, there are things that I think we can do in the Southeast Asia FinTech ecosystem to help more people get access to some of these products.

Chia: [00:26:43] I'd love to take a contrary view, and I actually do agree with you and a lot of what you say Spencer. My question is, Southeast Asia is also a very income-unequal geography, right? We have a lot of really rich people and a lot of the middle income and a lot of countries that are in Southeast Asia are actually not that well to do. So we talked about democratizing finance, what sometimes you bump up against is that the ones with the money or really actually have access, they are really very plugged into Western infrastructure. But at the bottom of the pyramid, middle income of emerging markets actually don't have that much disposable income to begin with. So I'm curious how you think about that?

Spencer: [00:27:25] Yeah, I think you've got a really good point, I think there's quite a bit to unpack here, one is the access, which we talked about whether it's to different markets like the US market, or to the European markets, and so on. And the other part is just the disposable income that you talk about. I think that is basically the quantum insights, right? And I think if you look at the past year of COVID and everything with the global situation and so on, and the stock market is really increasing in valuations across the board, you'll find that definitely there is a certain level of inequality that has exasperated and increased over time.

And then you see employment rates across the world also falling, and people are getting unemployed, people not able to find good opportunities, and so on. So you definitely see that, to a point about how I think many parts of Southeast Asia, people may not feel that they have enough disposable and investment income or investment allocation, I think that definitely is true. And then to the question about access, there could be better tools to work on increasing access.

I think there are many companies who are very, very, for example, US centric, very, very European centric or whatever. And they can do a much better job of bridging this in a different kind of market in a different way. But of course, these are all things that I think we're solving as entrepreneurs in that ecosystem.

Keng: [00:28:32] I just want to add to what Spencer said. He's so right, I think a lot of times we see a lot of people taking stuff they see in the US and the EU, and then just taking it to Southeast Asia. But oftentimes it doesn't work. When you look at access to financial services, which is something that I care a lot about, for example, again using Indonesia's example, more than 200 million Indonesians don't have access to a bank account. And if you think about it, everything you do nowadays requires a bank account. So it's very, very limiting to so many huge populations of people that don't even have access to basic infrastructure. So I think there are a bunch of FinTechs trying to solve this.

Speaker 12: [00:29:10] I recently did a podcast with Sazzad from SDI Academy. So it was a Tech For Good podcast. And what was interesting was that even within Singapore, we don't even have to look that far into the rest of Southeast Asia, within Singapore, where the migrant workers, for example. I think what COVID really brought out was that this community of people, while the rest of us were benefiting from a lot of the FinTech services and even mobile application services, this community that needed their services even more than anyone else did not have access to them.

And so there was a sprint almost to create mobile services, app services, remittance services, for example, which is a space in FinTech that's maybe not accessed that much just for the migrant worker community that may not have access to a SingPass account, may not have access to certain digital identity that we take advantage of. So I totally just want to send snaps to that comment, because I think we need to really broaden our idea of what are the user groups that FinTech can access, because there's a lot of value that can be created for different communities as well.

Jeremy Au: [00:30:10] Yeah. So I think to push back on Chia pushing back on Spencer, just because it's targeting like top of the pyramid or in the middle of the pyramid-ish, doesn't mean that it doesn't trickle down. Because I think as Southeast Asia continues to grow and people get richer over time, I think they're going to ascend and float into the tools and services. So it's not binary, you can have the tiger trading app was a Chinese company, Hong Kong company. But you can't have a Robin Hood equivalent. In five years’ time, more people will be like stonks only go up. So now moving on to Allison. Allison, you had a question. And then Pamela, yeah.

Allison: [00:30:44] Thank you so much for hosting this, I've been really interested in seeing how digital wallets and robo-advisors, Spencer, you mentioned StashAway, have been progressing and would love to hear your opinions in where you see growth opportunities in these areas?

Spencer: [00:30:59] I think, definitely you won't be able to speak to all the features some of these products have. But in terms of features, some of these platforms that I've seen have really interesting abilities, I guess feature sets to allow people to be able to dollar cost average, for example, and invest. If you look at Southeast Asia and Asia as an ecosystem, it's very real estate focused. A lot of the conventional wisdom is if you make some money, you buy property, or you get real estate, and so on. I think that's definitely great advice and has worked for the last 30 years.

But if you look at some of the markets that, for example, if you compare against some of the other markets, that may not be necessarily the case. And I think some of these robo-advisors definitely do provide some interesting tool sets for people to be able to dollar cost average, maybe spend a portion of the income on an average basis into some of these financial products, and so on. And hopefully that generates reasonable returns. But of course, that being said, they do have to make sure that they're offering products that are suitable for them.

Jeremy Au: [00:31:50] I would also love to hear Oliver's take on this because Google Pay is probably, what, is it the largest digital wallet in Southeast Asia now? I know you guys have been growing like crazy.

Oliver: [00:32:00] I certainly don't think we're the largest digital wallet in Southeast Asia. Although thank you for thinking that. I think that something worth clarifying for most people outside of India who might not be familiar. There's actually two versions of Google Pay. One, there's Google Pay which is the Apple Pay of Android, right? But just like the evolution of the old Android wallet, which is present in like 38 countries, basically a tap-and-pay use case. And then there's Google Pay in India, which started out just as close to four years ago, which baked in a lot more functionality from peer-to-peer payments, recharging your phone, bill payments, even buying gold, all of that stuff.

So that version of Google Pay was relaunched in the US. So we launched that like two months ago. And it's growing pretty well. We also launched it earlier last year in Singapore. So if you're in Singapore, that's the version of Google Pay that you're seeing now. And we feel like it's still a long way to go because we are certainly playing catch up to even Gojek and Grab who have more well-developed wallets with multiple use cases in them. But it's exciting. It's a space that we see a lot of growth in for Google in general.

Chia: [00:33:16] And maybe I can add something here. So the super interesting thing, and we talked about microtransactions and wallets in the beginning of this conversation, and I was talking about how it solved a problem on the corporate side, and especially when comes to lowering transaction fees for sending. And something that I kind of never really realized until very recently was how wallets really serve also a super important role on the receiving side for lower income groups who actually not only use wallets for receiving domestically, but it's also a super important infrastructure point for receiving cross border payments digitally.

And we see a lot of remittance growth that really comes in parallel to wallet adoption growth, because you have basically people who are able to receive money digitally through these wallets. And they can be families of migrant workers, etc, etc. So I'm not sure if that's necessarily an odd, I'm a little bit skeptical it's an odd per se, but it's also really interesting points in terms of financial inclusion and general adoption.

Jeremy Au: [00:34:17] Awesome. We're coming on our time here. Pamela, and then Alfonso was the last question. Yeah, Pamela, go ahead.

Pamela: [00:34:23] Thank you Jeremy. So actually a very good discussion on the microtransactions because it's also one of the things that I'm actively working on. And I'm happy to hear Jang's perspective on it a while ago that it's everybody wants to really solve the financial inclusion for those that are underserved and unbanked. And it's really getting that right use case for it. I'm relating it with the previous topics also discussed. While Spencer said that there are businesses or companies that are being replicated in Southeast Asian countries, but like what Keng also mentioned even similar to the Philippines where I'm from, the number from unbanked population is just way too big.

And we're only just scraping, I would say slowly, the Filipinos are getting there when it comes to financial literacy. And apart from financial literacy now, everybody also needs to learn digital literacy. So hopefully, I don't know how long it would take for let's say, the Philippines and the other developing countries to be at that point we're in this wealth management. And we would have access to so many financial products and services out there. But I just want to share, and I also want to know how it is in the other Southeast Asian countries on what are the challenges there too?

Because for example, one of the clients that I'm helping out is in the digital lending space as well. And in the Philippines, the digital lenders have a bad reputation. Because there have been bad practices as to collection, which is like there's the whole shaming. And some digital lending companies are calling, for example, people in your contact list if you haven't repaid on any of your debts. So I guess my curiosity would be what have been the significant challenges also for the other markets? I'm aware with a couple but it would be nice to also know what are these FinTech companies' challenges?

Jeremy Au: [00:36:15] Got it. Chia, why don't you answer that question? Go for it.

Chia: [00:36:18] Cool. I think there was a few questions there, so what's one of the bottlenecks for cross-border payments? I alluded to this a bit before, but it is a very interesting space. Really, I think it's infrastructure on the send-receive side that is the main bottleneck. And I'm not talking about drivers of the company, but really institutional bottlenecks. And so I think that's definitely one. So a greater adoption of wallets, more awareness of alternative options, I think that's definitely one positive step on that side.

You mentioned lending. So I think my view for lending and greater adoption on lending, the obvious one is the lack of a uniform credit score in our region. I don't think that'll be solved anytime soon so no point really mentioning that. I do think that one of the things that actually drives the lending industry to a more ethical and also a better place for consumers is more on the regulatory side, and also on the centralization of data. So regulators do take time to get up to speed with how they should be governing alternative lending instruments and lending platforms.

And I think what you see is that once regulators have a clearly defined framework that is good for both the lenders, and also for consumers, that it's a much better place to play. You see some geographies or jurisdictions where regulatory environments are unclear, and that's where all sides really suffer. So I'll pause there, hope that answers your question.

 Jeremy Au: [00:37:36] Awesome. Alfonso go ahead and shout out to Hian, leader of OpenSpace. He's a great guy. Check out his fund if you haven't.

Alfonso: [00:37:43] Yeah. Hey, Jeremy. Thanks for the opportunity and thanks for the panel. I actually wanted to take this opportunity now that I see that Oliver spoke about Google Pay to ask a question about it. As a product manager, it's something that has been really bugging me, it's something that I really try to understand. How come Google decided to go for their own standalone app and in fact, a specific app for Singapore, the architect Google Pay Singapore. Doesn't that create a kind of a chicken-and-egg where it becomes so much difficult to create an ecosystem going because I see Grab QR codes everywhere. I see a lot of like Fave but a lot of other means of payment in Singapore, which are very prominent, but I installed Google Pay Singapore like months ago, and I never used it once.

Oliver: [00:38:26] Great question, quick answer is Google Pay as an app isn't like a stored value wallet similar to like Grab Pay. There's no cash in, cash out, this Singapore app runs on like local rails. And that's the short answer of it. Every single country in Southeast Asia runs on different rails. And essentially, our goal is to build a product that can live on existing peer-to-peer real time payment rails, rather than building up a separate closed ecosystem altogether. So it was a very pretty nuanced product decision. And there are some tradeoffs that we will obviously have to make.

If you check out the US version of the app, there's a little bit more functionality in there in terms of personal financial management and card linked offers and all of that stuff. But you're right, if you ask me. Am I happy with the product? Of course not. There's so much more room for this to improve.

Jeremy Au: [00:39:24] Awesome, Mad, we will squeeze you in, welcome Hian as well. Mad, want to say something?

Mad: [00:39:30] No thanks, Jeremy. I can't really share from the Indonesia perspective, because I spent my entire life here. And like specifically from retail, because like, that's what we do here. I mean, we were just even discussing another day with Kevin as well. If you see, I mean, this is one of the biggest unbanked populations in the entire world even. And from the resource perspectives, we're talking about how we can actually unlock this subscriptions model in the retail business.

Because they're just so big in the US, health and beauty, skincare, business, et cetera, et cetera. They have amazing returning customers , it's just like because they're very simple. If you set a subscription model or if it's cloud [inaudible] et cetera. And here in Indonesia it's just impossible, because the credit card penetrations here in the market is just so low. And at this point, we were talking with Kevin, how we can actually like Gopay or Ovo and those guys can actually help us on the retail business unlocking this area with their subscriptions model, but so far, it's a little bit of, I would say, a bit of difficult. So that's what I don't know. If anyone here have some ideas how we can actually do a bit of proper retail subscriptions model with the very low penetration credit card in the market, but can still become a very seamless journey for the customers.

Jeremy Au: [00:40:42] Awesome. Thanks, Mad. And Hian, what do you think big boss? Any thoughts you have?

Hian: [00:40:47] No, I just jumped in, I don't want to comment because the etiquettes are you come into a room late, you don't know what's going on. You need to ask me a question while I respond.

Jeremy Au: [00:40:57] So I guess what Openspace excited for FinTech, for all these hungry people looking to found FinTech, invest in FinTech, work at FinTech?

Hian: [00:41:06] Okay, so I'll give you the 30-second house view. Thanks for having me. So Openspace, obviously early stage, Series A we've been lucky, we've done a few so we bagged FinXL, which is Kredivo, that's the big one in Indonesia, we've also done insurtech Igloo, and we've also done SME lending Validus, just to name three. We've always been excited because about five, six years ago when we invested into FinXL, I actually said, "I can build a credit score without using people's social media data."

And to the point of the gentleman who was previously saying that there is a lack of a unified credit scoring system, I think we actually believe there is no need for a credit scoring system because you build FICO, and that business model is you're going to buy data, and FICO makes money by giving you that information. Well, if Android is a platform people give you access and you can actually track people that have a higher correlation. So I don't think actually credit scoring houses in the traditional way, will ever appear.

Maybe a social media company or a guy who knows how to do mobile will create that. But bottom line, I think the trend is there, the wallets are going to happen, our house feels that social commerce may be a bit early, because you look at Pinduoduo, the logistics as well as the payment systems was so seamless, and Wechat powered that adoption. We're seeing a lot of the social commerce guys really being more logistics players at this point in time, not quite able to gamify to that level of frictionless and may need to raise a lot of money so let's see where that goes. So there's so many places, I don't know where to start, you need to zoom me in, or else I'll just keep on talking.

Jeremy Au: [00:42:42] Well, that was an awesome way to wrap up the one hour on FinTech. We do have future episodes, it seems like there's appetite for more regular stuff. For anybody who wants to I'd love to go around the table and say what topics would you like to hear more in Southeast Asia Tech clubs? Just go around the table. You want to start first Chia, what topics you'd be interested in? And then I'll go to Keng and then go down rotation.

Chia: [00:43:03] Yeah, I'm super interested in how the angel seed will transform, seeing a lot of great stuff there. And an angel myself, so I'm always super curious. And so yeah, that's one.

Jeremy Au: [00:43:13] Keng.

Keng: [00:43:14] I'm interested also to explore regulation in our region. Again, going back to the theme of it's really hard to take what you see in the US and EU and replicate it here, for example. There's a lot of legislation that's not available here, some of it is not pro startups. So I think regulation, compliance, legality would be interesting to discuss. I think separately also very interested to discuss about Angel. I myself, also an angel investor. So I would be curious to see how it evolves.

Jeremy Au: [00:43:41] Awesome. Adriel?

Adriel: [00:43:43] Yeah, personality quite interested to discuss and hear about how the bifurcation of technology between the US and China will have deep seated implications in Southeast Asia. I mean, we are already seeing it, though in launch going payments, and so does that FinTech element as well, so quite curious to hear people's thoughts on that in future episodes?

Jeremy Au: [00:44:01] Kenneth.

Kenneth: [00:44:02] Actually impact investment, and impact investment frameworks as applied to micro finance.

Jeremy Au: [00:44:09] Oliver.

Oliver: [00:44:10] Well, we have 70 people in the room. So I'm super curious on how we can be helpful to the rest of the club and the community. Are you an entrepreneur looking to build a product or raise funding or someone from banking who wants to jump into FinTech or fresh grads finding the role in the industry? So I'm sure we can find a way to make this forum to be more inclusive of whatever people who need help.

Jeremy Au: [00:44:35] Awesome, I'm going to go for TKK, Alfonzo, Mad, Hian, Spencer, Dimitri, just kind of keep going. And then that's it. Yeah.

Ashley: [00:44:42] Thanks. My name is actually Ashley, that is okay, it's great. Thanks for the talk. And I'm very interested in the new trends of each of the sub sector within FinTech like go buy insurer tech, like keeping payment tech or etc. So I'm interested in the new trends or in debt.

Alfonso: [00:45:03] From my end is more like where [inaudible] first. A lot of time we are followers or fast followers, I'd like to hear more about cases where Asia is constructing.

Mad: [00:45:08] Yeah, for me [inaudible] I'll stick with my domain here, which is like in honor of retail. It will be super awesome if actually things [inaudible] , which is the cross modal retail. So b2c brands here in the market, we can actually I would say, catch up with the how big the other b2c markets in the US and stuff. And of course, how the FinTech can actually really unlock even for us retailers. I mean, a lot of people are doing a [inaudible] but as what I mentioned before, how we can actually do this, helping the subscriptions retail model to kind of like unlock in the subscriptions retail models here in the market.

Jeremy Au: [00:45:49] Hian.

Hian: [00:45:50] One of the things that the house is currently thinking of very deeply, or rather, my colleagues are thinking of very deeply is whether we can graduate from in country specific models to regional models. So one of the things of the thesis that I think a lot of my peer group have invested in is the logistics. And you can play logistics in many different ways, including as how Hoffman said, cross border logistics.

And one of the areas which we've kind of discounted, but I put it out there, I think it's really maybe something that we're actually missing is ecommerce enablers. When you look at Acommerce, you look at the guys in Vietnam, Philippines names dropping, and historically, I've always felt that those were ... There was adverse selection issues. Like for example, you handle the L'Oreal brand, at scale L'Oreal will just use their own warehouse, will use the customer that you've build your business on. So we've always been kind of like ecommerce enablers, not very cool.

But then you look at China. And the question I want to ask and if you guys want to address it in the [inaudible] , are we getting to a point where essentially, we're getting so sophisticated management teams capabilities, that it's cheaper for L'Oreal to use an ecommerce enabler as opposed to an in house. And you look at the chip TSMC started off as being an outsourced provider. Now TSMC is the market leader in technology. And then if you decided that I'm going to add all those ecommerce enablers across the region, I think you basically have outgrown some of these kind of big Chinese players, and then you can get to like five to $10 billion.

And I think it's incumbent upon myself, I started Openspace to try and keep a capital going after I finished up as an entrepreneur, I think it's incumbent for us to really try and think about building these major companies. Because it is those major companies that end up being the Baidu, Alibaba, Tencent, they become the flywheel of the ecosystem. And we're quite keen in trying to figure out certain sectors that can be bigger regional payments, going to a regional logistics can be the regional ecommerce player, can be a regional this and that, and then a lot of the questions about the heterogeneity of the region sort of disappears. So that's really sort of something that we've been talking about internally and I just wanted to share it you guys.

Jeremy Au: [00:48:03] Awesome, Spencer, Dimitri. And then that's it for our top suggestions.

Spencer: [00:48:06] Yeah, sounds good. On my end, definitely I would love to just hear more topics and just you talk to founders and hear from founders that have a very, very strong interest in this current role in a remote environment. To build teams that are tackling a problem not just in Southeast Asia, but also specifically China and the US. Just seeing how we can leverage on some of these remote nature to grow businesses internationally.

Jeremy Au: [00:48:31] Awesome. And Dimitri.

Dimitri: [00:48:32] Yeah, Jeremy I just actually just jumped off the call with a bunch of people smuggling electronics into Southeast Asia from China. Fascinating.

Jeremy Au: [00:48:43] [inaudible]

Dimitri: [00:48:43] Yes, please do. So dovetailing on what Hian's team is thinking about deeply and Hian is thinking about shallowly, I would love a sequence of sessions about Southeast Asia's regulators and which way they'll jump next. And let's not do Singapore, because I'm in Singapore jurisdiction right now. Let's go step about Bank of Indonesia, let's go step about Bank Negara. What they are trying to implement and what they're failing to implement would be awesome.

Jeremy Au: [00:49:09] Awesome. And Nick, I think you want to have this last suggestion here.

Nick: [00:49:12] Hi, Jeremy. Hi, everyone. Thanks for inviting me. I'm based in Shanghai and I've been following it was interesting, the discussion in Singapore. So to your question about founders that would be building businesses in relation to China. An ongoing discussion we had with China based international founders or Chinese returnees as well is the cost of starting up in China is basically growing exponentially, and the risks of getting copied and of basically having just enough runway to prove to get to a point that you get at least that minimum traction is being perceived as increasingly elusive to people here. And do you see Singapore as potentially a good hub for China ideas to get tested a little bit away from the limelight and from this ruthless Chinese environment.

Jeremy Au: [00:49:58] Awesome. Thank you so much, everybody. That's the wrap of today's episode, we have a wish list and moderators. And I will just be thinking sure about how we can launch more episodes and do them more frequently since there's so much appetite these days. Awesome. Good to see everyone and enjoy the rest of your lunch. That's a wrap of the episode. Thank you, everybody. See you all around. We'll be looking at taking this wish list and increasing the frequency and the depth of these conversations. Thank you so much.

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