Moderated by: Saurabh Madan, VP – SEA, Japan & ANZ
Anna Green, Head of SMB, Asia Pacific and Japan, Amazon Web Services (AWS)
David Harling, Managing Director, MoneySmart
Julio Bermúdez, VP APAC, Amplitude
Saurabh Madan: How has digitization helped drive financial inclusion in Southeast Asia? I will start with Anna because she’s seen it firsthand while living in the Philippines.
Anna Green: How has it helped drive financial inclusion? It definitely has. It has materially helped the Philippines. Over 70% of the population there don’t have bank accounts. It’s hard for people in developed countries to get their heads around that. One of the things that I remember being surprised about was just the team that I worked with, where we were just doing simple things like filling out documents and realizing that many people in the Philippines don’t even have a mailing address.
How do you get a bank account? How do you do KYC? How do you do anything that requires you to be registered with the government, if you don’t have an address? This is real, and it’s a challenge that is not just in the Philippines, but in a lot of developing markets across Southeast Asia. So what digital technology has done is it has allowed those people a way to access finance where previously they couldn’t.
It’s done in a couple of ways. The first is to use the device familiar to most people in the Philippines, a hand frame. The Philippines, as you may or may not be aware, is the second largest user of Facebook in the world outside the US. So, over five hours a day on average using social media so the population is now truly entrenched in a digital context.
Now the challenge or the opportunity for financial services there is to say, okay, well, let’s solve that. Let’s solve the fact that many people have a phone. Many people can contact their friends and learn about things on media, but they don’t have a bank account. How can we use digital technology, to reach that population?
So what I saw there was that local banks were experimenting with digital technology to create different FinTech solutions in that region. I’m sure you guys have seen that as well. That’s been the most interesting journey because people in developed markets often talk about FinTech and how they’re building and disrupting banks here. However, the opportunity with Fintech is really in the unbanked population in Southeast Asia. I pass on you guys. I’m sure you guys got the point on that. Are you seeing those unbanked corporations accessing finance differently?
David Harling: It depends on which market. We tried to penetrate developing markets, and you are right. There’s a huge unbanked population. We tried to penetrate emerging markets, which was tough. Philippines, Indonesia, and Thailand — very tough. Hong Kong, Singapore, and Taiwan — are a little easier to penetrate. The number of unbanked consumers in Asia is large.
Anna Green: So, that’s your opportunity! What do you think, Julio?
Julio Bermúdez: Yeah, we’ve seen a lot of financial products take off. I think one of the most exciting ones, at least from my perspective, has often been an opportunity for people without bank accounts.
There are a lot of people that aren’t participating in the capital market. You will likely get very little back when you put your money into a bank. So, for people to be able to start tapping into these capital markets across regions and different markets is an exciting opportunity until this month. Until the markets start doing well again. That itself has created another level of financial literacy for people. Even in places like Australia, and Singapore. So, I think to be able to democratize access to capital markets, It’s just another sign of technology kind of helping raise the tie for all those.
Yeah, I love that. Also, you hit on something which I did see in the Philippines and Southeast Asia generally: a propensity to use FinTech differently. The consumer base is 30% around the age of 30 and has only ever spent their time using a mobile phone. And, as I said, massive hand penetration. So the opportunity for FinTech is in Southeast Asia and has only accelerated post covid. We have seen the acceleration of product suite marketing applications. We have just seen a huge increase in engagement from the consumer base on those particular products. We’re coming from an AWS context. We see that as a growing part of what’s going on in Southeast Asia. Covid has made it more immediate a requirement for FinTech to get going and start building solutions for customers around things like KYC. So that people don’t need to go into a physical branch to be able not to get identified.
We’ve seen ISVs building solutions like that where the consumer base has massively gone from 2000 person use case to a million within a three to six-month period. Very quick. That technology is being adopted and adapted into financial services to make financial services more accessible to more people.
Saurabh Madan: Thank you. My take on that is that acceleration was supposed to happen. It just happened way too fast during the lockdown. People wouldn’t go out to buy things. People eventually needed to figure out how to buy something online and pay money online for delivery.
Saurabh Madan: David, the next question is for you. Your website compares home loans, financial services, etc. The new trend in the market is Digi-banks and Neo banks. What do you see around that? Will you start comparing what one bank is offering to another bank?
David Harling: Yeah, it is super interesting. Our business has been formed by traditional banks. Mortgage, personal loans, credit cards, and other stuff. What you are touching on is super interesting. It’s like the next generation of banking. The digital banks. Do we partner with them? A small bit. We could have done more.
It’s super interesting in terms of where the personal finance category goes. How can we extend our traditional banking products with Digi banks? I think that Digi banks will eventually take over traditional banks.
Anna Green: Are they cutting the margins already? If someone’s using your platform to determine the cheapest mortgage, are you seeing a material difference in what the traditional banking product looks like? Compared to the one that you made? Do you see that as being a differentiator?
David Harling: It’s interesting that we get insight into the traditional banking space but not the Digi bank space. We have no insight there, so wouldn’t be able to know.
Anna Green: Are they keeping their algorithms private?
David Harling: They are keeping it tight.
Saurabh Madan: Digi banks first launch their services. They have no physical stores. Standard Chartered is launching theirs next month. They signed with us, by the way.
Julio, is Amplitude noticing anything in the banking space? Since Amplitude is helping companies analyze all kinds of product data.
Julio Bermúdez: Yeah, definitely. One of the most interesting aspects of Covid has been that people have not been able to acquire customers in the way they used to. As we said, many people spend time on digital products and consumer apps that are highly tailored, personalized, and relevant experiences.
Then they go to a traditional bank that’s creating a digital product. They go in, and it just doesn’t work. It doesn’t make sense. What we saw was a huge problem. People are downloading those apps, trying those apps, trying to figure out how to open their accounts, getting stuck, or not having a good user experience. They deleted the app and went away.
The problem with that is, if you’re on the marketing team for that company, you got the down roads, the installs, the clicks, but you need to generate revenue. If you want that digital product to generate revenue, you must understand what’s happening and what the users are doing.
When we look at the public statements of some of these companies, you look at what Standard Chartered and DBS are saying. They say digital is the future. We are making money. Digital is more strategic. However, they need to learn how those things generate money.
That will be the next level because the consumers are expecting a type of experience you can get from Facebook or Airbnb. They are currency being confronted with these old, poor UI-driven experiences. That is leaving a ton of money.
Saurabh Madan: Absolutely. Digital banks are definitely the future. If you look at the e-commerce industry today, you can buy a product from Zara or Shopee. Wherever you get the best service and best delivery. You wouldn’t have loyalty to anyone. You’re not loyal to a brand. However, banks have had the luxury of tying us to their services. It takes a lot of work to switch a bank. As soon as there are five digital banks in Singapore, switching will become super easy. So they’re going to fight for our business. We won’t have to fight to get services from them. So I’m really excited about the digital bank. Anna, do you want to comment on that?
Anna Green: Well, that’s why regulators and traditional banks would have challenges with this kind of open source or anything to do with the sharing of data. It’s very obvious that there’s a challenge with their business model because you are correct. One of my favorite statistics, when I was the CEO of a bank was when market research teams went out and asked people how they felt about going to the bank. They ranked going to a dentist over going to a retail bank. It’s just a moment in time where if you’re running a business where people would rather go and get a needle stuck in your mouth sitting in a chair versus doing a transaction with paper. It’s not just your generation. It’s every generation. Nobody has the tolerance for standing in line at a retail bank and waiting in line with a slip that you fill out, and then somebody says, actually, that’s the wrong slip. You have to go back in the line. We all remember that. It’s unacceptable customer service and that’s how the world has changed. So yeah, holding onto that world for as long as I can and relying on the fact that there’s a whole cohort of existing customers who won’t change but the ones coming up are ready to go.
Saurabh Madan: Anna’s got a lot of insights to share. I will put her on the spot for the question we did not prepare. Anna, you were the CEO of a bank in the Philippines, which was not a digital bank. Imagine that it was launched in the Philippines tomorrow, and you’re still there. How do you compete with them?
Anna Green: I compete with the fact that most of the traditional banks in the Philippines are still building bricks and mortar retail stores. I just said that although 30% of the population is under 30. A huge cohort of people still doesn’t understand how to use technology. So the ones you want, the customers in the future, are the ones who are doing digital. This lens can be applied also to the workforce. We often have conversations about the digital skill gap, and you have to understand that some people want to go on that journey.
Some people understand it, and others simply can’t. So if I’m running a digital bank now, I am interested in what they’re going after. The reality right now is that the market they’re going to get will be all those consumers who are learning to use digital technology. It’s not going to be the existing people whose name is on an Excel spreadsheet in a branch. That’s still a reality. We don’t talk about that in technology, but it’s true. Sometimes when we talk about tech, we think the dinosaur doesn’t matter. However, that part of the business is still material and drives huge revenue for banks. So you have to know both, and it’s very sensible to look at both traditional and digital. They’re not going away, and they’re very smart and capable businesses that know how to run their businesses well.
So it will be a mix until one comes to the surface. It will take time. It’s not going to happen tomorrow, but it’s a journey. That’s also the reason why I moved to technology.
Saurabh Madan: Great. Any comments, David?
David Harling: Digital adoption is still a challenge. We try to enable as much digital interaction as possible. Covid has enabled and fast-tracked some of that, but you are right. There are so many traditional behaviors that exist when it comes to banking.
Take Singapore as an example. A lot of people in Singapore need to go to the bank, and they feel comfortable going to the bank as opposed to doing their banking online. That’s a big behavioral shift to influence and change. It’s tough. There are other markets globally that are more comfortable doing their banking online.
COVID was the perfect storm for money stuff. In the sense that people were forced to come online. It was perfect for most digitally enabled businesses. The digital banking environment is still not as penetrated as it could be.
Saurabh Madan: I will ask the question about your business, MoneySmart, if that’s okay. I was doing some research on the website. You also have got a crypto section now. So, you have home loans, credit cards, a crypto section, and other services.
What kind of trends do you see in the adoption of different services? Where are crypto, home loans, and credit cards?
David Harling: Crypto is a bit of a buzzword. It’s a big category, and many people are paying attention to it. In terms of our trends and what we are seeing as a company and as a business, investments are big now.
We are seeing fewer people interested in the market around getting a credit card or getting a mortgage. There will be life stages and circumstances that will always occur. The big trends and big topics are definitely around investments. Two main markets in terms of Hong Kong and Singapore. That’s a big trend.
How many people trade crypto? It’s such a small space at the moment. If I ask anyone in this audience now who has crypto, it’s 5%.
Anna Green: Singaporeans are more likely to invest in crypto. Developed markets in general, are more interested in crypto. This is a technology-educated audience so this is not a representative sample of the population of world. Very educated financially. With full respect to everyone, I tend to agree with David on this. Super interested in knowing your point of view, Julio, because I want to hear your absolute counter of that position.
I agree with David on this. Coming from a traditional banking background and certainly hearing what Christine Lagarde had to say about it most recently. Someone who has spent a lot of time studying financial products, financial systems, and processes, essentially said this.
Something that is intangible. It doesn’t have any security basis, and therefore it’s hard to value. The regulators need to learn how to understand it as an asset class. Therefore, it’s still not a conversation that I want to engage in, in terms of an investment proposition. Maybe there is a situation for high-worth private equity investors but for the moms and dads; it’s not a conversation. At least not at this point.
Julio Bermúdez: Speaking as someone who mined dogecoin back in 2014 in my apartment, I can show you pictures later. I think that in terms of whether it should be a part of a well-balanced portfolio, it does deserve to be part of a balanced portfolio. I don’t think that you should put your life savings into it. That’s not where it is, particularly because crypto is many things. You can probably use Bitcoin as the easiest representation of it. Maybe there is some merit in looking at a coin like Bitcoin being stable, in terms of whether it’s backed by anything.
Most currencies are fiat, so I don’t buy that as much. There are applications of cryptocurrencies that are very important. The most important thing is the blockchain. So, we have applications like Bitcoin on top of it, which are very popular. People are excited about that.
However, if you look at things like Ethereum and Solana, there is a world where we don’t need to have the same checks and balances that are extremely manual on paper in Excel. You don’t need to manually check to be able to understand whether the money is that money. There are ways for us to utilize smart contracts and blockchains to automate and remove a huge layer of inefficiency from capital markets. With that being said, I don’t advocate people going out and spending all their money on it.
I do believe in looking at crypto outside of just a financial thing. It is the underlying technology that will ultimately change a lot of things.
Anna Green: If you want to learn more about it and if you’re going to see a use case in practice, this will happen in gaming. This is an ecosystem where cryptocurrency will be experimented with. It’s a place that is almost like a perfect storm of events where you can build and go. For people who are looking at it as an investment tool, it’s a very long game.
Julio Bermúdez: It is a long game. If you have the right time horizon, it can be extremely lucrative.
Anna Green: 25 years? I shouldn’t be laughing because that’s an entirely viable option. It’s an investment strategy.
Julio Bermúdez: If you’re setting aside three, four, five percent for 10, 15, 20 years, it can be lucrative. Look at Bitcoin. It has appreciated thousands of percent in the past ten years. People are concerned about what happened between now and three months ago. Of course, that’s always on top of everybody’s mind, but if you have a long view of the market, it’s been crazy. Again, I don’t advocate it, but most importantly, it is another way the financial market becomes more competitive.
Whether we adopt it or not, bitcoin is a critical technology. That’s important. It is going to cause people to compete for asset classes and currencies. We are seeing an entirely new world of competition. You talked a little about taxes and regulatory frameworks. That will be another area of competition. Citizenship as a service will be something that will happen in the future as well. So it’s a part of a macro trend toward decentralization of power.
Anna Green: You come here for cutting-edge technology and that’s what we are doing. Has anyone ever heard of citizenship as a service with regard to cryptocurrency?
Saurabh Madan: Buy now, pay later. The last topic of the day. We spoke about digital banks, crypto, and Fintech. We also spoke about citizenship as a service. I love that. There’s this new wave of business. Is there anybody who uses buy now pay later amongst the three of you?
Julio Bermúdez: Not in our demographic.
Anna Green: I know many people who use it in our demographic.
David Harling: It’s a big thing, becoming more prominent.
Saurabh Madan: Julio doesn’t use buy now pay later. He has enough cash.
Anna Green: And cryptocurrencies.
Julio Bermúdez: My dogecoin is now in fractions of a penny.
Saurabh Madan: Buy now, pay later. What is the biggest challenge to scale?
Anna Green: Regulations. For me, that’s the gap in the market. That’s also the reason why they haven’t been able to be so effective. It’s a part of what happens with the regulations and technology. With Fintech, in particular, the regulators have to catch up. Once they understand, it becomes a much more challenging conversation for the industry.
Buy now pay later has grown off the back of not being regulated in the same way the traditional financial industry has. It’s providing an amazing proposition for people who otherwise can’t get credit. So it’s a really different and interesting business model. The people who have built it have thought really intentionally about it. The next pile that will be, how is that regulated? How does that look? What does that look like for traditional banks?
Julio Bermúdez: Yeah, I think we touched on that. People that can’t get credit now have access to these financial instruments. It’s essential. AfterPay is one of our customers. If we look at what they’ve been able to do, they’ve provided power to those who were powerless before.
As we talk about all these different changes, I’m not going to get super wild on you regarding what I think about credit supporting, but credit supporting itself hasn’t changed mainly over the last 30 years. That is another reason why buy now pay later has been so successful. People who didn’t have access to credit before can now do that very quickly, without going through that type of process.
I think it’s one of the things that a bank or any digital bank needs to offer. Look at Afterpay. You can do many exciting things when you kind of free yourself from the traditional ways of scoring consumers.
David Harling: The traditional banks are now moving into that space, which is fascinating since it’s unregulated. So, be careful.
Anna Green: Afterpay is an amazing example. They know their customer segment really well. One thing that’s interesting about credit risk, that it’s a known fact throughout the finance industry. I don’t like to generalize but there are a couple of studies around this that women are much better at credit risk. I don’t wish to offend anyone on stage.
David Harling: Is there some data around it, or is that an opinion?
Anna Green: It’s more around the studies that have been done around microcredit. In places like India, they give small loans to women in the community who are paying it back. They have taken note of that. Then learned about how women borrow money.
Often, buy now pay later provides an opportunity for women who don’t have a full-time job on record, but they give them credit. Those women know about the concept of paying the money back. They’re at good credit risk. These companies understand that, so they’re willing to take a risk on that.
There’s no data or information about the cohort of customers they’re going after. So, it’s not surprising that they’re being successful.