Part 3: Fintech Strategy
What it Means to be Open
Following SAS Thailand’s Innovator Tech Talk, Michael Araneta, Associate Vice President, Head of Research & Consulting, IDC Financial Insights APAC resumed an open discussion on Open Banking.
Mr. Araneta stated that open banking is an emerging phenomenon worldwide. In Europe, we are starting to see more movements and approaches to embrace the “Open Banking Framework”. The Bank of Thailand is particularly interested in developing open APIs. We are starting to see the topic of Open Banking popping up as a major topic of discussion across Insurance, Financial Management, Fund Management, and even Real Estates. This is an indication of how our industry is about to change.
There are three fundamentals of Open Banking:
1. Greater Understanding of Customers by Financial Institutes – this include single customer views, data collection, sentimental data collection, data augmentation, identity integration, and hyper segmentation
2. Great Unbundling – we are observing more unbundling of financial institutes as more processes will be taken away be FinTech or third-parties; yet with unbundling, more opportunities also open up in terms of re-bundling
3. Connection with Trusted Third-Parties – this is where Open API strategies of financial institution will be key, as Open API will allow financial institutes to re-bundle their services by connecting to third-parties; this could be an extension of internal APIs, partner APIs or external APIs. Soon, we will start to see more of the emerging business model, from business to developers (B2D)
In 2018, the strong prevalent theme is regionalization. We are starting to see in China and India, where there is a high percentage of disintermediation. Mr. Araneta presented three key factors that will make an idea succeed:
Moving forward, we will start to see more unbundling and re-bundling of financial services, more of services consumed by and provided by third-parties, as well as more exchange of functionalities, applications, and data, primarily through APIs.
Panel Discussion: Innovative Technologies of the Future
Mr. Araneta then invites three of Thailand’s FinTech entrepreneurs up onstage for a panel discussion on “Innovative Technologies of the Future”. The three panelists are Wichit Srikreephuthana, Director, Professional Services and Deliver, SAS Software (Thailand) Co., Ltd., Jarit Sidhu, Head of Partner Success – Indochina, LenddoEFL, and Thanasak Hoontrakul, Co-Founder and Managing Director, FairDee Insurtech Co., Ltd.
Mr. Araneta first opened the floor with each entrepreneur giving an introduction about their company, starting with LenddoEFL. Mr. Sidhu went on to explain how LenddoEFL is actually a combination of two companies – Lenddo and EFL. EFL started out in South America, derived from a research conducted in Harvard University. The mission of EFL was to increase financial inclusion, while Lenddo’s mission was to provide more access to financial services for the underbanked population in the Philippines. The core business of LenddoEFL and its main strength is in offering e-KYC services, providing insights to partners, in this case financial institutions to better understand their customers. LenddoEFL provides insights from obtaining mobile phone usage data, interpreting how customers use and manage financial applications – this would give a glimpse into who the customers are and what they do.
Moving on the FairDee, Mr. Hoontrakul went on to explain how FairDee had made insurance more affordable and fairer for everyone by the digitalizing processes. FairDee was launched in two countries, Singapore and Thailand, where the application groups people together, and analyzes the drivers based on data analytics of their driving habits and assessing drivers to calculate their premiums. FairDee is able to determine whether a driver is a safe driver from their claim history, offering a 15% cashback if they do not make any claims. Social grouping of friends, families and coworkers will also place a social pressure on the driver, which in-turn will improve their driving habits.
Comparing the claims statistics, Mr. Hoontrakul revealed that the rate of claims in Thailand is as high as 65%, while the rates in Singapore and Malaysia are 17% and 10% respectively. This high percentage of claims can be attributed to the claiming habits of Thai drivers, where most of the claims made were cosmetics claims – fixing scratches and colors rather than actual accidents. Mr. Hoontrakul pointed out that this is owed to the broken mechanics of Thai insurance, where no real-time data on claims were made and thus, it is almost impossible to trace back a driver’s claim history across different companies.
Turning back to SAS Thailand, who had taken the stage earlier in the Innovator Tech Talk session, Mr. Srikreephuthana revealed that this era is in fact a good time for SAS Thailand, with micro-segmentation of FinTech companies and the need for faster analytics. That is because most FinTech companies are built on top of analytics, and thus, the high demand for a working analytics platform like SAS Thailand. SAS Thailand is also a cost saving alternative for fraud prevention.
However, there is also a unique challenge working within the Thai ecosystem, where data mapping and data cleansing can prove to be time consuming, but because of this, there is a need for fintech to be able to help them work faster with data.
Mr. Araneta then asked the question of how FinTech copes with the challenges of working with traditional financial institutions and companies. FairDee was the first to response, addressing the main challenge inhibiting their growth – the lack of Open APIs among insurance companies. Because of FairDee’s fast progress, raising a Series A funding round of after only three months of operation, they cannot wait for the long process of onboarding traditional insurance companies. Therefore, Mr. Hoontrakul left a comment to all insurance companies that Open API is very important in order to open up more doors for innovation.
Moving on the LenddoEFL, Mr. Sidhu explained how because LenddoEFL is a software service company, they cannot avoid working with banks and financial service companies. Mr. Sidhu recalled LenddoEFL’s journey from when they first started, approaching many different banks asking for the opportunity to collaborate in terms of underwriting loans via LenddoEFL. All the banks they approached rejected the request, forcing LenddoEFL to have to offer the service on their own. Mr. Sidhu revealed that the main pain point in dealing with traditional financial institutions is it takes too long to get a buy-in from every stakeholder in the bank. Typically, it would take three months to get 9 out of 10 signatures needed, and another nine months for the last signature to secure the buy-in. Most of the time, banks are not evaluating the opportunity from the perspective that LenddoEFL is a startup company, not an established company. So the leaving remark Mr. Sidhu would like to make to all banks is to evaluate a startup company from the perspective that they are startups, not established.
Mr. Araneta’s next question for FairDee was his perspective on the Financial Evaluation of FinTech. Being in the field for two years. Mr. Hoontrakul revealed that they had been approached by a global insurance company to acquire the company, including the 12 people working in the company. The deal was rejected. “I guess it’s hard to find people willing to join corporates these days.” – said Mr. Hoontrakul.
Mr. Araneta then turned over to LenddoEFL with the question of “How are you trying to reach out to the bank to work with them more closely?” To which Mr. Sidhu answered, “We are more than ready to work with banks. So banks, we need you. But we also need you to need us as well. FinTechs are more than open for collaboration. So if Financial Institutions are open as well, with your experiences and our expertise, we can make something greater together.”
To which Mr. Hoontrakul from FairDee added, “Please let us know how we can understand each of your stakeholders and their KPIs, then, we can reflect on how we can help them achieve their KPIs.”
Ending the panel, Mr. Srikreephuthana added, “Analytics can help FinTech see how they can be competitive in the world. At the same time, corporates need to be agile, start small, fail fast, and restart again.”
Closing Keynote – The New Drivers of Success in Thailand Financial Services: Securities and Capital Markets for the Digital Era
Ending the day was Pichet Sithi-Amnuai, President of Bualuang Securities, on the new drivers of success for Thailand’s Financial Services in the perspective of the Securities and Capital Market. Mr. Sithi-Amnuai revealed that for securities businesses, brokerage is still the key drivers of revenue, followed by fee and service income, tradings, and others (dividend, interests, etc.). The market volume is still okay, but it is evident that the yearly brokerage rate is going down.
In the past two years, there has been a huge outflow from foreign investors, which also include Thai investors with foreign accounts. The key factors affecting foreign investment would be delegated to cross-border fund flow, technology progress, and regulatory compliances. At the same time, we are starting to see more active roles from FinTech in the Retail Investors sector, including more innovative investment tools, more contribution to investor education, and CRM tools.
One of the key drivers for success in the Securities and Capital Markets is internet trading. Smartphones are making securities investment more accessible, and by partnering with foreign partners, Bualuang Securities is hoping to be able to deliver better products and tools to their investors.
Regarding Fee and Service, Mr. Sithi-Amnuai pointed out that we are beginning to see how FinTech is starting to disrupt the brokerage business from advanced analytics to social trading, and even retail algorithm trading. At the same time, we are seeing more disruptors in the form of Initial Coin Offerings (ICOs), crowdfunding, Peer-to-Peer Platforms, and End-to-End Wealth Solutions. Artificial Intelligence and Machine Learning are gaining more important roles in the realm of proprietary trading revenue.
However, it is worthwhile because technology could greatly help with operating cost reduction and open up more innovation opportunities. Therefore, developing FinTech strategy is a very important movement that every financial institution should consider.
Source: IDC FinTech Innovation Summit 2018