“We have arrived at the end of the ‘Big Fish Era’.” A bold statement from Waleeporn Sayasit, Director of the Corporate Communications Division, TCC Technology Co. Ltd., opening the first OUTSIDE-IN series by TCC Technology. Quoting Klaus Schwab, “In the new world, it is not the big fish which eats the small fish, it’s the fast fish which eats the slow fish.” Waleeporn put forth a strong reminder for the participants in the room to understand why it is important to keep pace with all the developments and technology progress taking place in the world today. With the first OUTSIDE-IN: Fintech First event hosted by TCC Technology at Thai Fintech Association, Waleeporn launched the discussion with a brief overview on Fintech, or Financial Technology, and the Fintech Ecosystem in Thailand.

Fast Fish Overtaking Big Fish

Over a decade ago if we were to look at the world’s largest companies we would be sure to discover big names like Exxon Mobil and General Electric. Ten years later, however, the top 5 companies are now replaced by technology companies like Apple, Alphabet, Microsoft, Amazon and Facebook. And more recently in 2018, we begin to see financial companies picking up the pace. This is a sign that the financial world is making a lot of progress on the Financial Technology (Fintech) trend.

Source: Bloomberg

While the United States is beginning to witness the rise of fintech growth, Accenture revealed that Asia Pacific is now the 2nd biggest region for fintech investment after North America. The fintech investment in Asia Pacific increased more than 4 times in 2015 with a market worth of over USD4 billion.

Source: The Daily Records, March 26, 2018

Source: Yahoo Finance

But What Really is Fintech?

Waleeporn went on to explain that the definition of fintech is simply a contraction of two words, Finance and Technology. Fintech, simply put, is Financial Technology. It is the application of technology to make financial systems more efficient by being better, faster, and cheaper. By offering new value propositions with new and more accessible financial products and services, new processes, new business models, and intensive use of technology, smaller Fintech companies are becoming more competitive with some Financial Conglomerates and Giants.

As such, smaller fintech companies are rising everywhere in the world. Looking at the Southeast Asia Region, the number of emerging fintech startups had increased rapidly, with the highest number concentrated in Singapore and Thailand. Many of these startups are payment channel or mobile wallet companies, followed by financial comparison and retail investment. We are also starting to see some early stage of development in bitcoin and blockchain technology, as well as financial lending services. Yet many of these companies are still restricted by financial regulations.

Source: Techsauce

In Thailand itself, the number of fintech startups has been growing rapidly, particularly in the payment, financial comparison and retail investment sector, with the movement and support of the Thai Fintech Association.

Source: Techsauce and Thai Fintech Association

The Traditional Financial Market

Stepping back to look at the traditional financial market, we first need to understand that the financial market is made up of two major parts: the money market and the capital market, governed by the financial regulators. In the case of Thailand these regulators are the Bank of Thailand (governing the money market), and the Securities and Exchange Commission (governing the capital market), overseen by the Ministry of Finance.

In the past, the roles of the regulators and traditional financial players were perceived to be impenetrable, with high barrier of entry and very conservative protectionism schemes. With the rise of fintech startups, the frontiers between fintech Startups and traditional players are quite thick, with both parties seeing the others as frenemies.

Banks were facing challenges when coming in competition with smaller, faster fintech startups. Being heavily regulated and tied up with legacy systems that are difficult to change, and with the shift towards the mobile lifestyle of the new generation, banks find themselves too slow to adapt. Meanwhile, smaller, faster fintech startups are tapping in to unbundling the individual legs of banking services, from providing digital payment, cyber currency, business financing and consumer finance. By being focused on a specific leg, each fintech startup proved themselves to be much more efficient and productive than traditional financial institutions. Meanwhile, fintech companies are facing the challenges of confronting regulators by introducing new products and services regulators have never seen before. And with the high risk and impact involved, regulators are not too keen on giving the green flags.

In 2015-2017, changes started to occur, where both parties realize that to move forward into an area where both parties could come out winning, they need to be friends. Collaborative efforts started to form, and regulators began shifting their role to become promoters of this progression. We then started to see more accelerator programs, incubators, and an increasing number of co-creation efforts between banks and fintech Startups.

Fintegration

While traditional financial institutions like banks have a huge customer base to leverage from, and hard-earned credibility established over the years, because of their legacy systems and highly regulated processes and protocols, they find it very difficult to innovate. Thus, the one way out for them is to innovate from the outside; that is to integrate their products and services with fintech startups. These startups are much swifter, with their fail fast, fail cheap, and fail forward methodology.

The fintegration processes are mostly in the format of startups or acceleration programs, where we see large Banking Service Providers like the Siam Commercial Bank and Kasikorn Bank launching their incubation programs. Sometimes, the process can occur in the form of startup programs, Corporate Venture Capital investment, or even partnering or acquiring a fintech company.

However, Waleeporn pointed out that not only financial institutions are actively seeking out ways to innovate in the fintech realm, because today, we are starting to see other platforms such as Grab, LINE and We Chat moving into the space with their platforms. With the progression of technology and the speed of such progression, we are now living in a world where it is very difficult to predict where the next movement will be. Therefore, we should always keep ourselves up-to-date, beginning from joining OPEN-TEC, a knowledge sharing platform created by TCC Technology for the purpose of learning, connecting, and innovating.

Fintech Insights with the Fintech Gurus

Following Waleeporn’s session on the overview of fintech is a panel discussion moderated by Paveena Maneewong, with two prominent figures in the Thailand fintech space, Mr. Somwang Luangphaibooonsri, Country Lead, PayPal Thailand, and Dr. Yutthana Srisavat, CEO and Co-Founder of iTAX.

What is your inspiration for entering fintech Startup?

The panel discussion was kicked off with the first question to both gentlemen asking about their inspiration for entering the fintech Startup playground. Somwang was the first to respond, where he started with “I didn’t know really what fintech was, and even the word Startup was foreign to me. At that time, all I wanted to do was just to start a business.” Somwang then told the story of how he was working in a Stock Brokerage Company, where he witnessed endless transactions of money from various sources. That piqued his interest in the payment systems, and with his first-hand experience on how mundane and complex handling money and payment can be from selling second-hand goods online, he was set on improving the payment experience for both customers and vendors. Seeing an example from how PayPal succeeded abroad, he launched Paysbuy in Thailand.

Dr. Yutthana then told his story of how we got into studying Tax Law for his Masters on scholarship in the United States and continued on to a Doctoral Degree. From getting deeper into Tax Law at Law School, Dr. Yutthana then asked himself why do people not want to file their taxes properly? Then, he went on to discover that there are basically two groups of people. One would abide by the rules and file all of their tax documents as perfectly as they can. The second group basically has no clue how to handle their taxes because of the complexity of the tax laws, not because they do not want to, but simply because they do not know how. Yet Dr. Yutthana realizes the importance of those paying taxes. He even went further to call them the real heroes, financing our country’s growth and development. Thus, he launched iTAX in order to help people who find income tax law difficult to understand and make it easier for them to file in their taxes.

“But is the Revenue Department happy about your business? If you make income tax easier to understand for everyone, then people would understand better their tax benefits and refunds? Would this not cause the Revenue Department to lose more money?” asked Paveena.

Dr. Yutthana responded, “It is not their place to be happy or unhappy with what we do. It is their responsibility to make sure that everybody abides by the law. In fact, taxes are often used as the main mechanism by the government to propel the country forward. All the tax benefits and refunds policies set forth by the government serve a specific purpose. For example, the new policy where you can refund any tourism spending on second tier provinces is a mechanism to promote the tourism industry in those provinces.”

“So, Mr. Somwang, how far is your vision in building up Paysbuy?” asked the moderator.
To which Somwang responded, “Did you know that counter service payments began in small provinces at typical Mom and Pop Stores, or simply, an open desk in a small village? Small transactions like these occur everyday in small villages and provinces. So I just thought, how can I expand on these transactions? Can I bring them online? When I launched Paysbuy, obviously, our vision was to expand beyond Thailand. We wanted to go abroad, and that requires investments. We needed to seek out investors, partners, knowledge and technology. Anything that give us the wing to go beyond Thailand.”

Paveena then asked Somwang about his competition, in which Somwang responded that he admitted that he could not compete with banks or global players. There is a saying that a new competitor is launched every single day of a year. So really, what we could do is to focus on what our customers or users want. Users are facing complications with payment processes, processing time, and the complexity of different currencies. As such, electronic payment channels like ourselves seems to be the solution they are seeking.” Somwang also admitted that they had to be prepared to face potential challenges from cryptocurrency to replace cash usage in the future.

What are the factors allowing your businesses to grow?

When asked about the factors that allowed their fintech businesses to grow, Dr. Yutthana was the first to respond stating that there is no one success factor. “Even if you have the right timing, but without the right team, you would not be able to succeed. iTAX growth was not spontaneous. It was a gradual growth from 15,000 users to 1 million users. Crossing the threshold was difficult at first because people did not know who we are, they did not know if they can trust us. But after our first group of users came onboard, and they loved what we do, then, growth started to pick up from word of mouth.”

When Paveena further asked Dr. Yutthana how he managed to grow his fintech company without a tech background, Dr. Yutthana replied, “The most important thing for me is people. By people, I mean my customers, my employees, my suppliers, my team, they are all people. The most important thing is you need to understand these people. If you do not understand these people, you do not understand your business.”

Somwang then took his turn to revealed that for him, the most important thing is commitment. “You will face many challenges, and things will not always go the way you expect them to. In the end, you will need commitment to build trust, to gain customers’ confidence, to drive your business forward.” Somwang also shared that another important factor of success for him is opportunity. To him, opportunity, and the commitment to always seek out opportunity, is what brings you success. “Sometimes, you have committed, but you are not looking out for new opportunities, then you realize you are not getting anywhere. Opportunity comes with time. Opportunity sometimes mean you would have to go deep into what value are you offering, and to whom is it valuable. Always be clear about who is your target market, how big is this market size, be clear, and it will work out in the end.”

Your take on the current situation and challenges for fintech Startups?

When asked about their opinion on the current situation and challenges for fintech, Somwang began with asking back to the audience to give one example of a successful fintech in Thailand. There was a short silence in the room before somebody replied with ‘Omise’.

“You see? This is the challenge. Making sure people know you exist.” Somwang elaborated. “Fintech is not complex. Usually, it’s about working with and creating something new out of the things that already exist around you. Take iTAX for example; before there was iTAX, I could have done all of my tax calculations on an Excel Sheet manually. But the Excel sheet is only for my own use. But iTAX automates all of these processes for me, and not only for me, since iTAX is accessible by everybody. Most of the time, these fintech platforms are trying to make things easier for you by automating mundane processes. So look out for new opportunities, and you will find that you can convert almost any situation in your life into a fintech or a startup.”

Dr. Yutthana added, “Changes occur every day. But recently, these changes tend to occur much more frequently with technology. So really, you need to keep up, especially if you are working with software. Changes are occurring by the minutes. New competitors are arising every day. You hear a lot of the word ‘disruption’. When ‘disruption’ arrives, it is often catastrophic, but if you can catch up with it, you will be ok, and if you can’t, then you’re doomed.”

What are your biggest challenges?

When asked about their own challenges, Somwang was the first to reply, “With fintech, your biggest challenge is the regulations. Because the effect or impact of any failure on your part could be catastrophic, you have to accept the fact that regulators will be there waiting at the end of every road you take.”

Somwang described the first challenge he faced when he started Paysbuy, “The paid-up capital requirement for setting up a financial company seems impossible. At the time I started Paysbuy, the new requirement was about to come out, demanding a huge THB200 million sum of fully paid-up capital. We were lucky to be operating before this requirement was issued, but we were still required to pay up within two years. I kept running the business with the hope that one day, there will be an investor that believed in us. Along the way, I was lucky to have received a THB15 million investment from a colleague, but it still was not enough. “In the end, Somwang decided to sell Paysbuy to DTAC in order to cover for the THB200 million paid-up capital requirement.

“One good thing that came out of this was, automatically, this was an instantaneously very high barrier to entry for my competitors. As a result, I was practically the only player at the time. Which brought us to another challenge you have to face when dealing with the financial industry, because the consequence of any bank-related failure or risks is taken very seriously, as a financial company, you are required to have several infrastructures in place. Things like IT audit requirements, PCI or ISO certification, even your external audit has to be big names. As a result, the infrastructure requirement of setting up a financial company is very high.”

From Dr. Yutthana’s perspective, “My biggest challenge was building the right team. Imagine this, we have been running this business for 6 years, and yet, there was no competitor. Why? Because it is very difficult to find somebody who could truly understand, and who would have enough interest to work with Income Tax Law. Even more challenging is to find an expert in technology who also understand Income Tax Law.”

Dr. Yutthana described his journey running iTAX on how he loved going out to exhibitions and fairs if only to meet and talk with his users. “I would stay there all day if I could, because meeting my customers is the best time I could learn about how I could improve my product.”

Another challenge Dr. Yutthana faced with running iTAX is the complexity of the Income Tax Law, and how it is always changing from year to year. But luckily, Dr. Yutthana was teaching classes on Tax Law at universities, so he ended up having to always be updated on any changes that occurred.

“With tax calculation, you need to be 100% correct. You can not only be precise, you need to be exactly right. Therefore, another challenge iTAX face is to make sure that all calculations are absolutely 100% correct. Moreover, you are dealing with private information of your users, and privacy issues can be very sensitive. Therefore, you will find that our privacy information policy is extremely strict, meaning that, we do not take and use our users’ data for anything at all without their consent.”

In your perspective, which is the most successful Fintech in the world?

Somwang then asked a question back to the audience, “Why are you interested in fintech?” In which somebody replied that they were forced to be interested about fintech by the current situation they are facing. “Our lives have also become more difficult not understanding and not catching up with fintech progression” somebody in the audience responded.

When it was Dr. Yutthana’s turn to give his thoughts on the most successful fintech in the world, Dr. Yutthana’s reply was WeChat. “WeChat is my personal favorite, because who would have thought that a messaging application would jump into payment and fintech?”

Dr. Yutthana then elaborated on how WeChat’s payment model was unexpectedly interesting. “Everybody knows that in China, cash used to be king. However, in the recent years, you start to see more counterfeit money, and people began to lose trust in cash. By introducing the QR code payment on mobile, WeChat proposed a more secure way of payment, and immediately, this went viral. Today, the biggest transaction of QR code payment is in China.”

What is your simplest MVP?

When asked about the simplest version of Most Viable Product (MVP) they let out to test before launching their businesses, Dr. Yutthana was the first to respond, “My product is a free product, so there is no pressure on making money when we launched our MVP. So our initial MVP was actually on a PowerPoint Presentation, simply listing the questions and answers, laying out the logic chain. We then bring our PowerPoint out and talk to people, get their feedback, and then develop the application.”
Somwang added, “My situation is very different. Back then, there were many limitations, and we needed to rush into action. The market demand is out there, we talk to a lot of potential clients and users, discover their needs, and then went on to develop a solution for them.” Somwang described the bumpy journey of Paysbuy, where they made a lot of errors along the way, yet the simply could not wait. Yet Somwang added that things would have been much easier today, because of the Fintech Sandbox, a testing ground for fintech startups to test out their product with limited risk boundaries.

How do we as an employee prepare ourselves for the changes that’s going to happen?

With the panel session coming to a close, one of the key questions raised by the audience is how they should prepare themselves for changes, for which Somwang was the first to reply, “Transformation is always a hot topic, not only in fintech. Organizations are also undergoing transformation in their business operation and processes. So try to keep up, and don’t fall behind your competition.”

Dr. Yutthana added, “My advice is to not do anything robots can do, otherwise, it will be very easy for you to be replaced by machines. Try to create or develop something robots can’t do – take arts for example. Recent years, you are starting to see the movement towards arts and music. This is something robots could not yet accomplish. And finally, always ask yourself why, always stay curious, then, you would build the habit of not getting used to the things around you. You will be keen to adapt to changes.”