Economic Affairs

A 'dating' platform for banks and fintechs

Now they can connect as never before

It won't be long before a small, obscure bank in Cambodia, Laos or another under-banked country will have access to the same cutting edge financial innovations as the likes of Citibank, DBS and OCBC.

Companies without banking licences will soon be able to offer "white-label" banking services to millions of customers in the remotest places, many of whom have never had them before. Loan approvals will take seconds rather than hours or days. Bots powered by artificial intelligence (AI), which can even make small talk in multiple languages, will guide clients through their banking experience over mobile phones and deliver customised advice.

All this has already started to happen. The revolution that is re-making banking has just got bigger. The latest catalyst: a new platform that can connect financial institutions, which include banks, finance companies, insurance firms and non-banks, to innovative financial technology companies (fintechs) in a way that has never been done before.

Called the API Exchange (Apix), the platform is the first-ever global fintech marketplace. It was launched by the Asean Financial Innovation Network (Afin), which has three high-profile founders: the Monetary Authority of Singapore (MAS), the International Finance Corporation (IFC) - a World Bank affiliate - and the Asean Bankers Association (ABA), which aims to promote best practices in banking throughout the 10 Asean countries.

The Apix platform was unveiled at the Singapore Fintech Festival last month by India's Prime Minister Narendra Modi. It was created and is managed by a consortium led by US-listed IT services company Virtusa and includes a German digital bank called Fidor, the accounting and consulting firm Deloitte and a Singapore-based big-data management company called Percipient Partners.


Up to now, banks and fintechs have been "frenemies" - they compete with each other, yet need each other.


Fintechs are already disrupting banks and taking away some of their business, such as payments and fund transfers (think of PayPal or ApplePay), lending (through entities like Lending Club and other peer-to-peer lenders) and personal financial management - a service that bankers provide, but which can now be delivered through dozens of free apps.

Banks are facing what a Citibank study on fintech disruption calls their "Uber moment", much like the taxi industry did several years ago.

A global fintech survey by the consulting firm PWC last year found that in Asia, 83 per cent of banks thought that at least some of their business is at risk of being lost to standalone fintech companies over the next five years.

And so now banks have started to embrace their technologically savvier and more nimble disruptors, collaborating with fintech companies, and sometimes investing in them.

In Singapore, DBS has teamed up with Kasisto, a company which builds AI-powered platforms that can hold human-like conversations with bank customers.

As part of its mission to help start-ups and SMEs, UOB has invested in equity crowdfunding platform OurCrowd, an Israeli firm which provides alternative funding options to companies.

OCBC is collaborating with start-ups Blackswan Technologies and Silent Eight to detect money laundering and other suspicious financial activities through AI.

Fintechs are happy to be embraced. Even as they are disrupting banks, they still need them: Banks control millions of customers, which fintechs have to work hard to acquire; banks command trust which fintechs still need to build; and banks are flush with funds, while fintechs are often unprofitable start-ups, living off venture capital funding. Forty-five per cent of banks partnered with fintechs last year, according to the PWC report.

But there is one big problem, which is similar to that with dating before online dating platforms appeared: There is no easy way for banks and fintechs to find each other, or to know what each wants or can offer. Moreover, bigger banks and fintechs have a huge advantage over their smaller, lesser known peers.


But the Apix platform can change this. Any financial institution - whether it's a bank, insurance company or non-bank that wants to offer financial services - can sign up. So can any fintech, from anywhere in the world.

The financial institution can define the problem it wants to solve - for example, reducing loan processing time, or speeding up fund transfers or providing financial planning solutions to its customers on their mobile phones. Fintechs can showcase the services they can provide. The two can then connect. Banks can tap into multiple fintechs to solve different problems, while fintechs can reach as many banks as they want to serve.

For every banking need, there is a fintech that can offer a specialised solution, no matter how simple or sophisticated. For example, a micro finance company in Indonesia wants to expand into basic banking services. Through Apix, it can connect with Fidor Bank, which can provide it with a digital banking platform.

Or, a bank in India wants to perform credit assessments on customers in rural areas who have no credit history. A fintech firm from the Philippines based in Singapore called Lenddo can calculate credit scores based on information from social media and smartphone records.

A Malaysian bank wants to improve its "know-your-customer" (KYC) processes. A Singapore-based fintech called KYCK! can provide this service using blockchain technology.

The Apix platform has an advanced search function so banks and fintechs can easily locate partners that best suit their needs. It is compatible with multiple back-end systems, so it is plug-and-play. It also provides a "sandbox" in which solutions can be tested before they are deployed.

The response to the Apix platform has been positive. In less than three months since the platform has been open, more than 100 financial institutions and some 400 fintechs have registered.

The banks already operating on the platform include Unionbank of Philippines, VP Bank from Vietnam, Bangkok Bank from Thailand, The Citybank from Bangladesh, Vietinbank from Vietnam and India's Axis Bank.


The stakeholders in Afin have a common interest in building a bridge between financial institutions and fintechs.

The IFC, which is the arm of the World Bank which works with the private sector in emerging economies, views fintechs as an important part of the financial ecosystem. "As the fintech sector evolves, it is imperative that fintechs are able to scale - regionally and globally - to remain dynamic while becoming stable partners for financial institutions. The Apix platform will deliver technology innovations more quickly," noted Mr Ivan Mortimer-Schutts, the IFC's regional leader for retail payments and mobile banking.

Spreading innovation more widely is also a common goal. The ABA, which supports banks throughout Asean, views the platform as "vital to deepening financial inclusion in Asean markets", said its general secretary, Mr Paul Gwee Choon Guan.

The promise of greater financial inclusion was also one of the motivations for MAS to support Afin. "There are about 1.7 billion adults globally who are unbanked," said Mr Sopnendu Mohanty, MAS' chief fintech officer. "They do not have access to a bank account, secure and efficient means of payment, or insurance protection."

He explained that this is because banks face high costs in trying to reach customers in remote areas, including in Asean, and many of their mainstream services may not be suitable for these customers.

Fintech firms, on the other hand, are able to create agile and mobile digital solutions for these under-served segments, which include small and micro enterprises. "But they lack the resources to scale and penetrate new markets." He added that Asean banks also tend to be encumbered with legacy systems, and can benefit from innovative fintech solutions.


Although Apix does indeed hold out the promise of empowering smaller financial institutions, it will not totally level the playing field.

Smaller institutions will still need the skills and internal processes to integrate and administer the innovations that fintechs deliver to them.

Regulatory standards between countries also differ widely; bank regulators in poorer countries with less developed banking systems will have to negotiate a steep learning curve to regulate new types of financial services. Moreover, smaller institutions lack the scale that bigger banks command.

Despite these limitations, Apix could be a game changer for banking in the region.

Mr Mohanty believes the broader economic benefits from greater financial inclusion could be huge. He cites a recent study by the Asian Development Bank, which found that wider access to financial services would boost GDP by 9 per cent to 14 per cent, even in relatively large economies such as Indonesia and the Philippines, and by up to 32 per cent in smaller economies such as Cambodia.

Singapore stands to gain as well. "A prosperous and growing Asean benefits all within, including Singapore and Singaporeans," he says.

Correction note: An earlier version of the story mentions VP Bank from Lichtenstein. It should be VP Bank from Vietnam.