Working Paper: Technology: The Impact on Asian Finance

Mobile money. Internet users are increasingly accessing the web through mobile devices. Banks are embracing this trend by improving mobile finance via ‘omni-channel’ (clicks+bricks) strategies, and they are facing vigorous competition from technology-based finance start-ups that are giving them a run for their money.

“Show me the data.” Finance, as an information business, is being transformed through a combination of internet-based transaction data, customer evaluations and Big Data analytical techniques that are enabling better credit risk assessment at lower cost, especially for smaller businesses and loan amounts.

More clicks, fewer bricks. Customers are increasingly demanding online finance, and even though they still value branches, they want better service combining people and technology alongside non-traditional partnerships.

Level playing field. So far, banks and financial regulators have not reacted to the threat of online financial providers entering the payment business. However, when they enter into deposit taking, credit and even raising equity, the question of level playing field will arise. There is a delicate balance between nurturing innovative competition and ensuring financial stability.

Any time, any place. User experiences outside of finance, such as with Google, Amazon and Taobao, are shaping expectations of mobile finance – fast, user-friendly, any time, any place access.

Transformation just starting. Regulators need to embrace technology to address key policy priorities and help finance serve the real economy better:

• Mobile money provides low cost, secure access in rural areas and can improve inclusive finance
• E-trade finance/BPO (Bank Payment Obligations) reduces transactions costs and risks for SME trade, fostering job creation and regional integration
• Internet-based transaction data and analytics enable better credit risk assessment for small and medium sized enterprise (SME) lending at lower cost
• Technologies also allow regulators to enhance their own effectiveness
• Regulators and business need to work together to keep abreast of opportunities and risks brought by technology and determine implications for regulations and business models.

The views expressed in this report are those of the author and do not necessarily reflect those of the Fung Global Institute. The author is solely responsible for any errors or omissions.