With 1.7 billion people around the world unbanked or underbanked, there is still much to do to bring the underserved into the financial mainstream. Access to finance and the formal economy can unleash economic opportunities and raise standards of living for the underserved.

This is especially true in Southeast Asia. According to the World Economic Forum, six in 10 people in this region are unbanked or underbanked today. In Vietnam, it’s as many as seven in 10.

AI is transforming industries at a rapid pace, and Southeast Asia’s consumer finance landscape is no exception. By speeding up data collection and analysis, these technologies enable quicker pre-lending assessments and lending procedures. Lenders benefit from enhanced efficient risk management and streamlined processes and can now serve customers who were previously unbankable due to a lack of credit history.

However, there are two drawbacks to AI that have to be carefully considered.

First, automated processes can speed up decision-making and enable access to finance but are not perfect solutions. For example, AI assumes a borrower’s creditworthiness on standardised characteristics, which can exclude borrowers that don’t always fit, especially when you’re credit invisible. If the data sets used to train the AI system are biased, it may also lead to skewed processes that may treat prospects and borrowers unfairly.

Secondly, technological advancements have also led to a surge in unregulated lenders. Indonesia had around 150 registered P2P lenders before President Joko Widodo ordered a moratorium on permits for fintech lenders in 2021 to clean up the sector.

The Reserve Bank of India found that more than 600 of the 1,100 digital lending applications operational between January 2020 and February 2021 were unregistered and illegal, which unnecessarily hinders the progress of financial inclusion.

There are two key principles lenders should consider increasing more safely and sustainably to ensure the development of the sector: responsibility and financial literacy.

Responsible lending practices

To achieve financial inclusion, we need to ensure the consumer finance industry is properly regulated and doesn’t harm populations already at risk. Without government oversight, predatory lenders may intentionally introduce products with unfavourable terms and engage in deceptive and coercive practices.

These could include providing misleading information about terms and conditions, exorbitant hidden fees and penalties, or illegal and unethical debt collection tactics, such as harvesting data from phones to harass debtors when they are unable to repay their loans.

Also Read: How Salmon aims to promote financial inclusion with AI banking in the Philippines

People with limited financial knowledge are most likely to fall into these traps, perpetuating a vicious financial cycle and creating further financial distress for these vulnerable populations.

Unregulated lenders also exploit AI to speed up the lending process, giving less time for borrowers to make informed decisions and making them more susceptible to debt traps. Automated processes reduce transparency in application processing, making it harder to detect discrimination or predatory lending targeting specific groups.

As technology and the economy evolve, consumers need even better protection from the growing array of complex financial products. That’s why government oversight is needed.

Regulated financial services can offer access to sustainable and responsible credit products in ways that can be supercharged by AI. For example, combining AI with traditional credit bureau data helps lenders to balance risks and maximise financial inclusivity, ensuring loans are offered responsibly based on repayment capabilities.

Home Credit has embraced this type of lending model – for instance, 42 per cent of its customers in 2022 were first-time borrowers using regulated financial services for the first time. This was a 19 per cent increase from 2021.

Responsible lenders can also offer consumer protection services, like payment holidays or repayment insurance, shielding customers from credit risks. For example, Home Credit provided 2.2 million customers with the option of paid holidays and deferred payments during the peak of the Covid-19 crisis in 2021.

Many companies in the region now offer cooling-off periods, allowing people to cancel loans free of charge. This allows borrowers time to properly consider their decisions and facilitates informed decision-making.

As Southeast Asian markets mature, regulated lenders can expand their offerings to include a wider array of financial products, such as insurance. Life insurance penetration in emerging Asia Pacific markets rose to 2.4 per cent in 2021 but still lagged substantially behind developed Asia Pacific markets (8.4 per cent). Regulated lenders have the advantage of existing customer relationships and data and can offer accessible, personalised insurance products tailored to individual needs.

For example, Home Credit now partners with more than 20 insurance providers, offering various solutions to customers that range from life insurance to accident insurance for mobile phones. These broader offerings help clients better manage their financial health, supporting them in enhancing living standards and financial security in the long run.

Financial literacy

Educating customers and prospects on the vast array of financial products and services available as well as basic financial management principles is also essential, as this knowledge in making better financial decisions beyond our relationship with them.

Also Read: How affable.ai aims to dive deeper into GenAI with its new magic search feature

Consumer finance firms needn’t limit themselves to educating or working with existing customers even though Home Credit serves around 140 million customers around the world and has reached 225 million people globally in 2022 through financial literacy activities.

Financial literacy activities can take the form of publicity campaigns through popular mediums, such as radio or social media, direct community workshops and consumer-facing campaigns. While a significant investment, consumer lenders can reach new markets, build a stronger brand and enable inclusion, improving the long-term well-being of customers.

Consumer finance players can also better enable societal development and inclusion by focusing financial literacy efforts in particular ways. For instance, research shows that women generally have reduced access to formal financial services than men.

They also have specific financial literacy needs, as they tend to live longer and earn less than men, according to an OECD study. Through programmes tailored to improve women’s financial literacy, lenders can potentially increase their economic participation, promoting gender equity and making an impact on individual women, their families, and the wider society.

Digital literacy is also a crucial component, as many of the financial transactions are now processed online. It is also a big factor contributing to customer protection in this digital age. An Asian Development Bank Institute research study shows that digital literacy has significant positive effects on saving and borrowing as well as risk management behaviours. The crucial point is that despite the rise of AI and its enormous capabilities, a human approach to financial inclusion is more important than ever.

According to a PwC study on digital pathways to financial inclusion, AI could have a transformative impact on the lending business. They estimate that a 15 to 30 per cent rise in AI-facilitated credit approvals could take place with no impact on loss rates for lenders. Despite the genuine promise that new technology offers in this space, financial literacy and broader inclusion efforts cannot be ignored.

As technology transformation accelerates changes in multiple industries, the financial services sector cannot lose sight of the critical goal of empowerment and inclusion of communities.

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On my first Echelon in 2019, I had the wonderful opportunity to speak about cybersecurity in one of the Echelon stages. Along with my AntiHACK.me co-founder, Dexter Ng, we gave a series of live demos on how easy it was for hackers to scam potential victims with only an email address or a phone number.

Fast forward four years, and we’re back as exhibitors in Echelon. This time, we represent our cybersecurity and data protection firm, Privacy Ninja. It was a great experience to physically mingle with the startup community again!

Having witnessed the ebb and flow of startup businesses over the years, my recent experience at Echelon reinforced one unwavering truth: cybersecurity remains as crucial as ever in an increasingly advanced threat landscape.

Businesses acknowledge the need for cybersecurity, but they don’t know where to start

The consensus of the young business owners I spoke with echoed throughout the event. This, is despite the well-documented rise of industry-shattering hacks and the escalating numbers associated with such incidents. In light of this reality, businesses and startups have become acutely aware of the perils they face and the critical need for cybersecurity measures to avoid falling victim, as countless others have done before them.

However, many find themselves at a loss as to where to start. At Privacy Ninja, we emphasise that one of the keys to business success lies in a proactive approach to addressing cybersecurity concerns. By adopting this approach right from day one, organisations can ensure comprehensive protection at every juncture, leaving no room for exploitation or compromise.

Outsourcing to experts for effective cybersecurity

To address the challenges faced by businesses, seeking the assistance of cybersecurity experts is a strategic choice. When it comes to effectively navigating the complex landscape of cybersecurity, outsourcing to experts offers numerous advantages.

Also Read: Time to elevate the CFO’s stake in cybersecurity

For instance, when young startups engage the services of a trusted and CSA-licensed VAPT provider like Privacy Ninja, they gain access to a wealth of knowledge and expertise. This enables them to quickly address queries and concerns regarding pen testing activities, including frequency and timing. We also value-add by guiding businesses on the specific exercise that will satisfy their requirements.

Additionally, outsourcing to experts offers numerous advantages, allowing startups to harness specialised knowledge and experience while avoiding resource-intensive endeavours. Building an in-house team of Data Protection Officers (DPOs) and penetration testers, for instance, requires significant time, training, cost, and practice before these individuals can effectively contribute. Moreover, investing substantial resources in training comes with the risk of trained professionals leaving the company, resulting in a loss.

Finally, outsourcing to third-party service providers provides the added benefit of cost-effectiveness. Privacy Ninja, for example, provides a price-beat guarantee, understanding the financial constraints that startups face, particularly when focused on revenue generation.

Having once been a startup ourselves, we appreciate the importance of maintaining a healthy cash flow while ensuring top-notch cybersecurity measures are in place. By partnering with service providers, startups can secure their digital defences without breaking the bank.

Prioritising cybersecurity from day one of business planning

With funding and achieving MVP taking centre stage (and nothing wrong with these), cybersecurity is often put on the back burner. Organisations must establish a solid foundation for protecting all aspects of their entity, especially the proper management of the personal data it manages.

Also Read: The future of cybersecurity: A plan to fill the workforce gap and protect the world

When cybersecurity is treated as an afterthought, it may result in uncovered and unprotected areas of concern, leading to organisational consequences. In Singapore, the consequences may include a hefty financial penalty of up to US$1,000,000 (a significant burden for small enterprises and startups), business disruption, reputation damage, and loss of potential clients and customers due to credibility issues regarding sensitive information.

In a recent case involving Fortytwo, the breach could have been prevented if only the e-furniture company had conducted a vulnerability assessment and penetration testing on its e-commerce website to properly determine the severity of the existing vulnerabilities, which they decided not to patch, eventually leading to exploitation by malicious threat actors.

The same fate was also suffered by Vhive when it fell prey to a preventable ransomware attack. With this, rather than considering cybersecurity as an afterthought, prioritising it can save organisations the trouble of going through the consequences.

In an ever-evolving threat landscape, the importance of cybersecurity for startups cannot be overstated. Given the ever-evolving threat landscape, cybersecurity holds paramount importance for startups, demanding proactive measures from day one. 

As the startup community, including exhibitors like us, are relishing the post-Echelon high, here’s my advice to startups out there: don’t delay, prioritise cybersecurity from day one to protect your business and ensure long-term success. Take proactive steps today to safeguard against potential threats and secure the future of your business.

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Malaysia-based iMotorbike, an e-commerce platform for preowned motorcycles, has raised RM12 million (US$2.6 million) in a Series A funding round led by Gobi Partners and Ondine Capital.

Penjana Kapital, The Hive Southeast Asia, 500 Global, SOSV’s Orbit Startup, Goodwater Capital, Seedstar Capital, Permodalan Negeri Selangor Berhad (PNSB), and other undisclosed institutional VCs also joined.

The funds will be used to strengthen its operations in Malaysia and Vietnam, besides investing in technology and talent.

iMotorbike has secured US$4.2 million since its pre-seed funding round.

Founded by Gil Carmo and Sharmeen Looi, iMotorbike enables users to buy and sell preowned motorcycles. With connections of 5,000 dealers across Malaysia and Vietnam, it also provides financing options, insurance and road tax. In 2022, the firm generated over 2,500 transactions with over US$3.5 million in total revenue.

Also Read: Is there a sudden slowdown of the pace of digital transformation globally?

iMotorbike has 170 inspection points, six days return, six months warranty, countrywide delivery and a bundle of finance, road tax and insurance.

CEO Gil Carmo said: “This infusion of capital will be instrumental in fueling the next growth phase for the company as we spearhead the transition towards a circular economy in the two-wheeler market. We will expand our efforts to promote sustainability, create a robust ecosystem for the reusing of motorbikes, parts and accessories to reshape the future of mobility.”

Gobi Partners Co-Founder and chairperson Thomas Tsao said: “In Malaysia alone, there are 1:1 motorcycles for every car, and this ratio increases to 6.5X in Indonesia and a staggering 14.2x in Vietnam. This represents a combined market size of 216 million motorcycles which iMotorbike is poised to tap into.”

With rising inflation and higher cost of living amid surging fuel prices, iMotorbike expects to see more people turning to motorcycles as a mode of transportation and generating income.

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Southeast Asia’s thriving digital economy is priming for huge innovation in the payment services ecosystem. Across the region, everything from payment apps to wallets and even digitised national currencies are at play.

However, SEA’s payments ecosystem remains hampered by a chronic lack of interoperability between different platforms. Because how can you use one payment method when it remains completely cut off from any other?

The absence of interoperability has created a huge missed opportunity for the financial technology (fintech) industry. SEA’s burgeoning consumer base is expected to reach 623 million people by 2030. The region’s digital economy reached a US$200 billion gross merchandise value in 2022.

In addition, digital finance is the top investment sector in SEA, and the segment is projected to reach US$226.60 billion this year. These are big numbers indeed: but they could be so much more.

Unfortunately, SEA’s size and diversity mean there is a complete lack of uniform regulations. There is neither a common currency nor a consistent economic agenda within SEA, which makes it difficult to integrate payments across the region.

Similar to other large regional markets like Latin America, the banking and financial infrastructure in many SEA countries is outdated and fragmented, and the legislative framework does not support most cross-border and e-commerce business models.

Although the answer could be to simply launch local subsidiaries in new growth markets, this can be cost-effective and risky for payment firms.

Differing habits, but the same goals

At the moment, e-commerce is one of the biggest driving forces behind SEA’s digital economy, with its growth rate of 22 per cent spurring the region towards US$230 billion in GMV by 2026. Cash wallets and super apps are predicted to grow more than fivefold to exceed US$114 billion by 2025. Retailers, such as Singapore’s Cheers, are even developing their own apps to link customers’ shopping carts to their wallets. 

Also Read: Breaking the cycle: How Paywatch grows your business while taking care of your employees

However, creating a seamless and efficient ecosystem across SEA is challenging. First, payment habits differ dramatically from country to country. While the European Union (EU) has successfully built a single economic market, the correlating Association of Southeast Asian Nations (ASEAN) has a highly fragmented payments landscape. 

In Indonesia, e-wallets are booming, with transaction values rising by over 200 per cent in 2019. Malaysians tend to prefer payments made through bank transfer apps, as well as e-wallets. Cash remains king for Filipinos, even in online transactions. Vietnam, lastly, shows a tendency towards credit cards, as well as playing home to dozens of licensed non-bank payment service providers.

Nevertheless, there are clear moves towards improving interoperability. As recently as March 2023, Singapore and Malaysia announced the launch of a new QR code payment code link for Nets and DuitNow users, which will enable cross-border payments across the Causeway. Singapore and India have also linked their digital payments systems, UPI and PayNow, in an effort to increase instant and low-cost fund transfers between the two nations.

Also Read: Bridging the gender gap and boosting women entrepreneurship with embedded finance

India has also made enormous waves with UPI, a real-time online payment system that allows instant funds transfer between accounts. This is a benchmark payment method in the largest market in Asia – an example for others to emulate. As of now, 382 local banks are integrated with UPI, and more than 100 million users use it monthly. This is the kind of interoperability banks and fintech players in SEA should be seeking.

There is potential for greater payment interoperability through Central Bank Digital Currency (CBDC). This is a digital version of a country’s legal tender backed and issued by its central bank. Although no Asian nation has officially launched a CBDC yet, 35 countries are either in research, development or pilot exploration. CBDC projects can drive further financial inclusion across markets, especially as these enable users in rural areas to transact digitally. However, time will tell whether these pilot projects will turn into tangible products.

SEA has a bright future for developing a world-class digital payments ecosystem. Indeed, based on the success of UPI and the promise of CBDC, there is huge potential for SEA to gain an inclusive and user-friendly payment system. 

Within the six nations of ASEAN alone, there are 60 million people, of whom are some of the world’s most digitally engaged e-commerce consumers. Today there is significant demand for a region-wide digital system that will enable efficient and transparent payments across platforms and borders. 

While the problem is not easily solved, it is navigable with the right approaches. Based on our experience in Latin America, a similar market in terms of nuance and complexity, success is achieved from a combination of local expertise, especially regarding the legal and regulatory frameworks.

Operations in a new territory can evolve quickly, but if you are prepared and, importantly, compliant, you can benefit and positively impact payments and business ecosystems. The dots are already there in SEA: all that’s left to do is connect them. 

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Despite being some of the most talented, adventurous, and resilient individuals, startup founders are found to be susceptible to mental stress and depression. This is often due to the high-risk, fast-paced, and demanding nature of the tech startup world. Such environments often require founders to lead extreme lifestyles with few hours of sleep, isolation from non-work related peers resulting from long hours spent at work, and loss of control over personal life. 

According to a survey, 72% of startup founders revealed that their work had detrimental impacts on their mental health, with the most common symptoms including stress (44%), anxiety (37%), burnout (36%), depression (13%), and panic attacks (10%). In some severe situations, some even considered suicide.

Also read: WAOHire: Empowering both developers and the businesses that need them

Consequently, before finding themselves under the global spotlights for creating the next “unicorns” in the startup ecosystem, many entrepreneurs reported living through devastating moments of despair and self-doubt which can greatly impede their decision-making process and business acumen, further exacerbating the situation. For instance, a decision made by a startup founder under extreme stress can yield adverse consequences for the company, causing their business to lose profit or face legal action from investors or regulators. This also creates deeper damage to the psychological, emotional, and mental well-being of the said founder. 

As a result, it is therefore essential for entrepreneurs to not only take care when making business-related decisions but also look out for themselves mentally — taking regular breaks and seeking professional support when necessary.  

How Anapi tackles the mental toll on startup founders

To help address issues with the mental well-being of startup founders, there exist several products and services including mindfulness classes and professional counselling to counter burnout and other mental health issues. 

Anapi, one of the pioneering insurance brokers for startups based in Singapore understands the needs of founders. They offer a unique proposition by including mental wellness counselling for startup founders as an added value service under their new Startup Director & Officers (D&O) Insurance.

Also read: Unlocking potential: The evolving role of corporate accelerators

D&O is a liability policy that covers founders, directors and management staff from any legal actions taken against them for errors resulting from their management decisions. “As it is primarily taken out by founders to protect themselves from their individual liabilities, it makes sense to provide founders with a more rounded offering. After all, mistakes occur more often due to stress and pressure”, says Andrew Lai, COO of Anapi. “Anapi helps Singapore’s startup and entrepreneurial ecosystem by enabling companies to protect themselves through insurance. We believe this protection should extend to the individual founders themselves as they are the ones driving innovation and change in the market”.

What is included in the new D&O offering by Anapi

The policy protects founders, directors and other high-level officers of a company from any legal actions taken against them for errors resulting from their management decisions by covering the legal defence, settlement and investigation costs. Common sources of risk come from other shareholders, employees or regulators and include claims arising from employment disputes, errors in statements to shareholders, breach of regulation and alleged fraud claims. This type of coverage has become increasingly important for businesses as it helps mitigate legal risks faced by their key persons as they scale their business and manage multiple stakeholders, thereby giving them more peace of mind and empowering them to try more daring and innovative solutions.

On top of the insurance coverage, Anapi provides three sessions of counselling for the startup founders. This is extremely helpful for first-time founders or even serial entrepreneurs. Having an outlet to speak with an impartial professional is necessary during times of stress. Knowing that you have the channel to access professional help so easily will be a game changer for many founders, especially because stressful events can happen unexpectedly.

Also read: Marketing best practices? Indonesian business leaders weigh in

This special D&O offering is aimed at new startups incorporated in Singapore. Anapi’s solution is backed by a specialist Lloyds of London insurer which provides extended coverage compared to other Singapore policies. An example is that the policy also covers the entity itself which is needed in cases of lawsuits from vendors or breaches of contract.

Anapi’s new startup D&O Insurance is very easy to sign up for Singapore-incorporated startups. You just need to complete a simple form to provide some basic information about the company. There is no need to provide financial statements for review. Coverage can start within a matter of days, meaning that founders get protected quicker and get access to mental health benefits sooner. Anapi has also reduced the barrier for startups to get insurance by offering monthly payment options. This brings insurance more in line with how startups are used to paying for other services, making it easier for them to manage their cash flow.

Who is Anapi

Founded in 2018 in Singapore, Anapi strives to be the pioneering insurance broker for new and emerging businesses based in Singapore. They work mainly with startups and entrepreneurs in the finance, technology or medical space, providing deep yet concise advice and helping clients to obtain specialised insurance coverage all over Asia from Anapi’s wide network of general and specialist insurers.

To learn more about Anapi’s all-inclusive insurance products, please visit: https://www.anapi.co 

 

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This article is produced by the e27 team, sponsored by Anapi

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