A Glimpse of Open Finance & Fintech in Singapore and Indonesia
March 3, 2022
The term “open finance” has gained more popularity in the financial industry among the Southeast Asia general public. According to financial software provider Brankas, central banks in many SEA countries are eager for open finance. This digitalization has made fintech in Singapore and Indonesia grow rapidly.
However, it points out that the technique varies nationwide, with some favoring a market-led approach and others adopting a regulatory-driven one. Take a glimpse of open finance for fintech in Singapore and Indonesia below.
SEA opens up to the modern financial system with Fintech
Supposedly the continuation of open banking, open finance is the solution for open data, where consumers can easily have better control over their finances. Consumers then can utilize their data to make better decisions and improve their financial well-being.
Bain estimates that millions of small and medium-sized firms (SMEs) in Southeast Asia have significant finance gaps and that over 70% of adults in the region lack access to financial services. This is partially because many financial institutions do not have access to the financial information of their clients, which restricts their capacity to determine whether or not these clients qualify for particular goods or services.
That is why service providers who want to capitalize on the region’s sizable unbanked population and digital changes are finding Southeast Asia’s rapidly developing—but still primarily underdeveloped—open finance ecosystem to be an alluring market.
So far, the Southeast Asian nations that have embraced open banking the fastest are the Philippines, Indonesia, Thailand, Malaysia, and Singapore.
Open finance in Singapore and Indonesia
The Open Banking APAC study by the Emerging Payments Association Asia (EPAA), published in February 2020, praised Singapore, an early adopter of open banking, as a leader of API and open banking within the region.
Although open banking is not required in fintech Singapore, the Monetary Authority of Singapore (MAS) has encouraged the practice by, among other things, releasing the Finance-as-a-Service API Playbook, which provides guidelines on API governance, use cases, implementation, design principles, and 400 suggested API services.
The API Exchange (APIX), a global, open-architecture platform that serves as a marketplace for fintech and financial institutions to communicate, share ideas, and innovate collectively, was also launched for fintech Singapore with the help of MAS. Now, around 140 fintech businesses and at least 50 financial institutions rely on this technology to scale their financial products in a safe digital setting.
Indonesia is the largest e-commerce market in Southeast Asia. Given that the average Indonesian spends four hours daily online, it is not surprising that the online commerce sector is expanding quickly. To the point that online commerce will support roughly 26 million jobs both directly and indirectly in 2022. Twenty percent of the labor force would be employed in these 26 million jobs.
McKinsey&Company predicts that the Indonesian online market will grow five times in size during the next five years. This will significantly impact the job market in Indonesia and other facets of daily life.
The growth opens up an opportunity for the Blueprint Sistem Pembayaran Indonesia 2025. This is the support from the Government to accelerate and expand regional digitization. The support involves developing a payment system ecosystem that can aid in integrating the country’s digital economy and finance, promote banking digitization through open APIs, and create connections between financial and banking technology.
Singapore’s industry standards, innovation, and public awareness set a precedent for its counterparts worldwide, despite having yet to impact policy lobbying and education significantly. Many companies of fintech Singapore are listening to their customers to find solutions to their financial difficulties, flooding the industry with prodigious quantities of invention and creativity.
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