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The importance of Islamic financing

Indonesia is the world’s most populous Muslim nation – out of the 260 million people living in the country, 87 percent identify as Muslim. But the country remains a laggard when it comes to developing a robust finance industry.

One of the factors contributing to the slow growth of inclusive economic development is lack of Islamic financing.

What is Islamic finance and how does it differ from conventional practices?

The main difference between Islamic and conventional finance is the treatment of risk, and how risk is shared. In a conventional loan, the financier has a contractual right to receive interest (and capital repayment) irrespective of the condition of the borrowers’ business.

The main principles of Islamic Finance is the avoidance of all haram (harmful) activities such as charging interest. Islamic financial institutions must ensure that ambiguity (gharar) or gambling/speculation (maysair) is minimised in transactions and contracts. Complying with Shariah law also means these Institutions are not permitted to invest in alcohol, pork, pornography or gambling. – Financial Times

Promoting risk-sharing instead of debt-financing, reduces poverty and inequalities, which are the necessary objectives that need to be addressed by economic development policy makers. – Journal of Business & Financial Affairs

Indonesia has long been a contestant to become a global hub for Islamic financing, and created a road map for its development since 2017. The government believes Islamic finance will be an engine of stability and drive financial inclusion. Both Muslims and non-Muslims can benefit from Islamic Finance as it aims, by principle, to be a more transparent system of finance.

The risk-sharing features in Islamic financings also help ensure the soundness of individual financial institutions and discourage the types of lending booms and real estate bubbles commonly seen as precursors to the global financial crisis.

By focusing on asset-backed and shared-risk principles, Islamic financing has the potential to persuade more financing by small and medium sized enterprises (SMEs) to kick start their businesses. With so many beneficial qualities, it seems strange Islamic financing isn’t more widespread in the country, why is that? Without the right financial literacy, people are reluctant to shift from conventional financing.

Lack of Islamic finance in Indonesia

The establishment of Islamic banks in Indonesia 25 years ago is considered late compared to other Muslim-majority countries such as the Philippines (in 1973) and Malaysia (in 1983).

Indonesian authorities were reluctant to support it for a long time because the country was colonized by Dutch adopted Western-led financial institutions that dominated international finance since the end of World War II.
But after the global financial crisis in 1998, Indonesia was keen to find alternatives to broaden its financial base and better protect itself from global financial shock.

Indonesia’s President Joko Widodo (Jokowi) put together the National Committee for Sharia Finance (KNKS) in 2017 to boost Islamic finance and tackle the challenges surrounding Shariah banking in the country.

And while Shariah banking assets continued to increase in 2017, amounting to IDR 435 trillion (US$32.2 billion), or about 5.8 percent of total assets of Indonesian banks – up from 4.83 percent in 2015 – it was still small compared to Saudi Arabia’s 51.1 percent, Malaysia’s 23.8 percent, and the United Arab Emirates’ 19.6 percent.

The adoption of Islamic finance is also in line with government initiatives working to address barriers to SME growth, such as limited access to finance, which is frequently cited as a problem for smaller firms that lack sufficient collateral for loans.

In the last five years, SMEs have played a large role in Indonesia’s economic structure. Last year, SMEs accounted for 60.3 percent of the total GDP from 57.84 percent in 2012.The Governor of Bank Indonesia Agus Martowardojo hopes the role of SMEs to GDP can increase to 70 percent by this year.

A new early stage fintech startup hopes to help the government achieve their ambitious goal. Ex-bankers and friends Bembi Juniar, Dima Djani, and Harza Sandityo created Alami to boost Shariah financing and focus on educating SMEs about its benefits.

“Alami is a technology company that aims to facilitate small businesses to obtain Islamic financing from banks. It will accommodate Shariah financing, filter and provide accurate ratings for prospective borrowers and facilitate communication between banks and prospective borrowers,” explains Dima.

“I hope through the technological advancement that we offer, we will speed up Shariah banking processes and increase efficiently by at least 50 percent.”

Popularising Islamic-based finance in an unbanked country

Alami was founded in December 2017 and was the runner-up start up in the INSEAD Venture Competition held in Singapore and Paris. The company has raised at least US$100,000 in pre-seed funding round from undisclosed angel investors.

Bembi Juniar, Dima Djani, and Harza Sandityo the founders of Alami Shariah

Dima Djani, one of the founders of Alami, shares with ecommerceIQ that the lack of infrastructure, lack of support from key opinion leaders, and lack of education on Shariah finance are main roadblocks to the country’s slow adoption of Islamic financing.

“People don’t learn about this at school, and we believe technology is needed to spread the benefits of Shariah finance,” says Dima.

“Me and two other founders are young professionals with banking backgrounds. We create technology to simplify the loan process for SMEs to get financing and for bankers to easily focus on SMEs,” says Dima.

“Fintech is a strategic opportunity for Shariah finances to expand their market segment,” Financial Service Authority chief Wimboh Santoso said as quoted on CNN Indonesia.

The startup positions itself as a strategic partner to the few existing Islamic banks, not as a direct competitor and has already partnered with three prominent Islamic financial institutions: BNI Syariah, Bank Mega Syariah and Jamkrindo Syariah, with a total transaction value of IDR 9 billion and IDR 50 billion.

“The most common deals SMEs need money for is working capital to expand, either through trade finance or plain working capital financing and they are coming from the chemical and construction industries,” shares Dima.

How does Alami services work?

There are two simple steps SMEs need to follow to use Alami’s service:

  1. .SMEs register and fill out a form on Alami’s website – data to be shared includes corporate and some historical financial information
  2. The system assigns a rating indicating the SMEs risk and matches the business to Alami’s bank partners

According to Dima, Alami is an abbreviation of Alif-Laam-Meem, the first sentence of the second Surah or chapter of the Al-Quran (the meaning which only God knows according to Muslims).

But philosophically for Dima and his two other founders, Alami means to motor Islamic finance 2.0 in Indonesia.

“We see Alami as the second chapter trying to improve the Islamic finance sector in Indonesia through technology, creating value for our partners and being a unique Islamic-based fintech startup,” Dima elaborates.

“It is thought that wealth should be created through legitimate trade in assets,” – Dima, co-founder of Alamai

In Indonesia, there are other Shariah-based financing platform such as Cermati and CekAja, but these platforms focus on individual loans, not on SME financing.

What’s next for Islamic financing in Indonesia?

The startup announced its collaboration with Kapital Boost, the Singapore-based Shariah-compliant crowdfunding platform for SMEs to address the lack of financing available to SMEs in Indonesia earlier this year.

Under the partnership, Alami will leverage its SME network in Indonesia to direct businesses to Kapital Boost, who will facilitate fundraising and financing from global investors.

“We believe SMEs are a huge economic contributor for Indonesia and by helping them to grow, we are impacting positively on Indonesia’s economy,” shares Dima. “That’s our aim.”

“Our plan is to be one stop solution for Shariah finance in Indonesia, we are committed to popularizing Islamic finance in Indonesia and work hard to create easy to use technology for both SMEs and our bank partners,” says Dima.

When Singaporeans shop online, they tend to buy products sourced from outside the lion state.

Overall, it’s estimated that 55% of all ecommerce transactions in Singapore are cross-border – meaning the items were listed on etailers in the US or China, for example – and then shipped to their eventual destination.

The statistic is higher than corresponding figures for cross-border online trade in Japan, South Korea, and China.

This is undoubtedly strengthened by the fact that the overwhelming majority of ecommerce purchases in Singapore are prepaid with credit card and Singaporean consumers are exempt from GST and import duties as long as the total value of their order is below S$400.

Singapore is also a high-income country, meaning residents can afford to splurge, while also bereft of the same logistical challenges that stymie higher adoption of ecommerce in countries like Indonesia and the Philippines. Next-day delivery is the norm.

In 2016, the World Bank declared Singapore the fourth-best country for logistics infrastructure in the world noting it’s an important hub for regional and world trade, located conveniently in the heart of major shipping lanes.

There are other factors at play, too. Amazon and Singpost have a collaboration to facilitate the delivery of overseas purchases within three days – roughly the average time it takes to deliver a domestic order in Indonesia.

Despite the fantasized utopia of a truly open world economy – a scenario where goods and services can move unhindered to where demand is – the reality is that cross-border flows still involve a great deal of friction.

Cutting down cross-border fees for Singaporeans

The first problem is that there’s a high degree of financial inefficiency, with banks and payment processors trying to capitalize on arbitrage opportunities to bump up their own bottom line. Foreign exchange rates also work against consumer interest with banks routinely charging far more than official rates. And lastly, consumers are simply unaware of the available discounts and promotions that may be applicable to their purchase.

Jake Goh, CEO of RateX.

“Consumers are still paying unnecessary fees when they shop online, e.g. they pay 2%-5% in transaction fees on top of the price of the goods they purchase due to the frictions in existing payment networks,” explains Jake Goh, CEO and co-founder of RateX, a Singaporean payments startup that’s trying to iron out these inefficiencies and level the playing field.

RateX, which recently raised a US$2.3 million pre-series A funding round, has built a free browser extension – currently available on Chrome and Firefox – where users can get the lowest exchange rates for overseas purchases on Amazon and Taobao.

The extension also aggregates coupon codes, applying it directly to applicable sales. It leverages partnerships with Sephora, Zalora, ASOS, and more.

The extension is currently only available for consumers in Singapore, but the team expects to add Taiwan and Indonesia to its roster later this year. The long-term goal like most companies is to dominate the region.

“Southeast Asia is the world’s fastest-growing internet market. Gross merchandise value of ecommerce will rise to US$65.5 billion by 2021, up from US$14.3 billion in 2016,” outlines Jake referring to a study by Frost & Sullivan.

Jake claims RateX has helped shoppers save S$500,000 in both foreign exchange conversion fees and coupon codes since launch. He adds that they’re expanding at 30% month-on-month but doesn’t specify whether that’s in terms of users or transaction value.

A cursory examination of the website reveals the number to be actually S200,000 though.

Leveraging blockchain

The founder accepts that while the ultimate goal is to simplify cross-border commerce for all of Southeast Asia, a key hurdle the company faces is siloed infrastructure when it comes to payment and settlement mechanisms. There are significant overheads and fees involved when dealing with multiple currencies and paying merchants in different countries.

So what’s the solution to this problem? Jake believes blockchain can minimize the intermediaries involved in cross-border settlements. The team’s already working on the Rate3 token – a proprietary payment network built on top of the Stellar horizon platform that specifically looks to solve problems in fintech.

“This significantly reduces the risk and fees associated with different banks in various countries […] RateX eventually leverages on [it’s] own payment network to scale in a much more efficient way compared to existing methods,” explains Jake.

The eventual aim is for the Rate3 token to be used pervasively across the ecommerce ecosystem, bridging together shoppers, merchants, 3PLs, wholesalers, and manufacturers.

“We believe that blockchain technologies are key to creating this [enabling network],” affirms Jake.

The key challenge for the team will be convincing the disparate players in the ecosystem to come onboard by accepting this token as a payment mechanism. It’s unclear what the incentive structures will be for them to move away from existing structures towards Rate3.

At the moment, however, the primary mode of monetization is via affiliate sales, where merchants give RateX a commission of the sales it brings to them. The RateX browser extension will suggest products as users browse sites and the site has an updated list of trending deals.

“This business model allows us to give consumers zero markup on exchange rate conversion fees and transaction rate fees,” outlines Jake.

Singaporean shopping preferences

The startup’s been facilitating shoppers in Singapore for a couple of years now. What has it noticed about trends in the country?

Jake reiterates the view that Singaporeans are one of the top cross-border shoppers in the world. Despite a thriving mall culture, the sheer variety of international brands and fast-fashion trends means that all products cannot be found in local stores. Even when they are, it’s sometimes cheaper to purchase from overseas via online shopping even after factoring in shipping fees.

The two largest segments for its user base are consumer electronics and appliances – which are primarily sourced from either the US or China – as well as clothing and fashion brands that haven’t established a presence in Singapore yet.

The dynamic goes some way in explaining why Amazon set up shop in Singapore as well as the decision of Lazada to offer merchant goods from Alibaba’s Taobao marketplace. Consumer purchase intent is marked and vivid, why not double down to make the process even more seamless?

Jake also notes that most RateX shoppers display a tendency to purchase things late at night.

Online activity spikes between 10PM – 1AM in Singapore.

Mobile shopping is on the upswing, Jake says, but it’s still not the dominant channel particularly when it comes to big-ticket purchases. Desktop browsing and shopping are deeply ingrained in the Singaporean consumer psyche, a factor that Jake believes is due to the better product comparison features on a larger screen.

Singaporeans are also incredibly plugged in. The average resident has over three connected devices and the overall internet penetration rate is about 85%, one of the highest in Asia, but Singapore isn’t a mobile-first country like Indonesia or the Philippines. Consumers accessed the web on desktops and PCs before the smartphone revolution engulfed the region. It doesn’t seem like these preferences are going away anytime soon.

In 2015, Thailand’s insurance sector was valued as the 8th largest in Asia, with an annual growth rate of 4.5%. Thai residents spent approximately $334 on insurance every year, accounting for an overall penetration rate of 5.5%.

Life insurance accounts for the largest segment within the insurance industry in Thailand. These are annualized premiums paid out in the event of death or permanent disability; or after reaching a certain age. If you subtract life insurance from the overall industry pie, premiums decline considerably to $100/capita.

Photo credit: Thaire.

And this is where the largest potential for growth lies.

Thailand is already considered to be an upper-middle income country by the World Bank, with a GDP per capita of $6,033. When you combine that with a rosy economic outlook, it’s straightforward to predict that the size of motor and travel insurance will rise, too. Higher disposable incomes will lead to a greater outlay on cars and vacations – and the insurance industry is bound to benefit.

But one of the problems currently plaguing Thailand’s insurance sector is that distribution channels are antiquated and riddled with inefficiencies. To purchase an insurance plan, you normally have to arrange for a broker to meet you, prepare an unwieldy amount of paperwork, and wait for the bureaucratic red tape to churn its wheels.

The entire process is frustrating from a consumer standpoint and expensive for insurance companies too; broker commissions can eat into premiums and the process is only scalable by hiring a greater number of agents.

In 2016, a total of $5.1 billion in non-life insurance premiums were solicited via brokers, agents, and bancassurance channels. Precise figures for online distribution aren’t available, but the channel did grow by 25% as compared to 2015.

One of the startups that’s trying to simplify the insurance acquisition process is Frank. It offers motorcycle, car, and travel insurance direct to consumers in Thailand via its website. Consumers apply for their insurance product of choice, receive an instant quote, and for certain products, can have the policy in a few seconds. It’s fairly hassle-free.

Frank’s co-founder Harprem Doowa admits they’re still a small player in a very “traditional industry” but he affirms their product is largely positioned towards millennials and future Thai generations who are far more comfortable transacting online and will continue to carry these preferences along with them.

“This will take time,” he adds, referring to overall adoption of Frank’s product.

Harprem ecommerceIQ

Harprem Doowa, Co-founder and MD of frank.co.th

Innovating the insurance value chain

Another key challenge for Frank is ensuring that all parties involved in the transaction are equally adept and comfortable with technology. At the end of the day, it’s another distribution channel and isn’t inherently marketing its own product.

Frank’s policies are underwritten by companies like Bangkok Insurance and AXA – large, unwieldy, and geriatric organizations resistant to systemic change and constant reinvention.

“Insurance companies themselves are still not ready with the backend to underwrite policies immediately. Most still require manual approvals,” explains Harprem.

Another problem is that many potential customers opt out of the process because they’re unfamiliar and uncomfortable with scanning and uploading documents. They require the support of an agent or customer support advisor to complete the transaction – driving up costs and somewhat negating Frank’s value proposition in the first place.

The third aspect hampering progress in insurtech are Thai regulations: Harprem explains that while they protect consumers, there’s a real bottleneck towards online conversions because of the multiple in-person verifications required.

Value-add Partnerships

The fledgling insurtech company has experimented with a number of ways to make it more visible and enticing to customers. One of these is partnerships with popular ecommerce players like Lazada, Grab, honestbee, and foodpanda.

ecommerceIQThis may seem like a contrasting list of partners – how does quick food delivery equate to online insurance? – but Harprem is upbeat about the benefits its brought to the table.

“Doing partnerships with many companies increases our exposure 30X and when [consumers] go and search online for insurance, they see Frank. It wouldn’t be the first time and therefore they are more likely to buy from us,” he explains.

That’s a critical takeaway – startups aren’t flush with the kind of cash that large organizations have, they have to stay lean. By leveraging relationships with online companies, even something unsexy like insurtech can be galvanized into a winning brand.

“The more customers see your brand, the more likely they are to buy insurance from you at a later stage,” exhorts Harprem.

Where do the opportunities and threats lie?

Of course, it’s possible that large insurance companies eventually sidestep players like Frank and start selling direct to consumers via web channels but this will involve channel conflict.

Specifically, it will alienate the vast number of brokers who currently provide the bulk of insurance revenues. Another complication is the sheer time insurance companies take to make decisions, hampered by bureaucracy and lengthy internal approvals processes.

Harprem says the team is completely aware of this but isn’t overly worried. Frank’s nimbleness means it can continue innovating and pivoting as and when the need arises.

“It took one of our partners two years to update their home page.”

There are two additional areas which, if done right, could provide considerable value in the coming years. One is ‘microinsurance’, or insurance for low-income households that provides protection for health risks, property damage, or other specific perils.

Harprem says there’s definitely a business case for it in Thailand but adds that it’s not a priority for Frank right now.

The other opportunity is changing fintech from just another distribution channel to overhauling the entire product in itself. That’s where technologies like blockchain have the greatest potential.

In Singapore, this is already becoming a reality. Electrify, which allows users to buy electricity on the blockchain, closed a $30 million ICO yesterday. Insurtech company PolicyPal, which is powered by blockchain technology, allows underbanked consumers to purchase products like agriculture, property, life, and personal insurance.

“This, in my humble opinion is true fintech,” says Harprem.

Financial technology is always evolving in Asia-Pacific Region.

Banks, local telcos, payment solutions providers alike are pushing to increase cashless payment acceptance and integration (e.g. credit cards, mobile wallets, and/or variations of online and offline).

However, a common roadblock faced by most payment systems is that they are often siloed and cannot interact across organizations (e.g. companies or brands) or jurisdictions (e.g. cross-border).

To break to silo? Payment providers across the region are looking to various types of solutions, including blockchain, a decentralized technology, as means to disperse functions and expand global market reach.

1[decentralized technology]: Cryptocurrency is a digital medium of exchange not controlled by any one group or agency and secured by cryptography. Block chains are politically decentralized (no one controls them) and architecturally decentralized (no infrastructural central point of failure) but they are logically centralized.

eIQ sits down with Vansa Chatikavanij, Managing Director of OmiseGO Pte. Ltd., an Omise subsidiary blockchain company, to learn more about the upcoming product, a recent $25 million ICO, and how companies can benefit from this new technology.

What is OmiseGO?

“To put it simply, OmiseGO is a decentralized payment and exchange network designed to disrupt the current payment landscape,” says Vansa.

“The idea is to enable users connected to the OmiseGO network to trade any value (e.g. currencies, store loyalty points, rewards, in-game points etc.) efficiently, securely and at low cost across the internet.”

To allow users to interact with the OmiseGO blockchain, the company will be making its first user interface application, the white-label wallet software development kit (SDK), available towards the end of 2017.

The SDK allows third party programmers to develop a wallet application for its own brand or integrated existing wallets onto the OmiseGO blockchain.

What functions could be possible for a wallet running on the OmiseGO platform?

The simplest application of the decentralized payments network would be transfer of funds between peers without the need of a bank account and/or incurring high third-party fees.

But peer-to-peer payments are only the beginning. The main use cases of OmiseGO appear to be:

1. Remittances
2. Loyalty points
3. Mobile banking
4. Asset tracking
5. Digital gift cards
6. Tokenized fiat

OmiseGO, ecommerceIQ, eIQ Insider

OmiseGO was designed with flexibility in mind.

Take for example two retailers each with a loyalty program. If both are operating on OmiseGO, their users could potentially cash in their rewards points interchangeable at either establishment; creating their own trading market.

Cross-platform transactions means grocery points could one day be exchanged for air miles.

One of the largest markets that OmiseGO will facilitate is cross-border remittance. The World Bank predicts remittances to low and middle income countries are expected to increase 0.8 percent to $442 billion.

“Through OmiseGO, senders and receivers will be able to safely transfer money locally and cross-border to their families, regardless of whichever wallet or payment platform they are on,” says Vansa.

“There is so much opportunity for companies to customize their target users and customers experience and reward online financial transactions,” says Jun Hasegawa, Omise Holdings Pte. Ltd. Group CEO.

“With addition of OmiseGO, we are taking concrete leaps towards realizing the Omise group’s mission of Online Payment for Everyone.”

“Through OmiseGO, senders and receivers can safely go cross-wallet and transfer money locally and cross-border to their families, regardless of whichever account or platform they are on,” says Vansa.

Use of ethereum blockchain makes exchanging digital currency easy and secure as each user has access to their own private keys, making it impossible to manipulate the data.

1[ethereum blockchain]: focuses on running the programming code of any decentralized application.

A $25 million boost for OmiseGO

The company recently made headlines after a successful ICO (initial coin offering) that raised $25 million by selling its OmiseGO network token – OMG tokens.

Similar to kickstarter crowdfunding, a piece of code is granted to contributors that gives them rights to earn fees by helping run the OmiseGO network.

The product sounds promising but having strong backing is useless without educating its users.

“The exciting challenge with OmiseGO is the newness of the technology. Majority of people have heard of blockchain but are either unsure how it can be used to their benefit,” says Vansa.

“Similar to when the internet first started, not many people could have imagined where it would be today.”

The long term goal for OmiseGO is to “Unbank the Banked”; become a new global tool to enable financial inclusion for both the banked and the unbanked.

Its success would be a milestone for financial technology in Southeast Asia but we will have to wait and see as OmiseGO network is slated to officially launch towards the end of 2018.

Thailand has been one of the countries that continues to reduce its dependency with cash. The government has been keen on driving the country towards a cashless society, from launching nationwide e-payment scheme PromptPay to recently announcing a campaign that offers a reward up to 1 million THB ($29,463) for users who adopt cashless transactions.

It may seem like a lot of money to reward people to try more convenient methods of payment but the Thai Bankers’ Association predicted that commercial banks could save $2.18 billion in the next 10 years with a digital payments system as the cost of transportation and insurance that came with the use of cash transactions lowered.

Market value for digital transactions is also expected to reach $23 billion in 2021, up from $11 billion this year so it’s no wonder fintech has become so popular.

A company that was an early adopter and saw Thailand’s potential for digital payments is AirPay, the pre-payments platform by Garena (now Sea), Southeast Asia’s most valuable internet company to date.

Serving the unbanked one internet cafe at a time

AirPay was initially launched in 2014 as an e-wallet to facilitate online transactions for users of Garena’s gaming service and since been downloaded 3.2 million times.

As one of the biggest market for Garena in the region, Thailand was chosen as the product’s launch pad. AirPay Thailand’s Country Product Manager, Supphavit Hongamornsin, shares another reason with eIQ.

“Compared to the other markets in emerging Southeast Asia, we find that Thai people are more open to trying new forms of payment,” said Hongamornsin.

To ensure AirPay was user friendly for the roughly 18.3 million gamers in Thailand – where 26% of are below the age of 20 and have low bank account ownership – the company ended up creating two platforms to complement one another, AirPay Counter and the AirPay app.

AirPay digital payments

Thai gamer demographic shows a population of digitally savvy young people. Source: Newzoo

“An app was created because urban millennials with digital nativity are used to completing all types of transactions directly through their phones,” explained Hongamornsin.

The AirPay Counter, on the other hand, is a more traditional payments option that allow users to top up their AirPay e-wallet through cash payment at an internet cafe, convenience store or regular  mom and pop shop.

“We started the counter service at internet cafes because of their wide network and familiarity – there are around 40,000 of them in Thailand,” said Hongamornsin. “They’ve been highly helpful for residents in rural regions without access to smartphones or bank accounts.”

To date, AirPay has around 100,000 AirPay Counters nationwide in every sub-district of Thailand and partnered with local chain stores like Supercheap and IT Shops like IT City to expand its reach.

“Only 10% of our counters are actually in Bangkok,” said Hongamornsin.

AirPay digital payments

Internet cafe with AirPay Counter facility

Supporting the country’s cashless agenda

Since its inception in 2014, AirPay has evolved from simply facilitating online transactions for the Garena gaming community to providing a wider range of payment services for both physical and digital goods including utility bills, phone credit, movie tickets, and ecommerce.

Hongamornsin said AirPay wants to empower people, especially the younger generation, through better financial capabilities and provide a solution to siloed bank accounts.  

“Right now, there is actually very little that you can do with your bank account. In Thailand, for example, not all debit cards can be used for online payments.”

To combat this, one of the new services provided in the AirPay app is a virtual prepaid card called AirPay Card in partnership with MasterCard.

AirPay digital payments

Setting up an AirPay Card in the AirPay App

“There’s a large population in Thailand that’s still underserved by traditional financial services and unable to complete online transactions. With the AirPay Card, customers can purchase from any merchant in the world that accepts MasterCard,” comments Hongamornsin.

AirPay’s foreseeable future

In 2016, AirPay reported an annualized gross transaction value of $510 million. Although gaming services contributed heavily to the company’s revenue, AirPay is expecting the tide to shift to ecommerce with a goal of one million AirPay Card owners in Thailand by the end of this year.

Hongamornsin, however, admits that there’s still a long way to go before the country can achieve a “majorly cashless” status.

“I think it would take at least five years for Thailand to reach this milestone [80% cashless],” said Hongamornsin.

And unlike Shopee and Garena that have made their marks at a regional level, AirPay’s story is still pretty localized to Thailand.

In other countries like Indonesia and Vietnam where AirPay is present, Hongamornsin says the population is much more underdeveloped when it comes to digital payments creating new challenges.

These markets have complex banking landscapes that make it difficult for AirPay to integrate.

“In Vietnam, there are more than 50 small banks used by the population. Compared to Thailand’s roughly 20 banks, we still need to understand how to connect them all through AirPay.”

“Expansion to another country is definitely in the pipeline, but we want to make sure we are strong in our existing markets first,” said Hongamornsin.

With the pace that fintech is growing in Thailand thanks to the efforts by companies like AirPay, it won’t be long before the millennial becomes well accustomed to plastic over paper.

Here’s what you should know today.

1. Razer takes minority stake in Malaysian fintech startup

Razer has announced a strategic investment in Malaysian fintech startup MOL AccessPortal. MOL become the master distributor of zGold, Razer’s virtual currency.

The US-Singaporean company says its wholly owned subsidiary ZV-Midas purchased a 19.9 percent stake in MOL.

MOL’s MOLPoints virtual currency – already the most widely distributed in Southeast Asia, according to the company – will be renamed zGold-MOLPoints in order to leverage off the Razer brand.

In addition to their distribution through Razer’s online network, zGold-MOLPoints will also be available to purchase from over one million online and physical stores across 17 countries, including Australia, Indonesia, Malaysia, the Philippines, Singapore, Thailand, and Vietnam.

zGold is part of Razer’s zVault digital wallet platform. Gamers can purchase zGold to top up their ewallet using their credit card, PayPal account, and other payments options.

Read the rest of the story here.

 

2. Fintech startup Akulaku reportedly raises $5-10M from DCM Ventures

Akulaku is an ecommerce platform that allows users to shop by using installment, without having the need to own a credit card.

Operating in five countries including Malaysia, Indonesia, and the Philippines, it claimed to be the first online mall in the region that allows users to buy “every items” on installment.

The startup targets ecommerce platform users, and it help them get short term financing for their purchases. It also allows users to apply for instant credit before paying for the goods over time.

 Read the rest of the story here.

 

3. Community Chatter: Uber CEO Travis Kalanick resigns

Uber’s CEO Travis Kalanick is resigning from the ride-sharing company he helped found in 2009 following a “shareholder revolt” led by some of Uber’s most prominent investors.

In the letter, titled “Moving Uber Forward” and obtained by The New York Times, the investors wrote to Mr. Kalanick that he must immediately leave and that the company needed a change in leadership.

“I love Uber more than anything in the world and at this difficult moment in my personal life I have accepted the investors request to step aside so that Uber can go back to building rather than be distracted with another fight,” Mr. Kalanick said in a statement.

The move caps months of questions over the leadership of Uber, which has become a prime example of Silicon Valley start-up culture gone awry. The company has been exposed this year as having a workplace culture that included sexual harassment and discrimination, and it has pushed the envelope in dealing with law enforcement and even partners.

Read the rest of the story here.

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