ASEAN regulators expected to continue supporting fintech

Fitch Ratings said that local regulators are generally supportive of the fintech industry, drawn by the potential to broaden financial inclusion

Southeast Asian regulators are expected to continue supporting e-payment technology, with little risk to private-market products, Fitch Ratings has said.

That’s as tech-savvy, affluent users in underbanked markets could skip incumbents for financial technology (fintech) challengers, according to a report on Tuesday that also looked at fintech applications in lending, insurance and wealth management.

Local regulators are generally supportive of the fintech industry, drawn by the potential to broaden financial inclusion and drive product innovation, Fitch Ratings said.

Nonetheless, aggressive business practices are likely to attract a strong regulatory response, and we expect stiffer sector regulation as the industry expands, it said.

The credit agency noted in its report that electronic payments have grown on the back of a pandemic-related preference for contactless payment methods, as well as digital ecosystems built by popular tech platforms such as ride-hailing firm Grab.

Corporate users are also expected to have greater access to faster and cheaper wholesale payment services as technology improves.

Local authorities’ interventions in the e-payments space – such as the cross-border PromptPay network involving Thailand, Singapore and Malaysia – pose little risk to private players, according to the Fitch Ratings analyst team.

Rather, the networks in Singapore, Thailand and Malaysia are expanding to include leading non-bank fintech operators and government-led mobile payment initiatives should lend credibility to such technology, potentially easing public hesitancy, it said.

While the report’s authors flagged challenges such as network resilience and the safety of customer funds in stored-value facilities, they added: Payments regulation in most ASEAN-6 jurisdictions covers e-payment and e-wallet operators, while scale-based rules govern operational risk and limit e-wallet transaction and stored amounts.