In the first half of 2023, 41% of tech investment in Southeast Asia went into digital financial services, a consistent trend with investment in financial services hovering around 40% over the past few years.

Despite this influx of capital, few companies have successfully exited or gone public. Where has all the funding gone?

On the latest episode of the Impulso Podcast, we are joined by Gavin Tan, lawyer turned FinTech founder, as we delve into: 

  • Recent trends in fintech, from e-wallets to buy now pay later;
  • Impact of real-time payments infrastructure; 
  • How this has challenged the traditional e-wallet business model, pushing the evolution into super apps;
  • Key challenges for fintech startups in this region, from CAC to risk management; 
  • Navigating the complex regulatory landscape.

Tune in for an in-depth conversation on the current state and future of fintech in Southeast Asia:

Also available on Spotify and Apple podcasts.

[AI-generated transcript] 

[00:00:00] Sabrina

Hello, everyone, and welcome to episode 81 of the Impulso podcast by Momentum Works. So on today’s episode, we have a very special guest, Gavin. Hi, Gavin. Thanks for joining us today. So Gavin is a rehabilitated lawyer turned FinTech founder, and he has spent the last eight years scaling high growth FinTechs in Southeast Asia.

And he’s now building modern FinTech infrastructure to enable the next generation of tech entrepreneurs. 


[00:00:26] Jianggan

What is rehabilitated lawyer? 


[00:00:29] Gavin

Like reformed, 


[00:00:30] Jianggan

Oh, okay 


[00:00:31] Gavin

grown out of the bad habits of legal ways


[00:00:35] Jianggan

What was the bad habit? You’re trained as a lawyer, right? 


[00:00:37] Gavin

Yes. I’m trained as a lawyer.

Yeah bad habits, maybe being too pedantic, too detail oriented on you know commerce and full stops Things like that instead of looking at the big picture Yeah, and I guess a lot of lawyers also look at the world from a legal lens only instead of a business lens Law is just one department in a business.


[00:01:00] Jianggan

Actually, it’s different, right? Because I remember in 2017, I was in the Middle East doing some e-commerce advisory, and one of the founders I was going with, every time he goes somewhere, he brings his lawyer with him. And the only reason is that the lawyer is the only person in his organization who speaks perfect English.

So every time he has a negotiation with the Arab partners, it breaks down because the lawyer was like point by point. And the other part is like, fine. I mean, yes, 


[00:01:30] Gavin

exactly. Exactly. Yeah. So yeah, that’s a translator and lawyer in one. And then yeah, things get, things break down if you just focus in all the small details instead of the big picture.

So yeah, I guess rehabilitated in that sense. 


[00:01:44] Sabrina

So I think before the podcast we were talking, right, and you said something like, so much money has gone into FinTech. Where did it go? So maybe we’ll start with that for today’s podcast first. 


[00:01:54] Jianggan

Yes. And I just want to quantify the number a little bit, right?

I mean so, you know, we have been tracking the tech investment in Southeast Asia together with Cent Ventures. And over the last few years I think between 35% to 41% each year, I mean each half year. That month, that percentage of funding actually went into FinTech and all digital financial services.

So, the latest number we have, which was the first half of 2023, 41 percent of all the funding in the region went into digital financial services. That’s almost twice as big as e commerce, which was the second largest sector. So where has all this money going to? 


[00:02:33] Gavin

Yeah, I really don’t know.

Looking at these numbers, the reports and the numbers, I always notice a trend in terms of funding numbers. It’s always dominated by big funding rounds from a few companies. If we, I think it’s a better gauge to look at funding activity. So the number of companies in FinTech e commerce, et cetera, they have gotten funding.

But I believe it’s the same trend. Where it’s dominated by first Fintech and then e commerce companies. I can only hazard a guess. I guess maybe in recent months it would be some of the buy now pay later companies like ShopBack, Atomi, Advanced AI that might have contributed to these numbers. Yeah, so.

Yeah. I think very often these funding, this big funding numbers go into a few companies and it’s not spread out in the whole industry. And there are always trends in different years. Like maybe if you look five to seven year back is e wallets, then lending companies, then buy now pay later. So yeah, this is where the money has been going.

It’s not the case where it’s spread out evenly across different types of financial services. Hmm. Yeah. 


[00:03:46] Jianggan

I also have some numbers actually percentages of like, you know exits and apparently like payment accounts for most of the exits in this region. I mean, toC, toP, Codap ay, et cetera. And also acquisitions as well.

And , as it interesting mentioned about owlets, I remember like back in 20 15, 20 16 when Alipay and WeChat became dominant in China. And everybody in this region wanted to say that, okay, I want to replicate that success. I want to be that dominance in sort of mobile payment that translates into at some point in time, we counted 800 digital wallets in this region.

Well, as Dimitri of Cento would say that Southeast Asia took a scenic road on digital wallets. But of course, I mean, at the moment we probably realize that it will be a very different trajectory compared to what China has gone through. Yes. 


[00:04:32] Gavin



[00:04:33] Jianggan



[00:04:33] Gavin

Yeah. Yeah. I have an opinion on that as well.

 In my opinion the core business of e wallets, like users being on the same wallet and transferring value or money to each other, I think that business is dead. And that’s largely because of real time payments infrastructure that has come up across the world. 


[00:04:50] Sabrina



[00:04:51] Gavin

China leapfrogged that stage because the e wallets got so much penetration that there was no need for real time payment.

But the perfect example would be India where once UPI came up, which is built and launched by the government and it’s free and e wallets completely died off. And this real time payments technology is now coming up all over the world, Brazil, US in Southeast Asia, we have BI fast in Indonesia pay now in Singapore do it now in Malaysia, Prompt Pay in Thailand. Yeah. So really wallets as a business is no longer viable. Most of them have turned into super apps where they’re trying to monetize their existing wallet users with other services instead. 


[00:05:35] Jianggan

That’s, I think, I mean, I had a chance to work very closely with some of the early product managers of an or Alipay.

And their sense is that well first the wallet itself for Alibaba didn’t make money because. But that’s something specific with China, right? The MDR, the processing fees have been depressed since the union pay days. 0. 6%. I mean, Southeast Asia talk about 3%, 3. 4%, but in China has always been depressed.

 So we come up with a new service, you can’t really charge that high a margin. So people have to go for the, the volume and with the volume, then you can, meaningfully embed other services into it, right? Lending buy now pay later insurance, et cetera, et cetera. And if a large enough user base, I mean, certain percentage will convert and it will make sense. Yes, yes. The problems of Southeast Asia. I see that. I mean, the wallets are so fragmented, which means that they can probably monetize off the users to a certain extent, but probably not at the scale that you would expect for Alipay, et cetera. 


[00:06:37] Gavin

Yes, yeah, there are two problems in Southeast Asia. I think it’s a, the overarching problem is a CAC LTV problem.

Okay. And That’s the every tech business. Yeah. And, and why 


[00:06:47] Sabrina

What is CAC LTV? Yeah. 


[00:06:51] Gavin

CAC is cost of acquisition, cost customer acquisition costs. And LTV is a lifetime value. So the customer lifetime value, right? So you need to have enough customer lifetime value to pay for. Your cost of acquiring the customer, if not your business doesn’t make sense, right?

And why Southeast Asia has a LTV problem is firstly because of the fragmented market. So we don’t have a large homogeneous market, right? The largest market is Indonesia at about 200, say 50, 70 million population, right? And then the second problem which reduces this market size a lot is the tipping point of GDP per capita or income, average income.

Because if your income is below I believe there’s a report, it’s like 1, 500 US per month, then the ability to consume digital products or services is much lower. Right. So yeah, maybe for Indonesia we are looking at 270 million population, but really the core customer base is the greater Jakarta area. Which is 20 million population.


[00:08:01] Jianggan

So you chose to build a business in Indonesia? Yes, I did. Yes. Was that a wise choice or is that choice that you have to go along with it and you discover opportunities along the way? 


[00:08:12] Gavin

It was at that time a very practical choice, right? Most people would have assumed we chose to build in Indonesia because of the large market size, etc.

But that was not the case. I simply started building in Indonesia because it was the market I was most familiar with at that time, outside of Singapore, 


[00:08:32] Sabrina



[00:08:33] Gavin

And maybe, maybe just to quickly talk about open banking because most people know Brick as an open banking, open finance company, right? We build open finance APIs.

At our core, we are a middleware layer. So we build APIs to connect banks and other financial institutions to. FinTechs or other tech companies. And in Singapore, the banking industry is very concentrated. Essentially, 99 percent of the market is dominated by the big three banks. So that wasn’t ideal for a middleware connector type of business.

It’s different in Indonesia where they have thousands of banks. And even amongst the big significant banks, You can count easily 15, 20 banks, right? So it was a much better market for the business that we wanted to do and Why I started with indonesia was simply because I had already been working in indonesia since early 2019 For another company back then So already knew the market fairly well 


[00:09:41] Jianggan

And over the years has your understanding about indonesia or your fintech indonesia evolved or changed?


[00:09:47] Gavin

Yeah, in the tech space, I would say, and especially in fintech, things change very quickly. I don’t think any core assumptions have changed in terms of regulators, the market, etc. But there are always new initiatives that are coming out, right? And in fact, I would say Indonesian regulators are surprisingly forward thinking, and there have been a lot of activity the last couple of years.

So in, I believe it was 2020, they came out with an open banking white paper, recognizing the importance of open banking. Then they came up with a what they call their 2025 payment vision. So it was a five year roadmap on describing how they would implement real time payments, open banking and other technologies over five years. So some of the things have been progressing well. Especially if you put it in terms of government speed or regulator speed, right? 


[00:10:46] Sabrina

I think regulation is a pretty big thing that a lot of fintech companies look at, right? So do you think , your background as a lawyer has benefited you a little bit when, now that you’re in the fintech scene?


[00:10:58] Gavin

Yeah, it has. It surprisingly has. I, I think having a legal background, would benefit any founder in a highly regulated space, right? That’s a, yeah not only FinTech, maybe health tech, et cetera, that would be a big benefit in terms of training. And specific to FinTech how it benefited me was really on the licensing side of things, right?

You either have to apply for your own license or you have to leverage other people’s license And most often then not you would be leveraging existing players’ licenses, because as a startup, you need to move fast. Right. And to be able to close that partnership, you will need to sketch out a regulatory compliant process, design a regulatory compliant product so that your partner is comfortable letting you leverage their license.

Right. So yeah, a lot of my background and work in the earlier days of my FinTech journey was doing partnerships, building the right structure, , convincing partners. 


[00:11:58] Jianggan

Yeah, I have some resonance in that we used to run a fintech business in Indonesia before the pandemic. And I remember for me, I struggled quite a bit in terms of understanding, I mean, when the lawyers advise you on something, I struggle quite a lot to understand the technicalities.

And sometimes they’ll ask for, I mean, give you a few opinions or a few options, which option would you want to go through? And there’s some documents and stuff. And then you hire people at the local level who are from the industry and quite often you need to look at this and I need to say that, okay, is this a must or is this something that we can find a route around it?

Because if everything is a must, then you can’t do the business. Yes, yes. So we struggled quite a bit. 


[00:12:42] Gavin

Yeah, I think lawyers default to saying no, unfortunately. So they just tell you like, it cannot be done, cannot be done. So if everything cannot be done, then yeah, what do I need you for? So I think your lawyers will give you options.

Those are already good lawyers. At least you have a few options on the table, but yeah exactly that’s, I think how most entrepreneurs founders should work with lawyers. They should constantly challenge the options And challenge if this is really necessary or is there an alternative way to do it?

Can we relax this proposal that you have proposed a little bit? I think that’s yeah, the most practical way for founders. 


[00:13:22] Jianggan

And another thing is dealing with regulators, right? Because, I mean, lawyers will help you do it, but at the end of the day, regulators will still need to talk to you, they’re still going to interview you.

I think showing some understanding actually helped. So this was also the hard part for me, right? I mean, as the big shareholder of that company, quite often I was interviewed by the regulators and I need to know what I’m doing. 


[00:13:47] Gavin

Yeah, very often you do not need to know all the details. You just need to know the high level rules and what’s the spirit of the rules.

I think in the past couple of years, I’ve increasingly seen friends in FinTech Non lawyers, operators who handled the license application process themselves and they were successful in getting the licenses. So yeah, more people, I think regulators have also changed their mindset a little bit. So they’re more willing to work with non lawyers, work with business people directly.


[00:14:21] Sabrina

So maybe besides a lack of understanding of regulation, et cetera, what do you think is, are some of the other pitfalls that FinTech startups face in this region? That might have led to their failure. I’m sure you’ve seen a lot, you’ve been in this industry for 8 years. You must have seen a lot of companies.


[00:14:39] Gavin

I think CACLTV is one of the big things that we talked about earlier. And then the second I would say is risk management. So, yeah, CACLTV applies to all businesses. And it’s very hard to, make your cost of acquisition and customer lifetime value work in Southeast Asia because of the smaller markets fragmented markets versus the big homogeneous markets that we know today like US, China, India and then the lower average income is also a big hurdle, right?

We already talked about that. And the other big problem I would say is risk management. A lot of the fintech startups credit base or lending base in the past 10 years or so, the big businesses would be like consumer lending, SMB lending, buy now pay later, a lot of credit based startups.

And unfortunately, perhaps sometimes it’s the push for growth that these startups relax their credit decisioning and sometimes also fraud internal or external fraud, SOPs and systems, and that has led to a lot of big blow ups in the lending industry. 


[00:15:55] Jianggan

I think that was a discussion point that we had with many people.

So, we look at a lending business, right, and when you try to grow fast quite often that, I mean, as you said, that you relax the risk control. But over the last few years, I’ve had lots of discussions with some of the founders from China, those veterans who had been in sort of internet finance for 10 years or even more.

And in 2019, they came in to help solve the companies sort of structure their credit scoring system and stuff. And their common sense is that as long as the CAC LTV makes sense another point, as long as the person making the decisions know how to do the risk model themselves.

Know how to make adjustments. Then it’s much, much easier to control because I mean they see a lot of problems is that the founders themselves are not experts. So they rely on someone they hire. Yes. But quite often they hire someone from very established financial institutions who themselves don’t do everything.

Right. Yes. So they need to hire an additional set of people to help. Yes. As a result, I mean, it becomes a system with lots of people, and each of them making their set of decisions, and also being part of a decision of someone who is supposedly more expert. And as a result, when things become a little bit tricky.

So, for instance, we were looking at this company who was I think default ratio was like 40%. They don’t know how to fix it. It’s like the fund was pushing the head of credit, head of credit was pushing down to other people. And then initially, eventually I said, okay, this is too risky. And, but.

But from the other veterans who I’ve talked to, they said, Oh, this is a problem. I mean, if the founder knows how to look at the motor themselves, it could be easily fixed. What’s your sense about it? 


[00:17:44] Gavin

I think you always have to be disciplined. Once things start to go haywire, it’s very difficult to fix.

That’s like the scenario that you described, right? If you are already at 40% bad debt or like non performing loans, Then the only way to solve that is to lend a lot more to who so that your loan book size is increased a lot and your NPL also drop and you have good performing loans. Right. I don’t know.


[00:18:09] Jianggan

 But that like making things worse for 


[00:18:10] Gavin

Yeah, that’s exactly the, the next thing I’m going to say. It’s making things worse. So Yeah. You really have to be, 


[00:18:16] Jianggan

but this is the, the trajectory that many people will take, right? I mean, to cover this. Yes. To scale up. Yes. 


[00:18:22] Gavin

Yes, yes. Yeah. I think, maybe the first thing founders have to recognize is there’s a limit, especially in fragmented markets that we are talking about. There’s a limit for every product type, every business model that you’re looking to scale, right? And there’s an adoption limit as well versus the absolute limit. So if you push beyond that, then yeah, that’s when your cost of acquisition spikes a lot and your risk.

spikes a lot as well. So I think as FinTech founders, you have to be very aware of the limit, and the rate of market adoption, and not push too much beyond that. 


[00:19:01] Jianggan

Yeah, I’m thinking about a a friend of mine who runs consumer learning for one large platform, and they are doing well. So oddly during a period of like, you know, the fast growth, I think 2022, 2023, where everybody was like scaling up and stuff.

And he controlled the pace. He said, I mean, the market now is too much risk. And then you see the business was like green, like this, this, but now they’re still green like this, this. So what, what a lot of others were going ups and downs. So at that point in time, I said, okay, you really have.

You know, control the pace of your business as well. He said that’s what my 10 years of experience did for me because I’d made mistakes in other businesses previously. Now I’ve learned my lessons, but a lot of founders he sees are, I mean, first time founders. Yeah. So. Yeah, 


[00:19:46] Gavin

yeah, yeah. Yeah, I guess and first time founders, you listen a lot to your venture investors who want that, you know, that rocket ship growth.

Yeah, yeah, yeah. Risk is not, is always a afterthought, unfortunately. 


[00:20:00] Jianggan

Yeah. I have a friend in Latin America who is now like third time founder and he said the, the principle is tell a story to the venture investors, then, then get the money from them, then build a business at the, your own pace.

I said, I mean, they’ll get very annoyed with you for like a long time, right? He said, maximum two quarters. And afterwards they realized they have nothing to do, I mean, there’s nothing they can do about you. And after four quarters, five quarters, they realize you are right. 


[00:20:27] Gavin

That’s interesting.


[00:20:28] Jianggan

But that’s because he’s a third time founder. I mean, he has learned all the lessons and he knows probably better what is right, what is not right. Yes, yes, 


[00:20:35] Gavin

yes, yeah. And I guess he also has some reputation after being a third time founder, that his venture investors listen to him more. 


[00:20:45] Sabrina

Maybe we can zoom in a little bit.

So you mentioned that one of the things OneBrick does is open banking in Southeast Asia, right? Is it just Indonesia currently or do you guys also look at other markets? 


[00:20:56] Gavin

Yeah, right now we are fully focused on Indonesia. The ambition is always to be the fintech infrastructure of choice for Southeast Asia.

Indonesia is the first market we are starting with. Hopefully, we have a few more markets in the future. 


[00:21:12] Sabrina

Which market is next? 


[00:21:13] Gavin

Interesting markets for us are always high fintech growth markets. So Philippines, Vietnam, outside of Indonesia, those are the highest fintech growth markets. So yeah, very interesting for us.


[00:21:24] Sabrina

What do you think are some of the challenges that you would see or that you currently see in Indonesia? Or that you think you would see as you expand into Vietnam, Philippines?


[00:21:35] Gavin

I think if you ask me in emerging markets as a whole, yeah, not just Southeast Asia, but also other emerging markets 

And we are in the infrastructure business. So that’s a B2B business. Our customers are other companies, right? And yeah, whether you’re an infrastructure business or a SaaS business, it’s still very difficult to. Sell automation efficiency and convince other business owners to pay for that Because cost of labor is so low.

So that’s a big challenge. We are constantly navigating in Southeast Asia, but I also get the same comments from founders in other emerging markets. I think How we have solved it, right? So that’s the more interesting part. It’s always the Look at how this new feature product that you are selling helps increase revenue or profits for your customers.

So pitch it in that sense rather than the typical cost savings efficiency pitch. 


[00:22:40] Jianggan

Which is actually the common feedback I hear from a lot of customers. SaaS founders, be it for financial institutions, be it for other sectors, right? We’ll tell the business owners that I can help you expand revenue.

Everyone’s interested in, at least listening to your pitch and the pitching people that I can help you become more efficient. It’s much harder for people to sort of grasp exactly what it can do. Yes, 


[00:23:03] Gavin

yes, exactly. Yeah. Yeah. SaaS, I think in general, SaaS and a lot of FinTechs are like similar to SaaS also.

Yeah. If you are a. Buy now pay later solution. That’s like very similar to SaaS. Yeah, it’s very hard pitch and business in emerging markets 


[00:23:20] Sabrina

So I think when we were discussing earlier, you also mentioned that open banking is not as exciting right at least maybe in indonesia where you are Operating. So what do you think is more exciting or that you you’re looking at a little more in the fintech scene?


[00:23:35] Gavin

Yeah, so let me qualify that a bit. I’m in the open banking space. So for sure, it’s exciting for me I can wake up every day, right? So what I meant is Maybe maybe let me talk about again about open banking a little bit. So open banking open finance I’ll use it interchangeably has two big parts to it.

Many people know about the OpenBank. com Open banking data part, that’s when consumers get to move their data easily from, say, their bank accounts to their fintech app, right? But open banking also has the payments bit, right? And most of the world, people would refer to that as account to account payments, right?

Real time payments for example, BI Fast, PayNow, Doitnow, Promptpay, that’s also an example of account to account payments, right? And that’s right now, very exciting in Southeast Asia. The bit that’s not so exciting is the open banking data, right? And why it’s not so exciting is because for a few reasons, like number one, demand is down because FinTech funding has been down since Q1, Q2, 2022, right?

So there are less new FinTechs coming up, less demand for new innovative data products. And then on the supply side regulations still need to catch up. Unfortunately, I would say emerging Southeast Asia is a very regulator driven type of market. It’s not so laissez faire like US. And market education also needs to catch up.

Like most people today, most consumers still do not know what is open banking, right? So they will not be asking. their banks to enable open banking. There’s no consumer pressure. Yeah. So that’s for the data part. And that’s why I say it’s like, not so exciting, but real time payments is super exciting. Everybody now knows the success story of UPI in India.

So and that’s why all the regulators in the past couple of years have also been rushing to build and launch their own real time payments network, even in the U S right, with very developed financial services market. 


[00:25:43] Jianggan

US, the payment is still quite slow. I mean, so many of the payments, like within this country, get settled in like three days.

Yes. Yeah. It’s not that fast. 


[00:25:49] Gavin

Yeah. So now there’s FATNOW, which is supposed to be, or what you were referring to is the ACH. Yeah. Payments network. Yeah. Which most businesses still use. Most people still use. Yeah. 


[00:26:01] Jianggan

Yeah. But there are also lots of issues with the real time payment, right? I mean, for instance, now, I mean, issue that’s concerning many consumers is the order scams if you allow that cross border.

And of course, there’s a lot of I think there’s a lot of trusting to be a loss of like like controls in to build in ecosystem so that you balance legitimate transactions While sort of avoid I mean even even lots of businesses. I mean get scam, right? I mean you get an email from you like your boss Yes, asking you to issue a payment instruction.



[00:26:33] Gavin

yeah. Yeah, unfortunately scams happen for all types of financial services. It’s not just real time payments. Yeah. I guess, yeah, one big, definitely education is the most important to make people feel comfortable with a new technology. But I also think some sort of dispute resolution, insurance type of mechanism will be important for mass adoption of real time payments.

For example, for cards, there’s a chargeback process to it. So maybe consumers feel more comfortable with using card payments because of the chargeback process. Yeah. But, but I think overall the adoption of real time payments has been amazing actually. So there’s no, it’s not slowing down. It’s yeah, definitely will be widespread.

Just the next couple of years. 


[00:27:24] Jianggan

Have you have you heard of this incident like a couple of days ago of I think the Singapore football team was playing against the Thailand, the Thailand team and the goalkeeper, what’s his name? Like Hassan something. Yes. And he amazingly ave like 11, 11 shots.

And the indirect consequences that it sends the Chinese team like into the next round. And of course the, and and Chinese consumers dig out. I mean, found out that this person also runs a Nasi Lemak store, like a food store in Singapore. And people started sending like payments of appreciation to him.

And of course, I mean, we don’t know how much he’s really received, but someone said that the bank has hoarded his QR code because of all this, the money coming from. Oh, okay. Yeah. Interesting. And when I look at it, it looks like, I mean, if this kind of activity is allowed, At scale, then it can become a way to money launder in a way Like you you make an excuse and i’ve done something and then people send you token of appreciation the money gets transferred across Yeah 


[00:28:33] Gavin

I mean, I get what you’re saying, but but really the same argument can apply to any existing Financial rate whether is it cards like even for cards there is a visa direct which is It’s same as real time payments.

You can transfer money to any Visa number and it goes into the account that’s linked to the debit or credit card. And yeah, I mean, anybody can make, it’s, it’s, the real is just a tool, right? You can create a good scheme or a bad scheme. You can create that fake story, like you said, and use any real of your choice, whether it’s a crypto or cards, SWIFT, or real time payments.


[00:29:08] Sabrina

Basically when people want to commit a crime, they will find a way to do it. It doesn’t matter what tools you have available for them. Yes, 


[00:29:15] Jianggan

yes, yes. I remember many years ago after the terrorist attack in Mumbai, and there’s lots of people saying that, Oh so the terrorists from Pakistan used satellite phones, navigation systems and stuff.

There were some cryptography expert who wrote a blog back then saying that they also used food, water and boat. So basically the , tool is tool. I mean, you can be used by multiple sort of purposes. And and of course, but the speed and advancement of some of the technologies.

Make life harder for regulators and organizations within, right? So if they want to, I mean, a safe choice would be, okay, you shut everything down so that you don’t have the risk. , but how to balance that? It’s it’s always a tricky issue. And I think after the recent scandal about money laundering in Singapore, I think some people are caught in saying that, hey, we need to have more stringent sort of checks and controls.

But, I mean, any business in Singapore already know that. I mean, opening a bank account and making a bank account nowadays, It’s a lot of, a lot of effort to, with the KYC and the staff. And if you, if you step up that even further, that will hurt business. 


[00:30:22] Gavin

Yes. Yes. Agree. Yeah. It’s not just for consumers or small businesses that regulations have increased for business operators for like payments, processes, et cetera.

Regulations have also increased a lot in the last five years. So the Payment Services Act in Singapore that, that umbrella regulation, a similar movement has happened in all the other Southeast Asian countries, right? Regulators have generally rolled up different licenses into one Payment Services Act and also included previously unregulated activities into that license.

So the amount of regulation in general for. Payments for financial services have gone up a lot in the last couple of years. For example, one example is merchant acquisition, like providing the POS, that wire card service is not regulated previously in Singapore. Now it is. Yeah. 


[00:31:21] Sabrina

Do you see this just happening across Southeast Asia or just generally globally as well?


[00:31:28] Gavin

Definitely globally, the AML CFT, which is anti money laundering and countering the financing of terrorism. Those obligations and responsibilities have gone up a lot. Not only for financial institutions, but non financial institutions also, like lawyers, accountants, realtors, they have to do AML checks as well.

So that has gone up a lot over the years. Payments, I’m not so sure I can say for Southeast Asia, it’s gone up quite a bit. Yeah. But one thing I would say about AML and CFT regulations is they’re not effective at all. I mean, the banks, financial institutions as a whole spend so much money on AML compliance, but it doesn’t catch the major cases.

For example, the Singapore case, right? All that money spent on AML and CFT is. did not catch the biggest ever case. It did not catch 1MDB as well. All the big cases have slipped through. 


[00:32:33] Jianggan

But yet you make it hard for a lot of businesses. Yes. Yeah. So what should they do instead? What should regulators do instead?


[00:32:41] Gavin

If I was the regulator, I would make AML and CFT compliance result based or so if, if there’s a breach, you pay a certain percentage of the breach so that incentives are aligned. So if you let say one billion of dirty money go through your system, then you pay a fine. Your fine should be percentage based, like maybe 1% or 10% I don’t know.


[00:33:09] Jianggan

The regulators have to decide. So at the moment, you mean, you mean the punishments are not proportionate to 


[00:33:15] Gavin

Yes. No, it is proportionate somewhat, but primarily now it’s intent based. 


[00:33:20] Sabrina



[00:33:21] Gavin

So yeah, whether, whether you have set up the right systems, whether you filed your suspicious transaction report, whether you have done the right steps is more than, what was the impact.


[00:33:32] Jianggan

I see. I see. So now is that people have to put lots of extra steps because it’s measured by the steps you take, but rather than the effectiveness of the whatever you do. 


[00:33:44] Gavin

Yeah, I would say the impact or the result still influences the punishment. But yeah, whether you are right or wrong is whether you have put the steps in place and whether you have done your duty under the AML CFT rules.


[00:33:59] Jianggan

So if you make it result based, So if you have, okay, would that make, I don’t know, the organization put extra steps because they’re


[00:34:09] Gavin

Hopefully they put a more useful steps instead of 


[00:34:13] Jianggan

I see. I see. Interesting. Yeah, which are the steps which are not useful Or it’s hard to say 


[00:34:20] Gavin

It’s hard to say well a lot of a lot of the things I will say on this topic will be politically incorrect Yeah but Because there’s always a business incentive, right?

So especially for the sales guys, there’s always incentives for them to circumvent the schemes and the rules to hit their sales targets, right? That’s the problem. Yeah. 


[00:34:43] Jianggan

So, which means that if you make the rules very explicit, it’s easier to circumvent. in a word. 


[00:34:49] Gavin

Yes. I would say so. Yeah.

If you make the rules that you have to do step one, step two, step three, there’s always ways for people to think how they can squeeze the current situation to pass a step one, step two, step three. Right. But if it’s result based and if incentive sales commissions are also based on this results, right, there’ll be clawbacks, et cetera, then, then then all the incentives throughout the whole financial system will be more aligned.

to achieving the result. 


[00:35:17] Jianggan

Interesting. Interesting. So basically argument is that instead of like having like a fixed set of rigid processes, you make it more sort of result driven and make it sort of in a way you look at each stakeholder within the ecosystem or within the financial organization and look at their interest and how to how to find a way to balance this.

Yes. Yeah. I presume that would be a hard switch for very established institutions. Yes. Yes. It will be a very hard switch. 


[00:35:46] Sabrina

That’s a very technical discussion about all the regulations and payments. We’ll be coming back a little bit to real time payments. I think something we see now, especially post COVID with the rise as travel is kind of bouncing back.

A lot of these. Real time payments are also trying to do cross border payments. Do you guys see a lot of that as well, especially in Southeast Asia or generally just across the globe?


[00:36:14] Gavin

Yes, I definitely see a lot of that in Southeast Asia both as a consumer. I use it myself and I don’t have the numbers on my fingertips, but there was a report that came out recently I think by DBS and MAS because DBS is the clearing bank for cross border QR transactions in Singapore.

So the, the, the growth is really good for cross border payments via QR, via real time payments. So definitely something that’s picking off, making consumers life much easier. 


[00:36:47] Sabrina

Yeah, especially when you travel, 


[00:36:50] Gavin

yeah, especially 


[00:36:51] Sabrina

besides this cross border real time payment, what are some other trends that you see kind of appearing now, or maybe you think in the next five years in the FinTech scene?


[00:37:02] Gavin

There’s still so much to do in fintech, I would say. The big trends that have come up in the past 10 years, right, is like e wallets, lending, buy now pay later. We’ve got a bit of neo brokerages, like the Ajayibs that Robinhood type of apps. Yeah, but Many things still have not been done, I would say.

Wealth management. Okay. Wealth management. We have to leave out Singapore, actually. Singapore is a very different market for the versus the rest of Southeast Asia, right? So if you leave out Singapore, yeah, wealth management has not been done. Neo banking is, yeah, not really done yet. Just starting in Indonesia.

So there’s still a lot to be done. And then the penetration in terms of the population is also, yeah, we’re just getting started. Outside of Singapore. 


[00:37:56] Jianggan

A couple of weeks ago Neobank in Brazil just celebrated the crossing of 100 million users. I think registered users, not active users. So they celebrated that.

 And of course, if you look at what they have been doing recently, a couple of things. So first, they’re expanding to Mexico because I think about up until a certain point. the new customers they can acquire in Brazil, their home market becomes limited. And the second is that they started to work with others to look at large ticket, long tenure kind of loans.

So they started with micro loans, right? I mean, the credit card, the small ticket items, and now they’re looking at mortgage, they’re looking at car loans and stuff, which means that the margins would start to dwindle, but as the base will probably grow, which. Hopefully leads to like a lower cost of capital, which makes their, their small loans, which their bread and butter more profitable.

 So I think in Southeast Asia, we don’t see actually many players which have reached that stage yet. Right. I mean, massive user base and which you can, yeah, not yet. Not 


[00:39:00] Gavin

yet. Yeah. I think some exciting new banks have come up in Southeast Asia. There’s Honest Bank in Indonesia. The numbers that are coming out, they have 1 million MAUs in November last year, so it should be higher now.

And there is also GoTime in Philippines that is doing very well. I don’t have the exact numbers, but, 


[00:39:23] Jianggan

yeah. I have 

a friend who is in a digital bank space who used to work for one of the large, gosh, okay, one of the large, big platform backed digital banks. And and his assessment about Indonesia is that very attractive.

And his assessment about the Philippines is the super hard. I said, why? And he said, I mean, when we look at the similar consumer profile, the Indonesian consumers just seem to have much more money compared to the, I mean, Philippine sort of consumers. And he doesn’t know why, but this is what he says in the data.


[00:39:57] Gavin

Yeah, it’s GDP per capita. Like Indonesia’s GDP per capita, average income is much more, yeah, than Philippines. So you can use this, this number to, to explain this. Yeah. I mean consumption is a lot more disposable income to consume. It’s a lot more. So your transaction fees are higher whatever interests on the base, the bigger base.


[00:40:19] Jianggan

So assessment from that friend is that lending business in the Philippines is attractive. Because the alternative people have in the market are very expensive and probably not very efficient. I mean, because interest rate is expensive because you need to cover the bad loans and stuff, right?

And if you can have a better sort of credit scoring, theoretically you can lower, I mean, whatever you charge to the consumers. He sees that in a lot of opportunities, but he doesn’t see, much opportunity in terms of attracting consumer deposits to use as a lending source in the Philippines as compared to Indonesia.


[00:40:53] Gavin

Yes. Yes. I think that’s the big secret that neo banks have to crack. So getting your customers to deposit their salary into your, the new bank account, right? I think the most successful new banks in the world the UK based ones, Monzo Revolut and. Starling. Yeah. So a lot. They have successfully convinced a lot of their users to switch salary depositing into and use the new bank account as the primary bank account.


[00:41:23] Jianggan

And here what do you think is the challenge? Is that because the money is relatively concentrated in the middle class and upper middle class? And, I mean, for, of course, the ultra rich, they don’t deal with their own money, so it’s fine that people, you know, the whole establishment serving them.

But we look at the middle class and slightly above middle class, so they have options, right? They have options. And for somebody new to come in, it has to be much more attractive than the existing option to, to bridge that, that, that, that sort of switching or education cost. 


[00:41:54] Gavin

Yeah, that’s true.

Yeah. You either have to pay a lot more in terms of interest rates to attract people, but that is short term. I think the longterm and better solution is to provide a match much better customer experience. So online signups yeah. Great digital app. 


[00:42:11] Jianggan

Which, which if you look at some of the I mean, in a few countries, if you look at the current experience provided by banks, theoretically is not that hard.

I mean, you know exactly where you can provide better service, but I think the difficulty is that how to realize that from product, from risk control, from everything. 


[00:42:28] Gavin

Yeah, from licensing, that’s the big one because capital requirements are very high for banking license. Yeah. Especially in Southeast Asia, many banks are unwilling to lend their license to startups.

That’s not the case in US or Europe, where you have a lot of banks loaning their license to fintechs. 


[00:42:51] Jianggan

What do you think is the reason for that? Huh. So one theory I heard from some people is that, I mean, but that’s commenting on a separate but related topic. So somebody from one of the large fintech players in China who have global businesses, and he’s saying that the Southeast Asian regulators they deal with are actually quite professional, and his assessment is that this whole region has gone through 1997.

So that changed a lot of thinking about, I mean, how regulation should be applied and how the banking sector or the financial sector should be sort of structured. So many of the, whatever that they imposed or whatever that they think has evolved is still relevant today.


[00:43:35] Gavin

I don’t have any good answer for this really. I have some insight into Indonesia for Indonesia specifically, All financial institutions, including banks, have to submit an annual business plan. So if they want to do a new activity, for example partnering a fintech to launch a new bank that has to be included in the business plan that was already submitted last year.

So execution would take longer. But overarching reason that, that explains this phenomenon versus North America. I don’t have any 


[00:44:10] Jianggan



[00:44:10] Gavin

for it. 


[00:44:11] Jianggan

Which means that, I mean, whoever who, who wants to build that kind of financial service, digital financial services businesses, they just have to be more patient in a way.


[00:44:22] Gavin

Yeah, they have to be more patient or they have to raise a lot more capital to acquire their own license, which is what Tonic and GoTime did in Philippines. 


[00:44:33] Jianggan

So that’s the, that’s the alternative trajectory, right? I mean, you raise more capital and, and that’s probably an easier sale to the investors because it can be quantified.

I mean, if you tell investors that I need to be more patient, it’s pretty hard to quantify that. 


[00:44:47] Gavin

Yes, yes, true, true. Agreed. 


[00:44:50] Sabrina

Maybe one last question. That’s a little less on the technical side. So you’ve been in the fintech scene for eight years, right? And now you’re a founder. So what have you learned as a founder operating in this region or in Indonesia?

Or just as a founder in general. 


[00:45:09] Gavin

One of the biggest lessons I have and which I learned pretty early on in my startup journey is momentum or speed is the lifeblood of startups. 


[00:45:19] Sabrina

Momentum works. 


[00:45:21] Gavin

Even if you are moving in the wrong direction, you just have to move, right? And so yeah, you move fast, you find out that what you’re doing is wrong fast and then do the next thing, do the next thing until you find the right thing.

So momentum is super important. Maybe for more recent lessons.

I, I had a thought, but I, I forgot.


[00:45:43] Sabrina

Is that something you learn as a founder? That sometimes you have too many things in your mind. 


[00:45:47] Gavin

Yeah, definitely. Yeah. 


[00:45:48] Sabrina

How do you manage it? 


[00:45:49] Gavin

Yeah, I learned to calendar and write down everything. Especially in the last couple of years. If it’s not in the calendar, it doesn’t exist. 


[00:45:58] Sabrina

Do you find that’s the case as well, Jianggan?

If it’s not in the calendar, it doesn’t exist. Even if it’s in the calendar, it doesn’t exist for Jianggan.


[00:46:07] Jianggan

I don’t know how to comment on that, but I think so one thing I have learned is, I mean, as a person, I, I mean, since, since my early age, I always knew how to deal with things which are uncertain, things which are left hanging. What I do realize is that a lot of people, I mean, when you run the company lots of people around you.

 Many people have to have the personality that they want things to be certain, which will make them very effective, but also make them very, very stressed. So because Sabrina is noding her head, are you like this kind of person. 


[00:46:40] Sabrina

I learned not to be so stressed. 

 So a lot of things. It’s something that you can’t from a result point of view.


[00:46:48] Jianggan

You can’t Really? Just look at it. I mean, do something. Then let this to a certain result. Quite often. I mean, you do something you’re either left with ambiguous result or no result so learning how to like live with it and sort of evolved the business as a whole rather than okay, I need to get that piece of work done complete It’s probably a psychological shift for many people Yeah, I agree 


[00:47:14] Sabrina

So I think that brings us to the end of today’s episode.

Thank you, Gavin, for joining us today. And thank you guys for tuning in to another episode of the Impulso podcast. We hope that you guys enjoyed today’s episode. And if you did do like our podcast and subscribe on YouTube, Spotify, Apple podcast, or your preferred podcast platforms to stay up to date on the latest happenings and trends in tech, new retail, and the broader digital economy.

Thank you. And bye bye.

Thanks for reading The Low Down (TLD), the blog by the team at Momentum Works. Got a different perspective or have a burning opinion to share? Let us know at [email protected].