Digital Platforms Take Initiatives to Help the Unbanked

by on Apr 06, 2018

A large proportion (73% of the population) of Southeast Asian consumers are classified as either underbanked or unbanked. While the underbanked have some form of insufficient representation by financial institutions, the unbanked have no deposit accounts and inhibited access to basic financial services. Some of these individuals rely on cash or other alternatives like payday loans and payroll cards, which are unsafe, inconvenient and expensive.

Looking to serve this population, two companies formed a joint venture within the lending space. Grab and Credit Saison Co. Ltd.—a Southeast Asian ride-hailing mobile app and Japanese credit card company, respectively—aim to support the “invisible people” who are not served by mainstream banks. The new partnership, Grab Financial Services Asia, reduces obstacles with an alternative method for quantifying credit scores and offers loans and consumer goods financing. With access to extensive consumer data, the firm can analyze spending patterns to better assess credit risk. If successful, Grab Financial Services could potentially create new economic opportunities for people across the region.

Other mobile-focused firms have taken steps to equip the population with financial services. Korean firm Kakao Corp provides the country’s most popular digital messenger, Kakao Talk. The firm entered the banking industry with the introduction of Kakao Bank, a digital-only bank that captured $477 million worth of growth through loans and deposits just four days after its launch. The bank offers more favorable rates and fees because of the low overhead costs associated with a strictly digital platform. With approximately 50 million active monthly users, Kakao aims to penetrate overseas markets like Southeast Asia. Establishing a presence in the region could be a catalyst for change within the financial sector.

As new technology and alternative credit-scoring practices enter the Southeast Asian financial services industry, the marketplace has a chance to expand by incorporating a previously overlooked but sizable demographic.