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Reaching Asia’s unbanked through core banking transformation

Reaching Asia’s unbanked through core banking transformation

Improving financial inclusion in Asia is critical to the region’s development and economic growth. Yet, around half its 600 million inhabitants in the Southeast Asia region are either unbanked or underbanked. While the scale of the problem varies by country, large swathes of Asia’s population live rurally, where it’s costly to provide physical banking infrastructure. As a result, these communities lack access to basic financial services.

In an attempt to boost financial inclusion, several governments in the region are taking steps to digitize their economies. In Vietnam, for example, banks must ensure half of all transactions are digital by 2025. However, the challenge for many banks is the decades-old technology that underpins their operations. In countries mandating digitization, legacy tech means banks can’t transform fast enough – something that 10x is helping financial institutions solve globally.

At 10x, we believe in making banking better for customers, banks, and society. This blog will look at how core banking can help Asia’s banks reach un- and underbanked populations.

Open banking is a game changer for the unbanked

The region’s growing digitization trend is developing with the introduction of open banking. Alongside the popularity of digital and mobile payments through personal QR codes, governments also bet that open banking can boost financial inclusion in Asia.

“If we fast forward five years, we’re going to see open banking becoming a lot more prolific in Asia,” says Richard Lim, Regional Sales Director for the APAC region at 10x. “Every country recognizes that it’s the way forward, but it won’t necessarily be modeled on the Western implementation of open banking because the use cases are different.”

Whereas governments have primarily used open banking to drive competition in advanced economies, in Asia’s emerging markets, it is vital to broadening access to financial services for people the banking industry is yet to serve.

Helping micro businesses access financial services

The push to increase financial inclusion in Asia is about helping individuals and micro, small, and medium-sized businesses (MSMEs). Together, MSMEs account for 97% of all enterprises in Asia and 69% of the workforce, according to the Asian Development Bank.

“MSMEs are an essential part of Asian economies, especially in developing markets,” adds Richard. “Many are possibly unregistered informal entities – essentially owner-operated with very few if any, employees.”

The main challenge for the informal sector is the lack of access to financial services, limiting their potential.

“Access to financial services could allow MSMEs to lease a shop, employ staff, and grow their business,” says Richard. “That adds value to the economy and supports economic growth. Key regional developments such as alternative payment methods, digital transformation across the industry, and open banking will deliver much-needed infrastructure, efficiency, and scalability to support this growth.”

Open banking without the regulatory burden

Open banking has not been widely legislated in Asia, which differs from markets like the UK and Australia, with adoption largely market-driven, as opposed to mandated. For instance, the Monetary Authority of Singapore sponsors industry initiatives such as the API Exchange (APIX), designed to improve cross-collaboration across the financial services ecosystem. By contrast, Indonesia is seeking to digitize its payments system by 2025, with open banking legislation introduced as part of that overhaul. Indonesia’s Central Bank Chief, Perry Warjiyo, says digitization opens the doors for significant financial inclusion opportunities in the country, where about half of the population is still unbanked.

Inclusive banking starts with cost efficiency

Reaching the unbanked in Asia takes work. But, unfortunately, the cost to serve through brick-and-mortar branches is fast becoming unsustainable, discouraging banks from expanding in this area.

Digitization changes this picture. Instead of focusing on the steep overheads of a branch network, banks can drive digital, mobile-first product innovation, scaling products and services to meet the need of the formal and informal sectors.

Reducing the cost to serve is a crucial step in the digital transformation journey, and one of the ways banks can address this is by migrating to a cloud-native core banking platform. Our SuperCore solution brings costs down significantly for banks through an end-to-end managed service. As a result, banks can reduce their costs by as much as 70% while unlocking greater speed and flexibility when creating and launching products. Finally, our API-first platform architecture and unified data model that support real-time insights offer a turnkey solution for consumers to control their financial data better.


Contact us here to learn more about 10x and how we are bringing about banking transformation in Asia.