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financial inclusion

Fintech Ant Group Affiliate MYbank Is Planning to Expand Operations in China to Serve More Rural SMEs

China-based MYbank, an online private commercial bank and an affiliate of the Ant Group with a special focus on working with rural areas and SMEs, has revealed that it will be doubling the number of rural counties it serves in the coming years.

MYbank and its business partners plan to provide financial services in 2,000 rural counties in China within the next four years (by 2025). This should coincide with the bank’s 10th year since its launch. The initiative will ensure that rural clients are able to access the same modern financial services that are offered in some of China’s largest cities. The initiative should also help with addressing the last-mile problem in the rural finance sector.

This latest announcement from MYbank has come along with the release of the firm’s 2020 annual report, which reveals that MYbank had been serving 70% more (year-on-year) SMEs in 2020 when compared to 2019. This rise in activity has mainly been driven by MYbank’s expansion into rural areas.

Since launching operations 6 years back, MYbank has managed to serve clients in over 750 different counties across China.

Xiaolong Jin, President of MYbank, stated:

“We have continued to record remarkable growth in customer base for five consecutive years. We expect rural finance to play a significant role in advancing financial inclusion, and will further our efforts to make rural finance more accessible with our financial institution partners.”

MYbank has reportedly kept its non-performing loan ratio at around 1.52%, which is a lot lower than the 2.99% average for Chinese SME loans (as of June of last year).

MYbank had teamed up with the All-China Federation of Industry and Commerce and the China Banking Association (in March 2020) in order to introduce a “Contactless Loans” initiative, in which 118 Chinese banking institutions had come together to provide supportive loans for small and medium-sized businesses as they tried to maintain operations.

The initiatve reportedly offered more than RMB 870 billion worth of loans to many different SMEs in sectors that were negatively impacted by the COVID-19 outbreak (including local dining and retail outlets).

During the 6 months since the campaign began, MYbank and its partner banks have waived RMB 665 million in interest payments for Chinese SMEs.

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Philippines based Digital Bank Tonik Reports $20M+ in Deposits in Less than A Month After Launch, Announces Partnership with PESONet

Earlier this week, Philippines based digital bank Tonik partnered with PESONet in order to support safe and secure digital fund transfers to its account from other banking service providers.

Tonik clients now have the option to send money from a PESONet participating bank directly to their bank accounts.

This new service is currently available through CIMB, PSBank, Landbank, and RCBC. Other PESONet member banks are expected to add the service in the foreseeable future.

As mentioned in the announcement, interbank transfer services through PESONet will be available with more banks within the next few weeks.

The announcement has come shortly after Tonik’s official launch in March 2021. The digital bank revealed that it has managed to secure more than 1 billion pesos ($ 20 million) in retail deposits in less than a month.

Tonik’s management also mentioned that they intend to introduce their loan offers and further expand their payment options during this year.

Greg Krasnov, CEO and Founder at Tonik, remarked:

“The response we got when we introduced the app last month was overwhelmingly positive. It’s a testament to the fact that Filipinos are thirsty for a financial enabler that cuts the red tape, makes banking less complicated, and lets their hard-earned money work better for their future. Allowing easier and bigger interbank transfers to Tonik accounts through PESONet is just one of several features that we are introducing in our app that I’m sure will make our customers love us more.”

Long Pineda, President at Tonik Digital Bank, Inc, stated:

“This is another chapter in our journey of growth and driving financial inclusion in the local banking industry. By making in-demand banking transactions such as interbank transfers safer and more seamless with PESONet, we hope to encourage more Filipinos to manage and maximize their finances with Tonik in the #neonormal.”

As covered, Tonik had started working with several companies in 2020 so it would be ready for a successful launch. After acquiring $6 million in capital in early 2020, Tonik chose Singapore’s online security firm V-Key as its mobile security partner.

As reported in July 2020, Tonik had selected Mastercard as its payments partner.

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Digital Banking: Reserve Bank in the Philippines Is working on Virtual Bank Framework to Enable Greater Financial Inclusion

The Bangko Sentral ng Pilipinas (BSP), the central bank of the Philippines, is reportedly looking into adopting a virtual banking framework so that it may be leveraged to enable greater financial inclusion.

The new digital banking guidelines are being developed to support a regulatory environment that promotes responsible innovation. The new rules will also aim to support cyber or online resilience while enabling the ongoing digital transformation of the financial services industry.

Introduced in December 2020, BSP’s “Guidelines on Establishment of Digital Banks” states that a virtual bank is a financial organization or entity that may be categorized as a bank, providing financial products that are delivered end-to-end via an all-digital platform with no physical branch locations.

Digital banking platforms are expected or required to maintain proper digital governance while offering secure, robust, and resilient tech infrastructure, according to the announcement. Proper data management strategies and related best practices are also expected of these new financial services providers.

Digital banks must also adhere to the same set of applicable requirements as other banking solution providers. These guidelines include maintaining proper corporate governance structures, appropriate risk management policies, compliance, internal control and audit procedures, and reporting governance practices.

During his speech at the recently-held SAP Virtual Roundtable discussion, Benjamin E. Diokno, Governor of BSP, said that for the Philippines, “digital banking or digital finance in general as a strategy is not so much about being ahead of the curve.” Instead, it’s “more about capitalizing on its gains to bring about a more inclusive financial ecosystem.” he added.

It’s worth noting that other Asian countries like Pakistan are working on their own digital banking regulatory guidelines. In a manner that’s somewhat similar to the Philippines, Pakistan is also looking to leverage virtual banking solutions in order to enable financial inclusion and bring more people into the formal economy.

The Southeast Asia region, in general, has been increasingly adopting digital banking and modern Fintech solutions, which is a trend that has really accelerated following the COVID-19 outbreak.

Countries throughout Southeast Asia such as Malaysia, Indonesia, Singapore, and Vietnam are investing considerable resources into their financial services sector.

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Fintech Firms in Pakistan Continue to Receive In-Principle Approval from State Bank to Offer Digital Financial Services

Supported by an upcoming generation of talented tech professionals, the Fintech industry is evolving rapidly in Pakistan. Fintechs could begin to make major contributions to the Asian country’s nearly $400 billion GDP.

Professionals leading the country’s finance ministry and its reserve bank (the State Bank of Pakistan or SBP) are planning to introduce initiatives that will improve the Pakistani economy.

New companies or businesses now operating in the country’s Fintech space such as SadaPay aim to enable greater financial inclusion while offering innovative and user-friendly digital financial services.

As reported by the Business Times, Mutaher Khan, an IT worker who’s been following the growth of the Fintech sector, revealed that they’ve seen over a dozen firms obtaining in-principle approval from the SBP in order to provide different types of financial services. These include establishing digital commerce gateways and bill payments facilities.

Khan claims that payments, bills and money transfers are some of the key areas where there’s considerable activity, along with a shift towards mobile and Internet banking – which may have accelerated following the COVID-19 outbreak.

Khan, who’s working on a directory for the Pakistani technology industry, called DataDarbaar.com, where you can obtain all the information on domestic startups and new technologies, noted that a lot of the growth on this front is being driven and supported by telco-backed Fintech apps, such as JazzCash and Easypaisa.

Khan confirmed that these apps have acquired a significant user base via their agent-based network that has now penetrated some of the most remote areas in Pakistan. He explained that  the same over-the-counter or OTC transactions have now been digitized. Meanwhile, there are traditional Pakistan banks that are also developing a strong online presence so that they can remain competitive in this fast-evolving Fintech space, Khan revealed.

In another update from the Business Times, the news outlet reported that there might be some scope for Pakistan and Singapore to work on Fintech projects and the broader tech industry as well. Singapore is now home to a major Fintech sector so there could be a lot that Pakistan might be able to learn from these initiatives.

An industry professional suggested that these collaborations might be as simple as knowledge exchange programs, which has become quite popular due to events like the Singapore Fintech Festival (SFF) where people are able to participate in masterclasses conducted by experienced business owners.

According to industry professionals, there could be a major investment opportunity for investors looking to establish some type of operation in Pakistan. Golden Gate Ventures and Stripe Asean are working on some projects, however, there’s still a lot of room for more growth and development.

It’s worth noting that Pakistan still faces many socioeconomic challenges with the vast majority of the nation’s population not having access to modern banking services, quality education, or decent job opportunities.

Pakistan has suffered from many decades of corruption and was also dragged into the lengthy issues and problems in neighboring Afghanistan after 9/11.

Most mainstream business and global financial services offered by platforms such as Amazon and PayPal (among many others) are still not available in Pakistan because the nation’s regulators have failed to implement a proper framework so that businesses can operate smoothly.

Despite these issues, Pakistan is home to one of the largest freelancer communities in the world and the country is on track to potentially become a leading or more prominent world economy by 2030. Pakistan is also considered a “middle-power” (so not completely a third-world country) which could be, in large part, due it being a nuclear power.

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CipherTrace and Blockchain Industry Insiders Comment on Updated FATF Guidelines on Virtual Assets and VASPs

Blockchain security firm CipherTrace has provided an analysis on the proposed Financial Action Task Force (FATF) guidance for digital assets and virtual asset service providers (VASPs).

On March 19, 2021, global anti-money laundering watchdog, the FATF, released a public consultation for its latest Draft Guidance on a Risk-Based Approach to Virtual Assets and Virtual Asset Service Providers.

As noted by CipherTrace, some important changes in the draft guidance are as follows:

  • DEXs or decentralized/non-custodial crypto exchanges and crypto-asset escrow services are considered Virtual Asset Service Providers (VASPs)
  • Stablecoins are virtual asset (VAs) and FATF Standards apply to these financial instruments
  • Only non-fungible tokens or NFTs that are able to potentially carry out money laundering (ML) and terrorism financing (TF) activities may be considered VAs
  • VASPs need to “assess and mitigate” proliferation financing (PF) risks
  • “Best practices” for counterparty VASP due diligence
  • Options for “mitigating peer-to-peer transaction risks”
  • Updated Travel Rule “clarifications and guidance”

As mentioned in CipherTrace’s blog post, FATF has clarified the definitions of Virtual Assets and Virtual Asset Service Providers.

The FATF doesn’t consider central bank digital currencies (CBDCs) to be a form of virtual assets. The agency “applies standards similar to any other form of fiat currency issued by a central bank,” CipherTrace noted.

The blockchain firm also mentioned that FATF considers decentralized exchanges, platforms, or apps to be VASPs.

As stated in CipherTrace’s blog post:

“A decentralized or distributed application (DApp), is not a VASP under the FATF standards—the Standards do not apply to underlying software or technology—but entities involved with the DApp such as owners or operators may be VASPs under the FATF definition.”

CipherTrace’s blog post added:

“VA escrow services, including services involving smart contract technology, brokerage services, order-book exchange services, advanced trading services, and custody providers are all VASPs.”

The CipherTrace analysis further noted:

“Some non-fungible tokens (NFTs) that may not initially appear to constitute VAs may in fact be VAs due to secondary markets that enable the transfer or exchange of value or facilitate money laundering, terrorist financing, and proliferation financing.”

CipherTrace added that assets “should not be deemed uncovered by the FATF Recommendations because of the format in which they are offered and no asset should be interpreted as falling entirely outside the FATF Standards.”

John Paul Koning, who focuses on monetary economics, financial inclusion, and cryptocurrency, pointed out that if you’re a shareholder of Uniswap (a leading non-custodial Ethereum token or ERC-20 exchange), then you’re likely a VASP.

Koning claims that these developments indicate that decentralized finance or DeFi “might be on the cusp of becoming KYC’ed.”

Brendan Blumer, CEO and Block.one, the company behind the development of EOS, a major blockchain platform for developing DLT-powered applications, has argued:

“DeFi is too often an intentional excuse to violate KYC & AML laws, but this will end abruptly. Compliant programmable finance will radically transform our financial system by displacing inefficient fee-taking middle-men and driving more value back to end-users.”

(Note: you may check out FATF’s complete report here.)

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