Digital ties between Asian nations offer massive financial opportunities

As financial technology maintains momentum during COVID-19, a Thai entrepreneur expects closer cooperation between China and Southeast Asia to help enhance digital connectivity in the region.

"After COVID-19, we will see very strong growth in the fintech space" due to support from the Southeast Asian and Chinese governments, said Tridbodi Arunanondchai, vice-chairman and co-founder of Singapore-based financial technology company Lightnet.

"We will also see a massive shift in behavior of how Southeast Asian and Chinese entrepreneurs connect" using advanced and next-generation financial services, Tridbodi said in an interview.

Founded in 2018 by Tridbodi and Chatchaval Jiaravanon－a member of the family that controls the Thai conglomerate Charoen Pokphand-Lightnet provides cross-border remittance services using block-chain infrastructure.

The startup raised $31.2 million in Series A funding in January and has formed partnerships with international banks such as Siam Commercial Bank in Thailand and Swiss crypto bank SEBA.

With an initial focus on meeting the remittance demand from millions of migrant workers in Southeast Asia, Lightnet is seeing opportunities from cross-border payments between China and countries in the region.

"Mirroring a general geopolitical and economic shift toward the East, China is increasingly partnering with countries in Southeast Asia to stabilize the region and increase overall prosperity," Tridbodi said. He noted that China is among Southeast Asia's biggest trading partners and sources of foreign direct investment.

"The trade finance volume between Southeast Asia and China alone is nearly $1 trillion," he said.

Tridbodi believes increased collaboration among small and medium-sized enterprises in China and Southeast Asia will boost demand for transparent, secure and fast cross-border payment solutions.

Noting that promoting digital connectivity will be important for Asia, he said one interesting thing with the Belt and Road Initiative, besides all the physical infrastructure projects, is how different countries in Asia are trying to connect to China.

"China's digital-forward approach is evident in its Belt and Road Initiative," said Tridbodi. He believes the digital Silk Road provides overarching infrastructure that supports the initiative. "Digital services are poised to facilitate smooth cross-border commercial and trade cooperation," he added.

"Regional fintech companies are well-positioned to support the Belt and Road Initiative. They are poised to reach new economic heights," added Tridbodi.

The entrepreneur pointed out that the COVID-19 pandemic has accelerated digital adoption. It has pushed organizations worldwide to embrace digital technology and fintech solutions in order to keep operations running.

As for the fintech sector, the technology has become a natural solution during the pandemic. This is not only because of its convenience and efficiency, but the contactless method that helps reduce the risk of COVID-19 transmission to people.

"Fintech made it possible for millions of unbanked and underbanked individuals in Southeast Asia to access government aid while countries focused on containing and limiting the spread of COVID-19," said Tridbodi.

But there are still challenges in enhancing digital connectivity between China and Southeast Asia.

For one, most countries in the Association of Southeast Asian Nations lag behind China when it comes to digital payments, said Tridbodi. Also, regulations throughout ASEAN and China are very different.

To tackle these challenges, Tridbodi said there is a need for increased government-to-government cooperation.

ASEAN comprises Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, the Philippines, Singapore, Thailand and Vietnam.

"ASEAN national governments should have open dialogues with their Chinese counterparts to promote compatible and mutually beneficial regulatory frameworks," he said.

For fintech companies, challenges come with opportunities. Noting there is yet to be a dominant player in the market, Tridbodi said Lightnet aims to provide infrastructure between Southeast Asia and China for trade finance settlement.

"We want to be a platform that can provide the best rate in real-time using the block-chain technology, to connect buyers and sellers to do trade finance between Southeast Asia and China in a more seamless and more efficient (way)," Tridbodi said. He added that the aim is to provide the "best experience possible".

Lightnet is expected to handle more than $1 billion in transactions this year, according to Tridbodi. That number is projected to grow five to 10-fold in 2021. "Eventually, we expect Lightnet to grow to the size of Visa," he said. He hopes the company can be the primary cross-border transfer intermediary for banks across Asia.

"By having a strong presence in China, Lightnet plans to leverage the country's digital infrastructure to expand our reach, and endeavor to improve the efficiency and afford-ability of legacy remittance and payment systems," said Tridbodi.

He said the fintech startup also hopes to accelerate the mass adoption of blockchain technology by delivering accessible and efficient financial services to the unbanked and underbanked populations of Asia.

South Asia, East Asia and the Pacific are home to more than half of the world's unbanked population, which adds up to 2 billion people, according to a report by the World Bank in 2015. In Southeast Asia, more than seven out of 10 adults are underbanked or unbanked, a report by global management consulting firm Bain & Company showed.

"We (Lightnet) will be one of the catalysts that can accelerate the adoption of fintech in this region, and we can be the bridge between Southeast Asia and China," said Tridbodi.