Singapore Startup Fractal Inks Deal with Filipino Fintech to Serve the Country's Unbanked Population
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Philippines-based online investment company Seedbox has partnered with Fractal, an identification management company, to provide Filipinos access to investment products, such as mutual funds, even if they do not have bank accounts.
Seedbox says using Fractal’s identification solution, which includes bank-grade compliant ‘know your customer (KYC), and ‘anti-money laundering (AML) capabilities, the company will be able to extend investment services to 40,000 Filipinos per month via its online platform
The tie-up would essentially solve a big problem for 45 per cent adults in the Philippines, who say documentation requirements are a major barrier to opening bank accounts, and 77 per cent Filipino adults who do not have bank accounts, Fractal said, citing data from World Bank’s Global Findex Database, and a Financial Inclusion Survey by the country’s central bank, both dated 2017.
“Digital technologies are driving opportunities for much greater financial inclusion. By providing technology solutions to non-bank financial institutions, our ambition is to expedite the transition to a more open and interoperable financial ecosystem,” said Julian Leitloff, chief executive officer and founder of Fractal.
Leitloff conceived the idea for Fractal after the 2008 collapse of Lehman Brothers, and Deutsche Bank, when he realised that the lack of anti-money laundering services was one of the reasons that cause unhealthy financial practices.
“We want to help both users and companies achieve fast and accurate global verifications wherever they are and have a hassle-free experience when it comes to AML/KYC related requirements,” he added.
Fractal also wants to solve the problem of high compliance costs across Asia, estimated at around $6.09 billion, as per LexisNexis 2019 estimates, and make AML compliance, which rose nearly 10 per cent over the last 24 months, cheaper.
Banking Issues in Asia Are Not New
Of the 400 million adults that live in Southeast Asia, only 104 million are fully “banked”, and have full access to financial services, which leaves 198 million people that do not have even rudimentary access to financial institutions, a recent joint study by Google, Temasek and Bain & Co showed.
Very basic problems like infrastructure costs, absence of public registers and reliable credit information, along with stringent financial regulations, make it difficult for institutional banks and insurers to penetrate the region in a meaningful way.
Fintech companies – much like Seedbox – have tried to plug that gap, and using Asia’s rapid tech innovation, boomed into a multi-billion dollar industry in the region, serving tech savvy millennials, and undocumented Asians alike.
Digital payments are expected to cross $1 trillion by 2025 in Asia, and account for nearly one in two dollars spent in the region. The market for e-wallets is expected to grow even faster, from $22 billion in 2019, to $114 billion, a more than fivefold jump, by 2025, the Google joint study said.