Last week, I was part of a group of Freshfields lawyers attending Money20/20 Asia in Singapore to learn about the latest trends in financial services, payments and fintech and to network and connect with clients. The conference was every bit as engaging and informative as we’d expected, and I’ve been reflecting on the key themes shaping the future of finance in Asia:

1. ASEAN emerges as a new fintech hotspot

According to new data from CB Insights, fintech fundraising activity in Southeast Asia grew by 143 per cent year on year in 2018. Fintech growth in the region is now outpacing growth in traditional hubs like the US, UK and China. One of the factors underlying this growth across ASEAN is insufficient financial inclusion. For example, according to World Bank data, in Indonesia only 49 per cent of adults have formal bank accounts; in the Philippines and Vietnam, it’s 34 and 31 per cent; and in Cambodia, the number is as low as 22 per cent. Insurance and wealth management penetration is even lower.

This lack of access makes it very difficult for consumers to manage their money by saving or borrowing and reduces their chances of breaking the cycle of poverty. But this is also where the opportunity for fintech companies lies: growing internet penetration and the proliferation of affordable smartphones allow fintech companies to offer innovative, often mobile technologies that create opportunities for unbanked consumers to obtain the services they need to improve their financial situation.

2. Partner up or go it alone?

Many financial institutions are considering whether to enter into partnerships to remain at the forefront of developments in the fast-moving world of fintech. The number of collaborations between established financial institutions, as well as between incumbents and fintech providers, has significantly increased in recent years. The key question is when it makes sense for financial institutions to partner with “frenemies” versus when they prefer to innovate from within.

Many panellists conceded that financial institutions find it difficult to develop innovations in-house. This is because of the considerable regulatory burden they shoulder, but it also comes down to their conservative and risk-averse nature as organisations. One interesting observation was that fintech partnerships are more likely to be found in a retail banking context rather than among the parts of a bank that serve institutional customers. Retail customers value convenience, ease of use and a slick customer experience – all of which fintech companies are well-placed to provide due to their lack of legacy infrastructure. On the other hand, the main priorities of institutional customers are reliability and stability. Given the systemically important nature of their operations, large banks often find it difficult to partner with fintech companies because of the risk of introducing a glitch into their tried and tested systems.

As an antitrust lawyer, I was particularly interested to hear how traditional financial institutions think about the opportunities and risks in fintech collaborations, as well as issues around the need for interoperability and standardisation. On the one hand, incumbents who actively develop products that are incompatible with rival firms’ products could deter competition if this strategy makes it harder for competitors to access a market. At the same time, although industry standardisation can address this issue by driving down prices and the costs of market entry, it may also lead to unwanted side-effects such as oligopolies where a small number of incumbents choose to split the market between them.

As policy-makers and regulators around the world build up their expertise in fintech, one thing is certain – fintech collaborations will remain a hot topic to watch closely.