Fintech players and financial institutions don’t play well together. Startups want to innovate, while big banks want to minimize risk and disruption.
To bring these two sides together and accelerate the development in the financial service industry is the mission behind the ASEAN Financial Innovation Network (AFIN), a non-profit organization established in 2018 by the ASEAN Bankers Association, International Finance Corporation, and the Monetary Authority of Singapore.
KrASIA spoke with Manish Diwaan, managing director of AFIN, about how his organization will help fintech players and financial institutions to collaborate using API Exchange (APIX), the organization’s proprietary application programming interface (API) marketplace.
AFIN brings institutions and startups to one sandbox
In established financial institutions, innovation can face roadblocks. Often, these are caused by risk management practices. For example, an API would have to pass many internal processes from risk and legal departments before a proof of concept can be approved.
An API is a software “intermediary” that allows two applications to “talk” to one another, as defined by US-based software company MuleSoft. Hence, it facilitates the building of new hardware or software.
“What we are trying to do here is de-risking the financial institutions from doing this in-house. Rather than go through all these risk procedures, bring it to the sandbox,” Manish said.
APIX streamlines API development by giving institutions their own secure containers on the cloud, which AFIN calls integrated development environments.
Developers can then showcase their APIs immediately on the platform. Besides avoiding constraints inherent in in-house development, they can also skip the lengthy process of finding clients and pitching.
AFIN’s research says it normally takes a fintech company anywhere from 12 to 15 meetings with potential clients to reach the proof-of-concept stage. This can take up to a year, and APIX significantly shortens this process.
“Let the financial institution discover you,” says Manish. “Go to the sandbox and create this prototype in a matter of days, not weeks, or months. That’s the problem that we are trying to solve.”
On how much financial institutions can save by being on the platform, Manish didn’t provide a breakdown but did say AFIN estimates the industry average for a proof of concept costs between USD 400,000 and USD 1.5 million.
“There have been success stories,” he said, citing the example of a bank in Singapore that has created a prototype for their digital customer onboarding with a fintech, that is based out of the UK. “We also have a bank in the Philippines that crated a prototype with a geolocation company that is not traditionally fintech.”
He added that APIX has also gotten a national stock exchange to create a prototype using APIs that it provided. “A fintech went ahead and created a prototype based on that, because the stock exchange displayed their APIs.”
Developing the future of financial services
For the future, Manish says APIX hopes to develop a separate category of common use APIs. He explained that common use APIs include APIs from location services, National IDs, telecom operators and billers, and others that are required by both fintechs and financial institutions to work with while they create new products and services.
“These organizations are important,” he said. “When a bank or fintech creates a product, they need to integrate with these organizations to create a minimum viable product. We are trying to integrate with these organizations to bring them on board for them to showcase their APIs, on top of which fintechs and financial institutions can develop products.”
Commenting on the key goals for APIX, Manish said that they want to be present in every financial institution, in areas where financial inclusion is a huge challenge. “It’s important for us to be present and help those financial institutions because to expect them to digitize themselves, it’s a huge cost.”
According to Manish, APIX is already present in 21 countries. They have signed memorandums of understanding with the Singapore Fintech Association, the Philippines Fintech Association, the Hong Kong Fintech Association, and the New Zealand and Japanese fintech associations.
In the near future, he hopes to see the platform expand beyond Southeast Asia.