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Aug 31, 2020

When banks meet fintech: Interview with SCB 10 X’s CEO, Dr. Arak Sutivong, and SYNQA’s Group CEO, Jun Hasegawa

Following our Series C round news, we recently published an interview we did with Mr. Akihiro Fukutome, Group CEO of Toyota Financial Services Corporation, and our Group CEO to discuss the future of mobility and fintech. This time, we interviewed Dr. Arak Sutivong, CEO of SCB 10X and President of Siam Commercial Bank PCL, and Jun Hasegawa to discuss current trends in the banking industry and where we see the future of banks.

Questions for Dr. Arak Sutivong, CEO of SCB 10X and President of Siam Commercial Bank PCL

Q1: Can you tell us about SCB 10X’s Moonshot Mission and how SYNQA fits into that picture?

Dr. Arak Sutivong: Moonshot mission is the SCB 10X’s main objective and our reason for existence. We are focusing on investments that can create unprecedented exponential growth. It represents ideas and creations that have never been done before and the recognition of market needs ahead of the future. Financial services is one of SCB 10X focus areas and we are looking to invest in key industry leaders and tech ecosystem players in the fintech verticals, where SYNQA fits all our criteria. Also, we foresee partnership opportunities between SCB 10X and SYNQA that we can bring forward innovations and new services to the market.

Q2: How does SCB 10X decide to invest in a company, why did SCB 10X choose to invest in SYNQA and what projects can we anticipate from this partnership?

AS: SYNQA has been an industry leader in the digital payment business since 2013, providing the tools to accept and manage payments to thousands of merchants across Asia with Omise. Their subsidiary OMG Network is exploring a value transfer network on the Ethereum blockchain to provide enhanced solutions to its partners’ clients. Both digital payment and blockchain technology are our priority focused investment areas.

We are exploring many potential partnerships with SYNQA. One of the areas that we are exploring is loyalty. We observe that there is a large gap of expectation between brands and consumers when it comes to loyalty programs. According to a McKinsey global survey, about 74% of companies focus on “Earn and Burn” and discount-based programs. 58% of consumers demand benefits that provide emotional and social/community benefits. However, only 26% of companies can deliver what consumers want. Hence, we see this as an opportunity area that SCB 10X and SYNQA can do together with great deal of synergy between both groups.

Also, another interesting area is decentralized finance (DeFi), where SYNQA’s subsidiary, OMG Network, has built the OMG Network on Plasma protocol, which is Ethereum second layer scaling solution. I think this is very important as the current gas price on Ethereum is very expensive and volatile, so for financial services use-case like payment to be built on top of the blockchain stack, OMG Network is the critical component.

Thoughts on current trends

Q3: More money is moving online and more forms of value are being digitized. With this comes the need for authentication, automation and a secure infrastructure. What are your thoughts on these changes and as a financial institution, what challenges does SCB face to support these activities? What is SCB doing to capture these opportunities?

AS: Digital payment is undoubtedly one of the most important areas to look at. In a post-COVID-19 world, to reduce and avoid transmission of virus, consumers are much more hesitant to use cash. Also, digital payments come with big data that helps us understand with deep insights our customer needs and behaviors. It is also the main building block for AI and personalization, which is the long term differentiator for any businesses. Hence, any startup that helps accelerate the adoption of digital payments is in a very good position.

Moreover, we believe that the trend of blockchain will be a key driver to promote cashless society. Blockchain can be used to reduce many existing clearing and settlement processes, enable real-time settlement, improve the reconciliation processes, reduce counterparty risk, and make the current financial system more efficient.

However, the key challenges are regulatory uncertainty, complex technology, collaboration challenges, and legacy and knowledge issues. Another challenge is the rise of tech companies who are venturing into the financial services space or so called “Techfin”.

To overcome these challenges and capture these opportunities, SCB is transforming its business model, organization, and continuously driving innovation and disruptive capabilities for sustainable growth. This is also the reason why SCB 10X has been set up and tasked with the Moonshot Mission.

Q4: We’ve witnessed the explosion of the gig economy and the rise of dependencies on technology. The workforce has changed over the years and with the onset of COVID-19, these changes are becoming more pronounced for certain demographics and countries. Similar to how more money will move online, so too will work with many opting to freelance. Can you share with our readers how SCB 10X has responded to these changes or plans to?

AS: We anticipated that the rise of COVID-19 would accelerate the online adoption for both consumers and businesses, especially small businesses and micro entrepreneurs that never had or fully utilized their online presence. That being said, we believe that there are still underserved needs for small businesses due to limited resources and lack of online experience, while that is not the case for large corporates. In this light, we believe that there will be opportunities for freelancers to serve the unmet demand arising from the rise of e-commerce which have been accelerated by the virus spread.

To give a little bit of the context, at the national level, Thailand’s freelancing market is growing at 11% Year-over-Year (YoY) and expected to become a USD 550M market by 2021 with over 2 million freelancers. At the regional level, Southeast Asia’s total gig economy is growing rapidly at 15% YoY and expected to become a USD 13Bn market by 2021.

In regards to our response to such trend, we plan to invest in high potential ventures that serve as the “e-commerce enabler” and “freelance platform” that gives a fighting chance for freelancers to pursue their dreams.

Q5: Why do you think freelancers are an underserved population in the banking industry? How do the current existing products not fit their needs? And how can SCB 10X help freelancers with their finance?

AS: The reason why freelancers are considered as underserved is because of their unstable stream of income. The banking industry has been built around the industrial age where most of the people were full-time employees/workers. Not many freelancers back then as there were no smartphone and digital platform to empower them. So, financial services, especially lending products, were catered for salary people with a stable stream of income.

SCB 10X has recognized this gap in financial services and that is why we have established SCB Abacus and MONIX, our digital lending platform companies. These portfolio companies are utilizing alternative credit scoring models based on big data to better serve these underserved populations. Since launch, we have seen a strong traction in their growth with positive feedback from their customers. So, we believe that we are heading in the right direction.

Q6: There’s an increasing movement where the boundary between tech and finance is getting thinner. Tech companies are leaning towards the traditional finance sector, and traditional finance companies are leaning into tech. For example, challenger banks are on the rise. How does SCB 10X, as a subsidiary of Siam Commercial Bank, reconcile with that change? How do you see challenger banks in the financial ecosystem?

We are seeing the same trend. Customers are shifting to digital at lightning speed with more choices being available to them. Financial institutions are being disintermediated and becoming less relevant from the rise of tech companies. The key challenges are lack of innovation, not customer centric, and complex legacy systems to change. Our aspiration is to transform ourselves from bank adopting tech to tech firm running banking. Therefore, we spun off SCB 10X to build inimitable technology capability, reinvent customer experience, and create unique value propositions to better serve and stay relevant to our customers in this new digital landscape. For the challenger banks, I think we still have to wait and see how the regulation will unfold. We are closely monitoring the progress of this development.

Imagine the future

Q7: SCB 10X activities are mainly in Thailand, but SCB Group has branches all over the world. Similarly, SYNQA’s group of companies also has ventures that go beyond Thailand, working in Japan and other Southeast Asian countries. Aside from Thailand, what other countries do you envision the SCB 10 X and SYNQA partnership extending to, and what would that look like?

AS: We are exploring partnership opportunities outside of Thailand. Cambodia, Laos, Myanmar, and Vietnam (CLMV) are on our radar given that we have our footprint in these countries. Indonesia is another country that we want to enter due to the size of population and digital activities happening there. Cross-border payment is one of the low-hanging fruit initiatives that SCB and SYNQA are exploring with the vision to become a regional hub for payment.

Q8: In your point of view, what do you foresee as the future of banking and how would it contribute to a more sustainable and fair society?

AS: I think the future of banking will be in the hands of companies, not necessarily having to be a bank, who are able to establish trust, security, and can quickly respond to customer demand with seamless experience. To do this, SCB 10X is adopting lean startup methodology to become lean and agile as well as customer-centric. One of the areas that we are exploring are underserved segments by financial institutions. Financial inclusion is the important theme at SCB 10X. We want to leverage the power of technology to better serve and empower the long tails such as gig workers and small businesses. These consumers and businesses are the grass root of Thailand’s economy and majority of the people. We believe that by helping them grow, it would also help Thailand grow. During the pandemic situation, we have just introduced the bank’s food delivery platform Robinhood which will waive the gross profit (GP) fee to be fair to customers, drivers and restaurants. However, this is just the start with many challenges up ahead. To make this happen, we need to collaborate and work closely with fintech companies and other ecosystem players, who are sharing the same vision.

Dr. Arak Sutivong, CEO of SCB 10 X and President of Siam Commercial Bank PCL

Jun Hasegawa, Founder and Group CEO of SYNQA

Questions for Jun Hasegawa, Founder and Group CEO of SYNQA

Q1: Can you tell us about SYNQA’s aspirations with this capital injection and more specifically, what your customers can expect from the partnership between SYNQA and SCB 10X? Can you provide more insight on subsidiaries’ involvement?

Jun Hasegawa: The capital injection is very important for our organization, but the partnership is even more important. The reason is, as a fintech company, we have the technology that can enable people to access finance at some levels, but there are a lot of obstacles in the financial world. The main one is regulations. Let’s say we’d like to open a neobank or an institution in the style of a neobank, we would need a banking license or a digital bank license. However, in Thailand, the central bank hasn’t issued any digital bank license to a startup yet. So partnering with a bank, such as the Siam Commercial Bank Group, that is really eager to transform itself to fulfill future customers’ demands is a perfect match for us. Together, we can work to achieve our bigger goals. We can fill their gaps in terms of speed and technology, and they can fill our gaps in terms of a large customer base, trust, and the regulation part. I believe this kind of partnership and collaboration can build the next generation of financial infrastructure that is accessible to a larger audience.

Thoughts on current trends

Q2: There’s this constant debate on fintech vs banks and fintech vs techfins, and how one will disrupt another. However, the point may be more on how all businesses, regardless of industry, must continue to create value for their customers and in fact, can work together to create that value or multiple forms of value. What are your thoughts on this and what are the major challenges partnerships like SYNQA and SCB 10X are tackling together?

JH: I believe developing partnerships, making friends, as the President of Toyota says, is the only way to thrive in the fintech ecosystem. Hence, our partnership with SCB 10X is really important.

I believe that we are tackling existing challenges such as regulations, but we’re also tackling challenges that customers may not know yet. What I mean by this is as entrepreneurs, we need to figure out what customers want before they do. We need to bet on things that do not exist yet. For example, I bet early on blockchain technology. We became involved in the Ethereum community very early, working with different partners. That said, concretely, on the technology and implementation side, we haven’t encountered big challenges yet because details are still in discussion with SCB 10X. But we want to participate in the DeFi discussion with this partnership too, and how blockchain can accelerate DeFi.

Q3: We’ve witnessed the explosion of the gig economy, the increase of remote work options, and the rise of dependencies on technology. The workforce has changed over the years and with the onset of COVID-19, these changes are becoming more pronounced for certain demographics. Similar to how more money will move online, so too will work. Can you share with our readers how SYNQA has responded to these changes or plans to?

JH: People’s ways of working and living are changing a lot, especially with this entire COVID-19 situation. When we talk about the ways of working, before the internet, the narrative was focused on organizations. After the internet, the narrative shifted to groups. People with similar interests, hobbies and passion were now able to gather together on the internet to form groups. And after the COVID-19 pandemic, I believe the narrative will shift towards individuals. The group will remain, but individuals can now decide where they want to work and how they want to work because remote work has been widely experienced. The flexibility of individuals in terms of work has drastically increased. With this pandemic, we’ve also started to witness a change in how companies hire people. So both the employee and employer sides are changing. So how do we address these changes?

First of all, as a fintech company, we can provide fair, open and accessible solutions in terms of payments for this new gig economy because of the way people are working, their employment status and how companies pay them is changing. Cross-border payments with no restrictions are becoming more important, even for companies that may not have that issue before. Also, with the gig economy, not only companies need to access open financial infrastructure, but  individuals as well. This is why we collaborate with SCB as they have a strong retail banking side.

Second of all, internally, we’ve been lucky because we’ve always been a remote ready company. So the pandemic hasn’t affected us too much in that regard. We actually continued to work well together with different digital communication tools. Although I personally like to go to the office, so I’m happy to be back, the pandemic has proven to me that our teams are resilient, adaptive and we can still work together.

Imagine the future

Q4: SYNQA’s group of companies are B2B and focused on fintech infrastructure. This puts SYNQA in a position that travels beyond the domestic market. Aside from Thailand, what other countries do you envision the SYNQA and SCB 10X partnership extending to, and what would that look like?

JH: The financial industry is a highly regulated and localized industry. However, COVID-19 has forced us to be more open and to think more in terms of platform. What we envision in the future is to transform ourselves into a location agnostic company. For example, we can access Amazon Web Services (AWS) from anywhere by paying for their cloud service. So if I can compare it, we’d like to provide some sort of AWS finance. What I mean by this is being able to access a finance tech stack from anywhere where there is no location restriction access.

In terms of the short-term, right now, our focus is e-wallet solutions. We want to extend our focused verticals later. But for now, in Thailand, we focus on the payment processing piece, e-wallets and services around the wallet.

Q5: In your point of view, what do you foresee as the future of fintech and how would it contribute to a more sustainable and fair society?

JH: In the past, finance was accessible to the top tier of the population –  people who have capital. However, the internet is changing the meaning of accessibility. Because of the internet, people can access information, resources and knowledge from anywhere regardless of their socio-economic status. Of course, not everyone has access to the internet yet, but an incredible number of people in the world can access it from anywhere. I believe that if everyone can access the internet, finance should also follow. We’d like to provide accessible financial solutions in the same way the internet is accessible to everyone.

The banking industry is changing in response to new market entrants and demands. Technology has forced us to rethink how people access financial services and what kind of products are needed. It’s always inspiring to hear the thoughts of leaders in the fintech industry. Thank you to Dr. Arak Sutivong and Jun Hasegawa for taking the time to share your vision!

To hear more about this partnership, you can also listen to the Breaking Banks podcast where Jun and Khun Pitiporn Phanaphat, Chief Business Development and Financial Officer of SCB 10X were interviewed by Brett King.