Executives of Singapore-based financial technology company ShuttleOne and Denmark-based MakerDAO Foundation are looking at the potential of the blockchain technology to make mobile banking more inclusive and sustainable in the Philippines and the rest of Southeast Asia.
Gustav Arentoft, business development associate for Europe of MakerDAO Foundation, says blockchain can enhance the provision of financial services to Filipinos and Asians who are not served by traditional banks.
“I am not saying cryptocurrencies and blockchain will tear the banks down and result in a new world order. But I do believe it is an awesome alternative,” Arentoft, 25, says in an interview in Makati City.
“What we set out to do is to create an alternative to prime financial system. I truly believe that we will become one of the biggest finance companies in the world to serve a lot of people who have been underserved. We have amazing projects and partners like ShuttleOne. I truly believe in ShuttleOne because whatever they do will benefit us as well,” says Arentoft.
“This technology will enable services for the ones who are being neglected currently. We want everyone to get good banking services,” says Arentoft.
Hongzhuang Lim, the Singaporean founder and chief executive of ShuttleOne which applies the blockchain technology of MakerDAO Foundation, says blockchain—the distributed ledger of digital records—can resolve a lot of problems including in finance.
“One of the biggest problems the blockchain is solving is the problem of consensus. This has been a problem for humans for a very long time. Now with the age of computers, we are able to automate this decision-making process by fixing a set of rules. The blockchain can make efficient a lot of these processes,” says Lim, 35.
ShuttleOne has teamed up with local institutions in Malaysia and Indonesia to provide digital payment solutions and is now looking at opportunities in the Philippines. It aims to provide mobile banking services to at least five million unbanked Southeast Asians.
“Our mission is to open the first mobile banking service for 80 percent of Southeast Asians. Southeast Asia is underbanked. I think only about 24 percent of the whole Southeast Asia has a bank account,” says Lim. “In five years, we want to open the first savings accounts of 5 million in the countries where we are operating across Southeast Asia. We want to move faster than most of the banks here.”
MakerDao uses a stablecoin called Dai that is pegged to the US dollar. Arentoft says that with Dai, anybody can send money from one country to another instantly and at a much lower cost. “The advantage in this case is that you can send it anywhere across the world. I can send money from Denmark to Singapore, Indonesia or the Philippines and within one minute you can receive it,” he says.
Lim says aside from being fast and efficient, sending money through the blockchain can reduce the transaction fee to a third of what it takes using the traditional remittance service.
“In a Malaysian remittance house, their average fee is 9.5 percent. For us, from end to end, between Indonesia and Singapore, we have reduced that to 3 percent. That is 300-percent decrease in cost. Of course, speed is there. In a normal remittance house, the guy may take two to three days to take out their money. We can do it in less than half a day. That is because of the blockchain application,” says Lim.
“We are making money borderless. Of course, we work with regulators who provide us the policies we need to follow. Locally, we have to follow the laws,” says Lim.
Both Arentoft and Lim attended the 3rd Asia Finance Forum: The Future of Inclusive Finance organized by the Asian Development Bank in Manila.
The ADB estimated that of the 1.7 billion people who are outside of the formal banking and financial system, more than half are in Asia and the Pacific.
A 2017 ADB study found that only 28 percent of adults in the Philippines had a bank account, and only about 15 percent saved money with a formal financial institution over a 12-month period.
It projected that the Philippines’ GDP could increase by more than 14 percent if the financial inclusion gap were closed.
The ADB forum focused on the future of inclusive finance by discussing how new technologies like artificial intelligence, big data and blockchain as well as the rapid expansion of mobile-phone banking and digital banking could help bring financial services to unbanked communities.