Southeast Asian Fintech Sector Embraces Wave Of Tokenization And AI

Tokenized digital assets, such as stablecoins, and the use of artificial intelligence took center stage at the annual Singapore FinTech Festival held in the city-state, with companies showcasing their latest services while regulators called for rule-making to support their healthy development.

"If we look ahead to the next 10 years, two transformative themes commonly come up. They are AI and tokenisation," said Chia Der Jiun, managing director of the Monetary Authority of Singapore (MAS), in his speech on Nov. 13, the midpoint of the three-day event.

It featured around 600 exhibitors from financial institutions and fintech companies, attracting over 65,000 visitors.

At the booth of Singapore fintech company StraitsX, an orange juice vending machine was set up, allowing users to easily purchase juice with stablecoins -- which hold value linked to a legal tender -- through a payment app. Users scanned the QR code displayed on the vending machine with their smartphone payment app and chose stablecoins such as the dollar-pegged Tether (USDT) or USD Coin (USDC).

This service was launched in September through a partnership between GrabPay, crypto exchange OKX Singapore and StraitsX, and is already available at some vending machines and stores in the country. Stablecoins used for the purchases are converted from dollar equivalents to StraitsX's Singapore dollar-pegged stablecoin, XSGD, with retailers receiving legal tender in Singapore dollars.

From 2024, StraitsX partnered with GrabPay and Ant Group's platform Alipay+, enabling overseas travelers to use stablecoins for QR code payments in Singapore. StraitsX is further expanding its reach, announcing a partnership with Thailand's Kasikornbank on Nov. 4, with future expansions planned for Taiwan and Japan, according to the company.

"We realized that [stablecoin] has an opportunity to help us really bridge the cross-border use cases across Asia-Pacific," Liu Tianwei, CEO and co-founder of StraitsX, told Nikkei in an interview on the sidelines of the event.

Liu Tianwei, CEO and co-founder of StraitsX, poses during an interview with Nikkei at the Singapore FinTech Festival. (Photo by Fumika Sato)

With the technology, users can use their e-wallets from their home country while traveling abroad. At the same time, cross-border payments and remittances benefit from reduced costs and shorter processing times, according to Liu.

"If you look at it in the past, where there's an overseas acquirer like us that facilitates an Alipay, WeChat Pay or any foreign wallet, typical fees that the merchants have to pay are around 1% to 1.5%," said Liu, adding that settlements would need two to three business days.

With stablecoin, "What it means is they (merchants) pay only 0.5% to 1%, which is like 50% better than what they are doing with the foreign domestic payment," he said. "And they get their settlement on the same day or on the next business day, which is a huge improvement."

Partnerships with apps like Grab and Alipay, which have large user bases, would make it easier to use stablecoins without downloading new apps, thereby driving broader customer adoption. On Nov. 18, StraitsX announced a new partnership with Grab, aimed at developing infrastructure to enable stablecoin payments at GrabPay-affiliated stores across Southeast Asia.

As digital assets become more common, Liu predicts that tokens of real-world assets (RWAs) such as bonds, stocks and mutual funds will increase.

"You're going to see a lot of RWA and financial products that will be denominated in local currency," he said. "They will drive the kind of use cases that will be interesting to a local that already has very strong payment rails."

Chia of the MAS said in his speech that "sound and robust regulation of stablecoins will be critical to underpin their stability," pointing out that regulations are taking shape rapidly across nations. "This is an important start."

In the U.S., the Genius Act stablecoin regulation bill was passed in July. The MAS has also "finalized the features of our stablecoin regulatory regime and will be preparing draft legislation," Chia revealed. "Under our regime, we have given importance to sound reserve backing and redemption reliability."

The other theme, the use of AI, was also a hot topic.

AI use by financial institutions is expanding from improving internal business processes to software development, customer service, market analysis, credit screening and fraud detection. In the future, autonomous AI agents are expected to be used for a series of lending operations and insurance claim processes, from credit screening to approval, according to the event participants.

"If I think about generative AI, that helped a lot of financial institutions to think about moving to this hyper personalized experience for customers," Mark Micallef, managing director of Southeast Asia at Google Cloud, said at the event. He said that many banks are "reimagining customer experience through the lens of that."

Shayan Hazir, HSBC's chief digital officer for Asia (excluding Hong Kong) and MENAT, poses during an interview. (Photo by Fumika Sato)

HSBC, in collaboration with Google Cloud, released the Digital Frontiers 2030 report at the event, which surveyed 2,436 consumers in six Southeast Asian countries: Indonesia, Malaysia, the Philippines, Singapore, Thailand and Vietnam. The personalized banking service most valued by users was "smart budgeting tools" (53%), followed by "investment advice" (48%) and "spending insights" (43%).

Shayan Hazir, HSBC's chief digital officer for Asia (excluding Hong Kong) and MENAT -- which stands for the Middle East, North Africa and Turkey -- emphasized the need to develop solutions that integrate AI with digital assets, quantum and other emerging technologies.

"Technology operates never in silos," he told Nikkei in an interview, saying that AI, digital assets and quantum together form the new tech stack and work in tandem. "(AI) agents will find it easier to execute on a blockchain, on digital assets, on programmable money, than they would for fiat currency. So I think convergence will happen across all aspects," he said.

Meanwhile, during the event, the MAS published the Guidelines for AI Risk Management, which require financial institutions to identify AI risks and manage the entire process from development to operation, based on the scale and risk of AI use.

"As AI adoption in the financial industry grows, governance and safety are essential," Chia said. "In fact, one of the key factors determining the pace of AI use, and the extent of AI autonomy permitted in work processes, is the robustness of guardrails and controls over the AI life cycle. FIs (financial institutions) have told us that they would like more regulatory clarity."

Source: Asia_Nikkei