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Southeast Asia letting startups play in the fintech sandbox

Insurance vendor, AI-based asset manager testing new business models

Singaporean insurance policy management app provider PolicyPal, headed by founder Val Yap, left, obtained a regular business license after taking advantage of the regulatory sandbox.

SINGAPORE/SHANGHAI -- Southeast Asian countries are working to cultivate homegrown financial ventures by temporarily waiving regulations to let them experiment with innovative services. 

The so-called regulatory sandbox, an idea originated in the U.K., is increasingly used in the region to enable startups with limited personnel and funding to try out untested business models. The growing presence of major Chinese startups and a lack of homegrown contenders may lie behind the push.

Taking advantage of a waiver program introduced by Malaysia's central bank in 2016, Jirnexu is gearing up to offer consumers early next year an online platform for comparing and purchasing insurance policies from various providers.

Under current rules, an agency can offer policies from only up to six insurers. And an independent financial adviser who sells insurance must meet with customers in person. With the sandbox, Jirnexu can sell many types of life and auto policies from a number of providers online.

"Our most recent investment round will play a significant role in developing the technology for Malaysians to search and obtain their insurance from a single platform in a matter of minutes," said Lucas Ooi, director of insurance.

Five more financial startups have been granted waivers by the Malaysian central bank. They offer remittance services and websites providing insurance information.

Kristal Advisors, which uses artificial intelligence to advise retail and other investors on asset management, has won an exemption under Singapore's program. "A license for service retail plans is with the assumption that you are going to have a million clients," founder Asheesh Chanda said. "The sandbox allowed us to allocate resources where we can, where we need to at this stage." It slashed costs in such areas as auditing, compliance, and reporting to authorities, he said.

In Thailand, the central bank has led a pilot program on settlement to promote payments via smartphone. Based on the results, parties including Kasikornbank recently got the green light to use QR codes for peer-to-peer payments and other transactions.

Some startups have moved on to become regular industry players using expertise acquired through the program. Singapore's PolicyPal, which offers a mobile app for easy management of insurance contracts, is now registered and operates as an insurance brokerage. "It was useful for us to try out as a digital broker and test our business model" while still a small company, founder and CEO Val Yap said.

In light of the success in the financial sector, the Singaporean government seeks to expand the regulatory sandbox to energy. This would offer flexibility while keeping the existing regime intact, avoiding the disruption that an overhaul would bring consumers and businesses, Industry Minister S. Iswaran said.

Indonesia, Hong Kong and Australia introduced similar programs in late 2016. The Asia-Pacific region stands out globally in its push to capitalize on the arrangements.

But governments must also quickly craft rules that both protect consumers and nurture the financial technology industry. Only a limited number of companies have actually taken advantage of the program, making it difficult to gauge the real impact on incubating startups.

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