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The real challenge for fintech is solving the fundamentals of risk and access

By Adrian Chng, GoBear CEO

If Covid-19 has revealed one thing about fintech, it’s that bringing everything online is not enough. Across almost every industry today we’re seeing cracks in operations and logistics, breaking the long-held notion that hyper-efficiency is the sole goal of going digital. 

It would be a missed opportunity if technology does not respond to the underlying issues with traditional financial services. Alternative data gives fintechs a chance to address this and build future solutions to meet the needs of all. As we reimagine tomorrow, here are three considerations to keep in view.

Everyone’s online, now what?

Nowhere is this innovation challenge more critical to understand than when we look at Asia’s financial services sector. 

Today, more than 70% of adults in Southeast Asia are underbanked or unbanked. But fintech for the sake of access is not enough to fix the deep-rooted issues and barriers to improve the region’s financial health.

We see this even in more developed and fintech-forward markets. GoBear’s 2019 Financial Health Index (FHI) found that while about 80% of people in Hong Kong have financial goals, less than half have taken the necessary actions to achieve them. In Singapore, 40% acknowledge that they lack an understanding of financial optimization, and another 25% of them do not know when or how to start planning.

This stagnation suggests that solving the inclusion hurdle is only the first step. The real opportunity of accelerating digital adoption lies in the utilization of new data that comes from more consumers living their lives online, the datafication of everything and the new ways it gives us to codify trust.

Through alternative data and technology, individuals with a limited credit history or proof of income can access new risk scoring models using past transactions, behavior analysis, and so much more.

Data should not be treated as static information

When used intuitively, alternative data should inform action-oriented insights. This is especially important in Asia where most markets are noticeably distinct from their neighbors and are each complex in their own ways. 

What makes this region so attractive for financial innovation is also what makes it a difficult target to crack but technology and data are the keys to accessing an in-depth and granular understanding of it. This is largely thanks to the leapfrogging of technology which led to the widespread adoption of mobiles, greater consumer experiences and the creation of unique data footprints. Most interestingly, across emerging economies, the use of smartphones outpaces basic or feature phones.

Tapping into this has been core to GoBear’s success. Technology and alternative data underpin our three growth pillars – an online financial supermarket, digital insurance brokerage, and digital lending business – to serve the approximately 300 million underserved consumers across our markets

Behavioral data, for instance, gives our platform more ways to weed out bad actors. Our data shows that if a loan application is filled out in less than a minute, it is more likely to be fraudulent, and applications made between 8:30 p.m. and midnight are less risky than ones made between 2 a.m. to 5 a.m.

Image Credits: GoBear

The way forward: achieving region-wide impact with a personal approach

The holy grail for financial services is to create personalized financial products which can also manage the delicate balance between value and risk. 

When achieved, it will not only move the needle for financial inclusion but benefits both consumers and providers. For individuals, the granular insights derived from technology and alternative data helps to customize banking and insurance products down to their identified needs. For financial service providers, it gives them a more targeted way to manage the pools of risk and returns because ultimately, they need to reason how the “good” of the group can pay for the “bad”.

Most recently, GoBear launched a travel policy, which was underwritten by one of our strategic insurance partners. Our data on preferred coverage indicated that travel insurance in Asia may not always sell because of a high claim limit for lost luggage. For travelers in the over-40 group, we increased medical coverage by removing coverages with lower consumer demand in this segment.  

Reducing this allowed us to rebalance coverages based on specific groups of consumers’ claim profiles and therefore reduce the risk to the insurer while covering what the consumer most needed. This approach has proven to be successful —  in the first quarter of 2020 GoBear’s digital insurance brokerage segment saw a 52% increase in average order value.

There is potential to take this further too. As technology and alternative data become more sophisticated, future banking and insurance products could even be personalized to a specific individual.

GoBear is already working towards this. We assess and price risk differently, and are co-creating financial products with partners to better meet consumer needs.  Our hope is to be the financial services platform that can provide not only a much greater consumer experience but one that fundamentally addresses the issues of risk and value, to improve outcomes for both consumers and financial providers and thereby significantly improving the financial health of people in Asia.

As the new normal sets in, banking and insurance products will increasingly move away from the physical and towards the digital.

Today’s global crisis has amplified the need for better fintech solutions, reinforced with alternative data. A meaningful solution should leverage this to focus on the greatest needs of a market versus offering a single bandaid for the region. Only then can we begin to solve the true barriers to finance.