Banking the unbanked has always been a challenge in Asia as the largest and most populous continent, and this issue is particularly pertinent in Southeast Asia (SEA). According to statistics collated by international accounting firm KPMG, a staggering 73% of Southeast Asians do not have a bank account, and in underdeveloped SEA countries such as Cambodia, the figure plummets to as low as 5%.

In Singapore, as the leading financial technology (fintech) hub in SEA, the focus is less on enhancing financial inclusion but more on transcending technological barriers. In May this year, the Monetary Authority of Singapore (MAS) announced that it has successfully completed a joint blockchain-based experiment with the Bank of Canada (BoC). The trial involved the execution of a cross-border Payment-versus-Payment settlement using the Hashed Time-Locked Contracts (HTLC) mechanism, which connected the domestic payment networks of the MAS and BoC without the need for a third-party intermediary.

Across the Straits of Johor, the Central Bank of Malaysia has always actively embraced the use of technology to enhance financial inclusion. In the context of blockchain technology, however, the spotlight is on the offshore financial center of Labuan located off the west coast of Sabah, Malaysia, which will soon be breaking new ground in the blockchain financial landscape. In December last year, Singapore-based cryptocurrency exchange CGCX.io signed a Memorandum of Understanding (MoU) with Archipelago Group and IBH Capital to collaborate on establishing the world’s first blockchain-based investment bank in Labuan.

Further north, the Bank of Thailand (BoT) was reported back in June 2018 to be actively exploring the potential uses of blockchain to revolutionize its interbank payment and transfer settlement system through Project Inthanon, which aims to use the Proof-of-Concept (PoC) framework to reduce costs and expedite interbank transactions. Fast forward to May this year, the BoT announced that it has developed a Central Bank Digital Currency (CBDC). On the regional front, Thailand’s state-owned Krungthai Bank in April this year has partnered with neighboring Myanmar’s Shwe Bank and blockchain startup Everex to develop an Ethereum-based, cross-border remittance system.

In terms of banking the unbanked, Indonesia and the Philippines have the most potential for development, as they are the two most highly populated SEA countries. For Indonesia, the announcement in February this year that cryptocurrencies are legally recognized as commodities is the only notable crypto-related development. Although it was reported back in January 2018 that Bank Indonesia was considering developing its own digital currency, there has not been any updates since then. Meanwhile, on the commercial front, it has been reported that five major banks are considering the possible uses of blockchain for their operations. As for the Philippines, residents in rural areas can look forward to having better access to financial services upon the completion of Project i2I. Project i2I was launched in May 2018 with the aim of connecting banks in remote areas with the country’s central financial network.

In summary, the decentralized and cost-saving features of blockchain render it the primary choice of technology to bank the unbanked in SEA.

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