Netbank bringing BaaS to South-East Asia
As the Banking-as-a-Service (BaaS) wave sweeps the globe, so new players are appearing. An example of the new breed of provider is Philippines-based Netbank, which claims to be the first BaaS player in South-East Asia. It has a full banking licence, partners for core banking with a domestic provider, Nextbank, and has gained an initial handful of fintechs as customers.
Netbank officially launched in June of this year, with a stated aim to offer full banking services and infrastructure. By this stage it was already a fully regulated bank, operating under a rural banking licence, and was booking loans originated by three alternative lenders.
Those alternative lenders included Uploan, which provides loans to salaried private sector employees, and Global Mobility Service, which provides loans to drivers of motorbike tri-shaws. For the latter, loan repayment is assured by attaching an immobilisation/location device to the motorbike.
Gus Poston and his fellow Netbank co-founders came with international and Filipino banking experience. With such a heavily unbanked market (only around 30 per cent of adults have access to a bank account), the Philippines should be an ideal environment for fintechs, says Poston.
However, it takes a long time to gain access to payments and to open accounts. He saw this in his founding role at bank-focused private equity firm, Bridge.
In Europe, he estimates that fintechs spend perhaps 20 per cent of their time on infrastructure, whereas this is typically much more laborious in South-East Asia.
“We see very obvious banking needs in the Philippines,” says Poston. “In some ways, the fact that we call ourselves a BaaS provider is kind of irrelevant” as it is more about the capabilities.
Netbank intends to span payments, account opening, loan issuance, disbursements and collections, card issuance and it has a white-labeled app and customer interfaces. The initial emphasis has been on lending; for payments, there is still a centralised ACH in the Philippines and an interbank switch is relatively recent. A future framework for open banking is evolving.
Netbank’s app is underpinning the launch, later this year, of Netizen, which will allow overseas Filipino workers to open an account in the country where they work, transfer funds to the Philippines (via a low cost remittance partner) and manage the funds in their account. Netbank’s app includes utility bill payments, money transfer, cash withdrawal via pawn shop networks, and purchase of online goods, with virtual payment cards on the way.
As well as fintechs, Poston believes there could be opportunities to create tailored white-labeled solutions for the Philippines’ 550 banks, may of which are very small and could constitute future customers.
Netbank has aspirations to take its BaaS offering beyond the Philippines. However, it is complex due to the different national regulators, says Poston. Countries such as Indonesia and Vietnam are seeing a lot of fintech activity, particularly around payments – “filling the gaps in national payment systems” – as well as lending.
Netbank is currently assessing other markets “but it is clear there is a need”.
In terms of technology, as a small company, Netbank has largely opted to partner. It is working with a partner to build the API layer and will work with others for areas such as KYC. The platform of its core banking partner, Nextbank, runs on AWS and the supplier claims 23 banks as users since launching in 2017.
In terms of its European BaaS counterparts, Poston feels Netbank is probably closest to Solarisbank (with its banking licence and core banking system). No doubt other BaaS players will emerge in the region and the currently immature market will expand, supporting fintechs and neobanks as they shake up the status quo here, as is happening around the world. In the meantime, Netbank constitutes a pioneer.