Value Nomad

April 2, 2020

Trends Shaping P2P Lending Regulation in Southeast Asia

P2P lending regulation in Southeast Asia is experiencing new trends that are shaping it. Let’s take a closer look at these trends.

P2P lending is fast becoming a cornerstone of financial inclusion, especially among Southeast Asia countries. In the third quarter of 2019 alone, SEA set a record with $701 million invested across 87 deals. This has necessitated increased P2P lending regulation in Southeast Asia.

Southeast Asia p2p lending

The vibrant sector has made these Asian countries intensify efforts to develop fintech ecosystems and improve the regulatory environment. Governments not only appreciate the advantages of alternative financing but also financial inclusion, and impact on economic growth.

P2P Lending Regulation Open Points

With P2P lending gaining traction around the world, regulation is becoming increasingly relevant. However, governments must be careful when setting requirements not to stifle innovation or lockout foreign invest in the market.

According to a recent survey by the Cambridge Centre for Alternative Finance.

SEA authorities have shown openness to both fin-tech and alternative lending. Countries, such as Indonesia and Thailand, have introduced standards to control and support the alternative lending industry.

Below are the four main trends observed in the regulation process:

Top Trends Influencing P2P Lending Regulation

  1. Cross-border co-operation among regulators

Authorities in SEA recognize the need for standardized cross-border regulation. There is more harmonization of requirements for the industry across borders.

Indonesia and the Philippines, for example, have shared best practices with other governments to reduce discrepancies. Full conformity is unlikely, however, these efforts to reduce the cost of doing business across borders because of regulatory differences.

  1. Pro-market policies driving innovation

There is an increase in discussion between regulators and P2P industry players in SEA. Regulatory sandboxes across the region confirm this trend. They allow the testing of new financial services and business models and help the government bring innovations to the wide market.

Southeast Asia has also made its sandbox accessible to other players. The APIX platform created by the IFC, Monetary Authority of Singapore and the Association of Bankers of SEA supports and facilitates financial innovation and inclusion.

  1. Increase in innovations in both RegTech and SupTech

RegTech improves transparency and reporting by P2P industry players. It also helps companies save on compliance costs. In this sense, the supervisory technology (SupTech) is only gaining traction.

In-depth data analysis and the application of machine learning and artificial intelligence will help identify and rectify violations in the supervised enterprise. One of the most promising areas is the translation of legal requirements into a machine-readable form to automate the control and the update of regulatory information.

  1. Bench-marking regulatory changes

90% of governments in Southeast Asia use regulatory bench-marking when crafting policies for the industry. Singapore and Malaysia lead the pack and influence the standards. Their framework provides an example of how regulatory standards influence the development of the lending sector and investor protection.

The regulation also covers policies on the use of artificial intelligence, big data analysis, personal data privacy and protection among others. Singapore’s policy promoting accountability, ethics, and fairness is an excellent example here.

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