RCEP: How Asia Pacific’s trade deal can reshape financial services

Financial services and technology players who want to capitalize on these prospects will need to create a broader ecosystem to offer a wide range of products and services to consumers across borders without excessive regulatory barriers. As the RCEP addresses those restrictions, three key pockets of opportunity will likely surface:

• A regulatory tailwind for FinTech: With the trade pact ensuring market access to cross-border players and equal treatment of both local and foreign suppliers, a new wave of innovative and regional-level FinTech players should emerge in the RCEP block. The agreement mandates that member countries fully open at least 65% of the services sector and ensure transparency of regulations. Such changes will allow for cost savings in technical and regulatory processes and facilitate easier cross-border market entry and expansion for FinTech players in the region. With the RCEP presenting a better-connected regulatory landscape, this 2.2 billion population market would be "too big to be ignored" for any serious players in payments, lending, WealthTech, and InsurTech.
  
  
• Opportunities in micro, small & medium enterprise (MSME) growth agenda and massive financing gap: RCEP members' keen interest in supporting and fostering the growth of the MSME sector can create new opportunities. This is especially the case for MSME lending players targeting the underserved emerging economies in ASEAN. Historically, despite ASEAN’s MSME development policies and several existing FTAs, there has not been much evidence to suggest an improvement in MSMEs’ access to financial products.
  
  According to World Bank data, East Asia and the Pacific account for about 45% of the global MSME financing gap, which stands at around US$2.37t. Such unresolved MSME financing gap requires a robust alternative financing ecosystem and financial services liberalization in the bloc could open the doors for regional MSME-focused lending providers to tap this large, underserved market.
  
  Since RCEP involves a mixture of high-income economies with a mature investor base, as well as upper middle-income and lower middle-income economies, it creates a promising landscape for MSMEs and investors focusing on the regional bloc. Further, RCEP could also create opportunities for new e-commerce players, crowd-funding platforms and P2P lenders in the region that would add non-traditional financing options for MSMEs.
  
  
• A boost for internet economy and payments: Southeast Asia is home to 360 million internet users, with 90% of them connected via mobile phones. And while its internet economy market is poised to reach US$300b by 2025, the region's adoption of cashless transactions only stands at 40%, which is half of the benchmark level in the US and UK. Such under-penetration, coupled with a new flow of e-commerce activities, could create digital payment opportunities for lifestyle banking, FinTech players, and super apps. A report conducted by the European Parliament indicates that the RCEP could help boost low-income members’ light manufacturing products output, while developed countries would see an increase in the production of high-tech goods.
  
  It is also worth noting that RCEP members have agreed to maintain the practice of not imposing customs duties for electronic transmissions, which will strengthen digital content platforms’ prospects in the region. The agreement also includes provisions to support the development of new financial services and payment, clearing systems and strengthen cooperation in e-commerce.