Rachel Barger, COO, SAP Asia Pacific Japan

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On utilising technology to link smaller players to the supply chain 

How can artificial intelligence (AI) and data-driven solutions support the growth of the burgeoning micro-, small and medium-sized enterprise (MSME) segment in Asia? 

RACHEL BARGER: Small and medium-sized enterprises (SMEs) serve their local markets, but many aspire to do business on a larger scale. However, their growth is inhibited by lack a of access to credit, trade barriers, complicated processes and logistics shortfalls. The International Finance Corporation estimates that 65m firms – or around 40% of formal MSMEs – in developing countries have an unmet financing need of $5.2trn per year. Similarly, local SMEs are competing with foreign companies that have higher levels of productivity and better business models due to their arsenals of digital technology. 

One initiative to overcome this gap is Business sans Borders (BSB), a regional programme that will connect SME-centric platforms to allow the firms to integrate into a larger ecosystem of buyers, sellers, logistics service providers, financials and digital solutions. The phase one proof-of-concept for BSB wrapped up in November 2019, and utilised AI and data-driven solutions to help SMEs discover price and sales opportunities in the larger global marketplace, access supply chains and easily source and utilise relevant digital financial solutions. 

Where do you see areas for improvement in the financial technology (fintech) ecosystem in South-east Asia?

BARGER: Underpinning the digital economy is the regional expansion of SMEs, which is driving the need for seamless business, trade and financial transactions across borders. With the acceleration of globalisation SMEs face considerable obstacles to frictionless trade and access to financial services. While SMEs aspire to do business across borders, they need greater levels of financial integration, financial inclusion and payment connectivity. SAP seeks to help advance this in the ASEAN region through our participation in BSB. In this way, BSB seeks to enhance the fintech ecosystem as an open, cross-border digital commerce platform. It not only helps buyers make smarter, safer decisions by making risk due diligence a natural part of procurement processes, but it will also on-board SMEs. 

In terms of payment connectivity, large business networks where multiple buyers and sellers are connected can result in duplication and complexity. This is why we need to collaborate with partners to act as a clearing centre for all payments between buyers and sellers, while facilitating the movement of funds. 

What are the main barriers to achieving an integrated digital economy in South-east Asia that fully capitalises on the region’s favourable demographics and rising purchasing power? 

BARGER: A robust digital economy in South-east Asia needs a supportive environment for cross-border trade flows. Digital financial services are a core element of this, which is why it is necessary to emphasise an interoperability framework based on global standards. This framework will require government cooperation to work with the industry on security-related issues such as user verification. To this end, it will be necessary to implement industry and global standards for data security and privacy, instead of relying on data localisation. 

Countries in the ASEAN region also need to continue to push for the harmonisation of trade regulations, including clearance and certification requirements for goods and services. The flow of goods and services should also be digitalised through initiatives such as the ASEAN Single Window and the ASEAN Agreement on Electronic Commerce to lay the foundations for dynamic growth.

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