Credit: SEAbridge Partners
Insights into SE Asia’s FinTech Landscape
The FinTech phenomenon may have started in the US and been refined further in Europe, but it is in Asia that the true potential of the sector is becoming evident. Large populations, sub-par banking infrastructure and proliferation of cheap smart devices have given Southeast Asia an increasing prominence on the FinTech scene. Add to this, the pro-entrepreneurial stance of governments in financial hubs such as Singapore and you have all the ingredients to fuel a FinTech boom in the region.
Let’s delve into what the FinTech universe in Southeast Asia encompasses:
Payments happen to be the most crowded space in Southeast Asia. Each country has its own payment challenges and FinTech companies are tackling these. With online retail sales projected to grow by 25% annually in the coming years, the payments vertical is one of the biggest beneficiaries of this e-commerce boom. The size and fragmentation of markets such as Indonesia and Thailand have given rise to significant payments aggregation opportunities. The payments space is still at an early stage in frontier markets such as Myanmar. However, payments companies in Singapore and Malaysia are mature and moving into Series B/C phase of funding. As a result, we expect regional expansion by leading companies in the region and/or consolidation in this vertical.
Lending & Financing has been enhanced significantly with the rise of crowdfunding. Crowdfunding taps additional capital sources and adds fluidity and flexibility to the fundraising process. Singapore happens to be the dominant player in this space as well. In 2015, Malaysia became the first ASEAN country to introduce a regulatory system for equity crowdfunding. Singapore also announced a new scheme that would make it easier for SMEs to access securities based crowdfunding sources. With Thailand, Philippines, and Indonesia’s population, crowdfunding could establish itself as an important alternative to raising capital from the private and/or the public markets. However, the challenge would be crafting a suitable regulatory framework in such countries. P2P lending is growing quickly providing much needed capital to underbanked consumers and SMEs in emerging markets such as Indonesia.
Technology has played an instrumental role in changing the Capital Markets & Investing landscape the world over. While Southeast Asia as a whole is yet to embrace this change, Singapore leads the region in making solid progress with respect to DIY algorithmic trading and robo-wealth advisory. Another interesting element in this vertical is the advent of social trading. Social trading is a new way of trading which involves the use of social networks as an information source for making financial decisions. On these platforms, users can compare, copy, and share trades, techniques and strategies. Besides Singapore, Indonesia and Thailand are innovating in this space.
Blockchain & Cryptocurrency is still a nascent vertical in the region. We expect virtual currencies to play an instrumental role in increasing speed and efficiency of payments and promoting financial inclusion. Singapore, Malaysia, Philippines and Indonesia have several start-ups in the cryptocurrency exchange space. Given that remittances from Filipino workers contribute significantly to Philippines’ economy, border payments solutions have sprung up in the country. However, the technology underlying such cryptocurrencies is what is even more exciting. Blockchain technology is a powerful tool that enables mediation of trust and selective transparency. Singapore seems to be leading the race with respect to a multi-faceted utilization of the new technology.
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