Southeast Asia Fintech Ecosystem Review

The Southeast Asia region is home to more than 500 million people and is a critical part of the world trading system. Also, the region’s economy greatly depends on agriculture; rice and rubber have long been prominent exports, while manufacturing and services are becoming more important every year. Among the countries in the region we have Singapore, Brunei, Malaysia, Thailand, Indonesia, Vietnam, Philippines, Laos, Cambodia, East Timor and Myanmar. Of all the countries, Singapore is the country with the highest GDP per capita as of 2020, while Indonesia has the highest nominal GDP with 1,088.768 billion

In the case of Southeast Asia, the economy has also been greatly affected by covid-19, since in 2020 it was estimated that GDP would contract by 4.2% in general, but the service sector, especially tourism, has been more affected than the manufacturing sector. In addition, small and medium-sized enterprises (SMEs) have suffered more than large ones (Brookings, 2020)

Nevertheless, the six largest Southeast Asia nations (the Philippines, Indonesia, Malaysia, Singapore, Thailand and Vietnam) are expected to record positive real GDP growth rates in 2021. With continued trade expansion and gradual recovery of the tourism and construction activities, Singapore’s GDP growth is forecast to increase to 5.8% in 2021. Similarly, Malaysia will experience growth of 7.1% in 2021, a rebound from -5.2% in 2020. (Global Data, 2021)

Also, Indonesia and Vietnam will become far more prominent players in Asia than in the past several decades, in part due to their own development achievements, rapidly growing trade relationships, and favorable demographic profiles relative to many of their competitors (DNI, 2020)

Fintech

Southeast Asia’s FinTech market is growing, in line with this wider growth of digital financial services in Asia. In 2016, investments in the Southeast Asian FinTech market increased to US$252 million, compared with US$190 million in 2015, a rise of about 33 percent. Singapore is the most developed FinTech start-up market in the region, and Singapore-based companies are providing services in other countries as well (World Bank, 2019) 

The growth of the Fintech sector is partly due to the fact that in the context of the pandemic, the use of digital services, such as digital banking, e-commerce and online payments, increased and around 40 million people connected for the first time in 2020 in 6 Asian countries, bringing with it new consumers (Fintech times, 2021) 

The sector is also recognized for giving opportunity to previously neglected groups of people to have access to finance, boosting the economy and stimulating demand. Also, many economies have implemented regulatory sandboxes to motivate innovation in the Fintech sector. In this region, the most disruptive sectors are Payment and Lending

Lending

In the case of the lending sector, it has made it easier for SMEs to get small loans and credits anytime to keep their business running (Finnovate, 2021). Lending platforms in Southeast Asia have emerged on a large scale in the past two years due to increased demand for such services since large numbers of people remain unbanked. For example, as of 2019, Vietnam with 63% usage was the top two markets where users applied for credit on a digital platform at least once (Krasia, 2020). Moreover, it is interesting to note that in the case of Indonesia, Gen Y and Z are fueling rapid growth of Indonesian peer-to-peer lending (Finch Capital, 2020)

Lending Fintech will be really useful in the recovery of the Southeast Asian economy, as it has great potential to make SMEs find the necessary financing. However, it will be necessary to pay attention to the support that this sector may receive, as well as the obstacles that may arise.