Major economies in South-East Asia have been hit hard by the pandemic and are still navigating the path to recovery amid renewed outbreaks, new virus variants and an uneven vaccine roll-out. Yet as devastating as lockdown restrictions have been, they are also proving a positive driving force for millions of consumers to adapt to new ways of spending and embracing digital commerce, permanently changing consumer behaviour.
According to research conducted by Bain & Company and Facebook, eight in 10 consumers in South-East Asia are now digital. To put that number into perspective, the number of new digital consumers added in just one year in the Philippines, Singapore, Malaysia, Indonesia, Thailand and Vietnam is equivalent to the population of the entire UK.
Digital financial services, in particular, have kept the South-East Asian economy afloat. The rise of digital payments and greater access to the internet have fuelled the rapid rise in digital consumers amid the pandemic. Online payments in the region are poised to exceed $1 trillion by 2025, driven by the ongoing trend away from cash payments and increased usage of e-commerce, as well as further development of new payment methods, particularly for e-wallets and prepaid cards.
Fintech for SMEs
Most fintech players introducing innovation in financial services have been primarily focused on individual consumers; understandably so, as it is the most obvious opportunity to tackle considering more than 70% of adults remains either “underbanked” or “unbanked” (see below).
Leading the charge is South-East Asia’s leading fintech platform, Grab Financial Group, which offers payments and financial services across lending, insurance and retail wealth management in the region. This rise of consumer fintech is expected to accelerate even further as it takes the biggest slice of the pie in venture capital transactions in South-East Asia; it already hit a record $10 billion in the first half of last year, surpassing 2020’s level of $8.2 billion.
However, we have yet to see the same level of activity in innovation in the SME fintech space, an untapped trillion-dollar market opportunity that will unlock potential for a largely underbanked segment in the region.
The private and public sectors must work together to address the digital and financial skills gap for SMEs; they should also facilitate new fintech innovation, especially in the area of credit and payments, to unlock the sector’s potential and speed the pandemic recovery. Ultimately, bringing SME development to the forefront will be the bridge to achieving broader inclusive growth and economic development in the region.
Source: World Economic Forum