Southeast Asian Nations are reportedly among the hottest spots for FinTech opportunities in 2019. Growing economic activities and government incentives are attracting FinTech solutions to various sector and to the regions. Reports show optimistic outlook for companies in the space of digital banking and payments, AI and blockchain spaces.
A report from Deloitte published on 31 December 2018 estimated that FinTech investments in Southeast Asian countries in 2018 have exceeded the $5.7 billion invested in 2017 by up to 30%. Google’s e-Conomy SEA report anticipated the Internet economy in Southeast Asia to have increased by 44% in 2018. This robust growth is set to continue as the FinTech market is projected to reach US$72 billion by 2020.
Investment in technology is substantial in the area: technology firms represented a significant 40% of total private equity deals in Southeast Asia in 2017. In the Q1 2018 alone, more than $2 billion was invested in Asia tech companies; and more than 60% of investors from South East Asia say that technology is their focus area in 2018–19 —wiith FinTech being the largest sub-sector, followed by Artificial Intelligence and Blockchain.
Organisations such as TechGrind aim to create of making a new Silicon Valley in Southeast Asia, working to develop a healthy and attractive environment for start-ups to run their operations.
One of the main reasons underlying this growth and adoption is insufficient financial inclusion for many in the region, which opens up plenty of opportunities for fintech companies to implement and expand their reach. Across SE Asia, less than 30% of the population have a bank account — in less developed countries such as Cambodia, this number falls to 5%.
Fintech solutions tap neatly into this wide gap between the unbanked population and access to financial services. Therefore, the high demand for digital payment, mobile wallets and alternative finance is increasing.
In the Asia Pacific region, Singapore is the technology space leader, particularly regarding the development of smart cities and hyper-connectivity. In Indonesia, the largest economy in Southeast Asia, digital payment platforms are growing at a rapid pace. Indonesia has the most connected population among emerging markets, very open to alternative payment methods. In 2018, Indonesian e-wallet OVO performed 75 times more transactions in comparison to 2017. The company’s focus is to increase the rate of financial inclusion in the country and support small and medium enterprises (SMEs).
According to government statements, Vietnam plans to become a cashless society by 2020, targeting to reduce the number of cash transactions to less than 10% of total payments in consumer-ends such as supermarkets, shopping malls and distributors. The plan includes proposals to develop and increase new payment methods in rural and remote areas of the country to boost financial inclusion as to at least 70% of Vietnamese over the age of 15 owning a bank account by the end of 2020.
In the blockchain sphere, the Thailand market is becoming increasingly crypto friendly. Thai cryptocurrency exchange Satang Corp. said in December that it plans to to raise nearly $10 million in a security token offering (STO). According to Cointelegraph, Satang’s plans are supported by the Thai government, which is seeking to develop an appropriate regulatory framework for blockchain projects and cryptocurrencies, as well as turning the country into a hub for blockchain firms.
Beyond the financial sphere, tech is also making strides. In the news industry, for example, Google has launched the Google News Initiative Asia Pacific Innovation Challenge. The fund will be directed to projects which use innovative technologies to create and improve the quality of journalism in the area.
Southeast Asian nations represent the game-changing nature of FinTech and disruptive technologies, with cutting-edge applications creating social change and solid ground for investment and market expansion.
“Emerging markets represent the greatest opportunities for fintech companies. Southeast Asia is particularly attractive: it has a very tech-savvy population and governments who welcome new technologies,” says Stefania Barbaglio, Director of Cassiopeia Services, an agency working on multiple projects in emerging economies.
“Tech enables leapfrogging in developing economies — FinTech solutions hold power to catalyse economic growth and societal improvements, so we will see big things happening in this space in 2019.”