Fintech has revolutionalised the payments industry and apart from the grand global success, its presence in the Southeast Asian market has attracted many giants from all over the globe to invest and branch out to this region.
Online shopping, food ordering, online taxis, and even money lending are now powered through digital tools by fintechs. But, the most interesting part is the attraction of giants such asGojek, Uber, etcetera to invest in the fintech industries of Southeast Asian markets.
As the digital financial services tend to generate annual revenue of US$38 billion in Southeast Asian markets by 2025, which is way more than the annual revenue of US$11 billion generated by far in 2019, I look at what led to its exponential growth.
Business models
There are several vital business models being used by fintech companies in the Southeast Asian region. But, among all the business models the two highest-grossing business models are digital payments and digital lending services.
Image Source: jbs.cam.ac.uk
Digital lending services have already made a mark in the global markets and with the rise of digital lending in the Southeast Asian region, there have been new players emerging in the market infusing more capital. But, next to it is the most prolific business model for revenue– digital payments!
Also Read: Fintechs often encounter issues translating a POC into a production order, finds study
Digital payments have been the pioneer of all the digital financial services. It is set to cross the mark of US$1 trillion revenue by the year 2025 and this goes to show that the digital payments business model has been the prime focus for many new and old players in the Southeast Asian fintech industry.
New kids on the block
Fintech industry in this region is quite segregated and there has been no monopoly among the players. But, there has been a tight competition between the local and the global players. Some of the local players are gaining high due to the local presence over the years.
Top five fintech companies in Southeast Asia:
- Tookitaki
A Singapore-based enterprise fintech software solution provider. - Incomlend
A Singapore-based online multi-currency invoice exchange platform. - Sunday INS Ltd.
An AI-based insurance and claims solution provider. - Growpal
An Indonesian funds distribution and funding management services provider. - Funding Societies
A Malaysian finance and investment management provider for small businesses.
Consumer trends
As the fintech industry is rising to its peak, the Southeast Asian fintech market set a new annual record with US$701 million raised throughout the third quarter of 2019. Consumer trends have seen a fundamental shift in the adoption of new Fintech technologies.
Image Source: cbinsights.com
With the digitisation of the fintech products and adoption of AI in the efficient management of financial services, it is creating new opportunities and new markets to be explored.
Also Read: Swiss fintech incubator F10 enters Singapore, soon to kick off accelerator programme
Many chatbots and AI-based startups are gaining traction and the most interesting part is the adoption and trust of consumers in these technologies for the management of their finances.
Innovative footholds
Innovations have found a new foothold in the fintech industry in the Southeast Asian region. The biggest innovative adoption for fintech in the region has been AI-based, machine learning and Natural Language Programming (NLP).
Banks have the problem of storing BigData, process them and analyse them to design personalised financial products for their consumers, which can be delivered through highly reactive real-time apps developed through mobile app development. But, with the AI-based technologies and power of cognitive computing solutions, this has been achieved by several Southeast Asian banks and financial service providers.
Digital lending has been a popular innovation in the fintech industry. With modern technologies and innovations in data processing and predictive analysis, the digital lending paradigm has grown more personalised and custom-tailored for the Southeast Asian markets.
What does the future hold
The future of fintech evolution in the Southeast Asian markets lies in the innovations and development of some key factors. Connectivity is one of the important factors as the fintech industry is moving more towards digital expansion. In countries such as Indonesia, Philippines, Vietnam, and Thailand; rural areas have huge internet connectivity gaps.
Higher broadband access and digital literacy can change this scenario and bring in more users and consumers from rural areas. There are several other challenges to be overcome. Like the once where a centralised payment infrastructure is in need to reduce the hassles of cross-border payment regulations and issues.
Also Read: Strengthening its expansion into fintech, Grab introduces GrabPay Card
Countries such as Indonesia, Vietnam, and Myanmar need some data protection regulations. Though Singapore, Malaysia, and the Philippines do have data regulations for users. Other concerns over cross-border data flow and issues pertaining to the digital trade need to be addressed.
About 47 per cent of fintech Startups in the region depend upon the loans for funding and that is the key issue to be addressed for the fintech industry’s development in the region. This needs to be realised and more funding and venture capital should be infused into the startups and digital financial service providers.
So, if you are a financial startup, looking to storm into the fintech industry of the Southeast Asian market, then this the right time for you to cash in!
–
Editor’s note: e27 aims to foster thought leadership by publishing contributions from the community. Become a thought leader in the community and share your opinions or ideas by submitting a post.
Join our e27 Telegram group here, or like e27 Facebook page here.
Image credit: Two Paddles Axe and Leatherwork on Unsplash
The post How fintech is disrupting the Southeast Asian payments market appeared first on e27.