Eager to trial their services is a young – half are under 30 years old – and digitally native population that spends around 8 hours a day online. Smartphone penetration is on the verge of crossing 70 per cent10 of the population and each year tens of millions of its people became first time internet users.11
The COVID-19 pandemic acted as a further catalyst when technology emerged as a critical means of reaching a population with health advice and allowing financial and commerce transactions to continue against a backdrop of lockdowns and mobility constraints. This saw an additional 60 million people in the region become online consumers throughout its duration.12
However, unlike in markets where banking access is more universal, the opportunity for fintech companies is not purely focused on converting consumers to digital alternatives but is often about addressing the challenge of providing a broader suite of financial services products. Those such as lending and wealth management services which have traditionally been once out of reach to consumers who have no previous experience with them and lack the credit histories required to obtain them.
Digital consumer finance
So, whilst providers in the region started out with a focus on providing e-wallets to facilitate online and offline payments, they have broadened their functionality and in some cases are now replacing bank accounts and offer access to a broader suite of financial products, including savings and investment products, lending and insurance.
An example of one such product is Singapore-based Grab, which allows consumers to invest as little as $SG1 ($A1) at a time in fixed income funds through its app and offers users the convenience of being able to make cash deposits into their digital accounts whilst in its rideshare cars. They hand over their money to drivers who themselves are insured through fractionalised premiums paid only to cover the time that they are working for the company.
This has helped some – including Grab, but also GoTo (formed by the merger of Indonesian internet leaders Gojek and Tokopedia), MoMo, amongst others – increase user numbers over time. As has their metamorphosis into ‘superapps’ and a broader digital ecosystem of services that users would typically pay cash for – such as e-commerce, ride hailing, food delivery and mobile top ups.
The convenience and offering of these ‘superapps’ have led to their growing popularity amongst the population and a proliferation of providers that’s seeing digital payments fast becoming the norm for many of Southeast Asia’s consumers. It’s also helped propel the region to becoming one of the fastest-growing fintech markets in the world.13
Should they successfully convert a population with high smartphone penetration rates but traditionally dependent on cash to one that conducts and manages its spending online, they stand to capitalise on a digital economy that could be worth at least $US300 billion by 202514 (though post-pandemic estimates are that this could now be $US350 billion15) and a financial services opportunity of $US38 billion.16
Southeast Asian digital financial services represent a $US38 billion revenue opportunity by 2025