Bringing digital financial services to S-E Asia

January 9th, 2020 – With a population of 570 million and a booming GDP expected to reach US$4.7 trillion by 2025, the six largest markets in South-east Asia – Indonesia, Malaysia, the Philippines, Singapore, Thailand and Vietnam – represent one of the world’s fastest-growing regions. Within the region, the digital financial services industry holds big potential that could be unleashed if fundamental underlying challenges are addressed.

By 2025, we expect digital financial services to generate US$38 billion in revenue, with Singapore accounting for US$9 billion of that sum. Based on research conducted by Bain & Company in collaboration with Google and Temasek, Singapore’s digital financial services industry is likely to grow by 14 per cent annually through 2025. However, the industry could become substantially larger, reaching US$60 billion in revenue throughout the region, if certain conditions are met.

It is well known that throughout much of South-east Asia, consumers have more limited access to financial services than their peers in developed markets. Across the region, seven out of 10 adults are either “underbanked” – meaning they have no access to credit cards or have no long-term savings product, for example – or “unbanked”, without access to a basic bank account. In addition, millions of the region’s small and mid-sized enterprises (SMEs) face large funding gaps.

Now all eyes are on digital financial services – including payments, remittances, lending, investments and insurance – to overcome these and other challenges.

Four factors have stymied the growth of digital financial services in the region. First, consumers and merchants alike have been slow to abandon cash and make the move to digital. Another obstacle has been the lack of a reliable digitised identification system in most South-east Asian markets. In addition, regulators have taken a cautious approach. A final issue: Outside of Singapore, the region’s financial infrastructure remains largely underdeveloped, with an absence of robust credit bureaus, for example.

Despite these impediments, the market is poised to grow fast. High smartphone penetration and engagement will speed customer adoption of services like e-commerce and ride hailing, while paving the way for embedded financial services. Also, regulatory policies are becoming more open.

More…https://www.businesstimes.com.sg/opinion/bringing-digital-financial-services-to-s-e-asia

Written by The Business Times
Photo: Miowelfare