All over the world, financial technology is one of the most potent and growing industries, with the power to not only improve but also completely disrupt the traditional financial sector. There almost always is a new fintech focused firm springing up every day at different corners of the world, to not only solve certain problems that have existed for so long but also to create better effectiveness and efficiency. So far, however, they have been successful because there is a very real and almost palpable need.Southeast Asia is one of the regions that has been at the forefront of fintech growth over the years and the need for a vibrant fintech sector has been quite necessary because of certain problems the region faces. A few of the world’s largest financial institutions can be found in the
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All over the world, financial technology is one of the most potent and growing industries, with the power to not only improve but also completely disrupt the traditional financial sector. There almost always is a new fintech focused firm springing up every day at different corners of the world, to not only solve certain problems that have existed for so long but also to create better effectiveness and efficiency. So far, however, they have been successful because there is a very real and almost palpable need.
Southeast Asia is one of the regions that has been at the forefront of fintech growth over the years and the need for a vibrant fintech sector has been quite necessary because of certain problems the region faces. A few of the world’s largest financial institutions can be found in the area but even with all their might, a recent survey as cited by Entrepreneur, has revealed about 296 million out of the region’s 400 million adults, do not have proper access to financial services, with at least 198 million of them, completely un-banked.
Some of the problems border on infrastructural impediments as well as difficult financial provisions, which has made it difficult even for these large firms, to reach a good enough percentage of the region’s population. However, fintech firms are rising to the challenge.
India, for example, has a significant need for fintech services, which is still growing steadily. The country’s government, however, recognizes this need and has been making specific moves to support the growth of its fintech sector, especially in a bid to make sure financial inclusion reaches areas in the country that have been neglected for quite a while. Speaking to Citywire Selector, Robeco Global Fintech Equities’ co-manager, Patrick Lemmens, has corroborated this and has emphasized the government’s efforts.
“The concept of digital finance helps people to manage their financial affairs when often it is difficult to use financial services when you don’t have a lot of money. The combination of demonetization and government stimulus around the opening of bank accounts has led to a lot more Indians being banked.”
Comparing China and India, Lemmens notes that China has been great with fintech because while India has had a growth in traditional banks making tech strides, traditional Chinese banks have not been picking up the ball.
“That’s why players like Alibaba and Tencent have been able to be so successful and tap into a market of people with growing wealth but that have been under-served.”
Generally, the fintech sector in Southeast Asia is growing because of a few reasons. Firstly, there’s a strong need for financial inclusion, especially in excluded parts. Secondly, there is considerable growth in technology and internet use. There’s however also a growing interest among people in the region for technological and financial possibilities, as well as where they both meet.
For this reason, a study conducted by Google, Singapore’s Temasek, as well as management and consulting firm Bain & Co, has predicted that by 2025, Southeast Asia’s digital payments will have gone past $1 trillion and will also represent almost half of all transactions. In the same period, the e-wallet market is also expected to jump five times its current $22 billion value, to $114 billion.
So far, fintech companies in the region have substantially reduced the number of unbanked and underbanked people. However, there still is a considerable number left, spurring a consistent need for fintech innovations in Southeast Asia. For China, the government’s decision to float its own digital currency will not only ensure financial inclusion but also help trading as Chinese fintech stocks are already reacting positively to the forthcoming launch.