Digital financial services (DFS) in Southeast Asia (SEA) is on an impressive growth trajectory, with revenue projected to jump 22% from USD 22 billion in 2022 to USD 33 billion in 2024, Google said. Temasek, Bain & Company’s latest report has been released. Say.
e-Conomy SEA Annual Report explore Trends and insights across five key digital sectors in Southeast Asia: e-commerce, travel, food and transportation, online media, and DFS.
It covers the current state and outlook of the SEA technology landscape across six key countries in the region: Indonesia, Malaysia, the Philippines, Singapore, Thailand, and Vietnam.
This 2024 edition highlights the rapid growth of fintech in these countries driven by the introduction of cutting-edge technologies, increased competition, and changing customer behavior.
Digital payments and digital lending continued to drive growth in this sector this year, accounting for more than 90% of DFS’ total revenue.
Digital lending: a key driver of fintech revenue
Notably, digital lending remains the largest revenue driver for the DFS industry in Southeast Asia. From 2022 to 2024, digital lending revenue surged 35% to reach USD 22 billion, accounting for 65% of total DFS revenue this year.
This growth has been fueled by digital banks entering the space and leveraging advanced technologies such as artificial intelligence (AI) to expand lending to underserved customers.
Peer-to-peer (P2P) lenders are also growing and maintaining low non-performing loan (NPL) ratios. According to Indonesia’s Otoritas Jasa Kuangan, P2P lenders were able to maintain non-performing loan rates at around 2-3% even as loan balances doubled to USD 4 billion from 2022 to 2024. That’s what it means.
In markets such as Singapore and Thailand, digital challengers are emerging and lending competition is intensifying. In Thailand, non-banks are increasing their share of the micro-lending sector. Meanwhile, foreign fintech companies are aggressively expanding their presence in the Indonesian market and reshaping the competitive environment.
Going forward, the report predicts that digital lending will continue on a growth trajectory driven by AI innovation. By 2030, the sector’s total loan book is expected to reach USD 200-300 billion, up from USD 71 billion in 2024.
Digital payments continue to proliferate
Digital payments is also an area that is registering significant growth due to the proliferation of transactions via cards, account-to-account transfers (A2A), and e-wallets.
In 2024, the gross transaction value (GTV) of digital payments increased by 14% year-on-year (YoY) to USD 1,138 billion. Digital payments revenue followed a similar trend, increasing 15% year-on-year to USD 8.2 billion.
The growth of A2A and e-wallet transactions is being driven by partnerships with leading e-wallet providers and major payment card networks, as well as the expansion of transactions. Cross-border payment connections between regions.
At the same time, merchants are increasingly adopting these payment methods due to low merchant discount rates (MDRs).
Additionally, small merchants often benefit from subsidies that encourage the adoption of e-wallets and A2A transfers.
MDR is a fee charged to businesses by companies that process debit and credit card transactions. These fees are generally higher for credit and debit card transactions compared to A2A transfers and e-wallet payments, especially in competitive markets like Singapore.
Despite high fees, credit and debit cards remain important in Southeast Asia, particularly Singapore and Malaysia. In these markets, payment cards are prized not only for their security features and flexible payment options, but also for their rewards and benefit structures. This makes them attractive to high-value transactions and wealthy consumers.
The report predicts that digital payments will continue to grow, with GTV expected to reach between USD 2.1 trillion and USD 2.4 trillion by 2030, with A2A and e-wallets accounting for 63% of the market. This is an increase from 58% in 2024.
Changes in investor behavior drive wealthtech adoption
Weathtech, the third DFS industry highlighted in the report, is also an emerging fintech category. The sector is being driven by a generational shift in investor behavior, with digital securities platforms in particular gaining traction among Southeast Asia’s growing middle class and high-net-worth individuals (HNWIs), the report said. .
It also notes that investors in Southeast Asia are increasingly concerned about climate change, pollution and social infrastructure, and that this trend is driving the development of more sustainable investment products and solutions.
In 2024, assets under management (AUM) for digital wealth platforms will grow by an impressive 24% year-on-year to reach an estimated USD 69 billion, with the region’s market share increasing from 8% in 2022 to 14% of total AUM. increased to %.
The 2024 edition of the e-Conomy SEA report, titled “Rising Profits, Harnessing the Advantages of SEA,” examines the health of Southeast Asia’s digital economy through the lens of profits, with an astounding 2.5x increase in profitability. It emphasizes the enormous efforts made to achieve this goal. It will reach USD 11 billion by 2022-2024.
These strong results were driven by sustained growth across key metrics, including gross merchandise value (GMV) of USD 263 billion, up 15% year over year, and revenue of USD 89 billion, up 14%.
Featured image credit: Edited from Freepik
