Southeast Asia’s fintech industry is thriving with a surge in digital payments, alternative lending, and wealthtech adoption.
The region’s strong fundamentals and growing digital economy are poised for continued growth in the coming years, according to a new report from fintech-focused corporate financial advisory firm Royal Park Partners (RPP). It promises innovation.
Financial inclusion opportunities for fintech companies in Southeast Asia
The report is released In December, we explore the drivers and key trends in the Southeast Asian fintech market, highlighting the strong fundamentals in Southeast Asia that have driven the rapid growth of the fintech sector.
First, the report highlights Southeast Asia’s relatively underdeveloped traditional financial infrastructure and large underserved population, which present significant opportunities for digital financial services. It is said that there are.
The report found that while COVID-19 has accelerated the digital shift, there are still 820 million unbanked adults and 1.8 billion unbanked adults in Asia Pacific (APAC). It points out that the country faces significant financial inclusion challenges.
In Southeast Asia alone, 85% of adults are unbanked, meaning approximately 300 million people lack adequate access to financial services.
Micro, small and medium-sized enterprises (MSMEs), which represent over 97% of all businesses in Southeast Asia, represent another huge opportunity for digital financial service providers.
These businesses face a significant credit gap of USD 300 billion, with more than half of MSMEs struggling to access formal credit, hindering their potential and economic progress.
Growth of the youth and middle class
A second driver of Southeast Asia’s fintech boom is the region’s growing technology-driven youth and middle class, which are fueling demand for digital-first financial services.
In Southeast Asia, young people between the ages of 15 and 34 make up more than one-third of the population. Meanwhile, the region’s burgeoning middle class has grown at a compound annual growth rate (CAGR) of 6% since 2015 and is expected to expand further, growing by 5% annually until 2030.
Southeast Asia is seeing a rise in financially affluent households, driving demand for customized savings, insurance and wealth management solutions. At the same time, increased purchasing power and discretionary spending is driving the need for seamless, real-time and secure payment systems.
Payments: Fastest growing market in Southeast Asia’s fintech scene
The report highlights payments as the fastest growing market in Southeast Asia, driven by the shift to cashless transactions and the growth of the cross-border economy.
QR code payments are driving this trend, with transaction volume exceeding USD 13 billion in 2023 and more than 85% of retailers in Thailand, Vietnam and Indonesia accepting this payment method.
Additionally, continued ASEAN integration efforts to connect real-time payment systems are facilitating cross-border digital payments and boosting regional commerce.
The rise of “super apps” is another notable trend in Southeast Asia’s payments landscape. Super apps like Grab, Gojek, and Shopee have evolved from single-service platforms to comprehensive ecosystems offering diverse services including food delivery, digital payments, financial services, and more, all within one app. . These platforms have become central to our daily lives and have collectively amassed a user base. Approximately 310 million across the region.
Digital payment transaction value in Southeast Asia is expected to grow at a CAGR of 19.8% from 2024 to 2029, reaching nearly USD 1.7 trillion.
Southeast Asia remains heavily reliant on cash, a dependence driven not only by cultural preferences but also infrastructure gaps and legacy issues with digital platforms.
However, this dependence is expected to decline due to the growth of digital payments and government-led efforts towards financial inclusion, the report said.
Alternative financing: addressing the credit gap
Alternative financing, including buy now, pay later (BNPL), is also one of the fastest growing fintech industries in Southeast Asia. These platforms play an important role in bridging the credit gap and supporting local economies. According to the report, alternative lending platforms are driving 20% annual growth in small business lending, with further expansion expected.
Leading countries such as the Philippines have seen the fastest growth in fintech lending to small and medium-sized enterprises, with disbursements increasing by 35% in 2023 compared to the previous year. The country’s US$221 billion small business credit gap highlights tremendous opportunities for small business financing. Alternative financing solutions.
Consumer adoption of BNPL has also skyrocketed, with 40% of Filipino users now relying on BNPL for budgeting and immediate expenses.
The Philippines has emerged as Southeast Asia’s leading alternative financing market, accounting for 59% of transaction volume in 2024.
The Southeast Asia alternative lending market, including BNPL, is expected to grow at a CAGR of 45%, increasing from USD 26 billion in 2021 to USD 116 billion by 2025.
Wealth management is undergoing major changes
Another fintech industry that is growing in Southeast Asia is wealthtech. The sector is growing due to Southeast Asia’s tech-savvy population and a growing middle class seeking better and more accessible wealth management solutions.
Robo-advisor players, in particular, are gaining traction among young investors through their data-driven super apps. Robo-advisors leverage artificial intelligence (AI) and algorithms to provide customized digital financial planning and investment services at low cost.
According to the report, 40% of individuals under the age of 35 in Singapore currently use robo-advisor services. Popular platforms include StashAway, a Singapore-based platform. reached USD 1 billion in assets under management (AUM) within 3.5 years with Endowus, an award-winning asset and fund platform. exceeded Total assets under management for five years are USD 7 billion.
Micro-investment and digital intermediation platforms are also becoming popular in Southeast Asia. These platforms enable low-income users to participate in financial markets, improve accessibility to wealth management, and help increase financial inclusion across the region.
Notable players include Tiger Brokers, an online broker headquartered in Singapore. experienced The CAGR for account openings in city states is an astounding 539%. Finhay is Vietnam’s largest online investment platform. Over 2.7 million registered users.
Featured image credit: Edited from freepic
