Fintech fever
05 Feb 2025
Clelia Frondaroli documents the rise of digital financial technologies in Southeast Asia, and what it means for financial inclusion in the region
Image: tawatchai1990/stock.adobe.com
It is not easy to overlook Southeast Asia. The region spans over 4.5 million square kilometres, containing 11 countries, five separate time zones, and countless languages and ethnic groups. Yet, although Singapore has been regarded as a highly developed centre for financial trading, other smaller ASEAN economies have been left to wait in its shadow.
However, with the emergence of fintech companies, and as innovations have flooded the region, Southeast Asian economies have experienced a surge in investments, funding, and growth. As more and more companies set their roots in Indonesia, Malaysia, and Vietnam (to name a few), how has this ‘fintech fever’ helped shape and change the region for the better, and what does this mean for the future of the industry?
Forces at play
“The start of rapid growth in the fintech industry in Southeast Asia can be attributed to a confluence of factors,” says Shadab Taiyabi, president of Singapore FinTech Association. Of these factors, he cites high rates of smartphone ownership and internet connectivity as some of the forces at play that have made Singapore, and on a wider level, Southeast Asia, the ideal hub for fintech innovation.
But why is this the case?
Financial technologies, such as electronic wallets and payments, offer better access to digital banking as well as encouraging a broader acceptance of cashless transactions. According to the Infocomm Media Development Authority (IMDA), smartphone penetration rates in Singapore are currently at 96 per cent, while the region as a whole is projected to reach 80 per cent this year.
Although estimates vary, when taking into account the global smartphone penetration rate of 67 per cent, Southeast Asia far exceeds the rest of the world. So why would fintechs not take advantage of this hyper-connected and tech-savvy population?
Taiyabi continues: “Additionally, Southeast Asia is seeing a rise in purchasing power from both corporations and individuals, driven by a growing middle class and rising incomes due to economic development.” This, coupled with what Nick Lauw, partner and head of Tech and IP, Asia at RPC, calls an “enabling regulatory environment” and increased funding support for start-ups, “it isn’t hard to see why the growth of the industry in Singapore in particular has been rapid.”
Yet, looking at the financial landscape, it is not possible to talk about the rise of fintechs without mentioning financial exclusion in the same breath. Despite overwhelmingly high smartphone and internet penetration rates, Macquarie’s 2022 report reveals that over 50 per cent of the Southeast Asian population remain unbanked with no access to traditional financial services.
“Financial exclusion perpetuates poverty,” explains Ben Goldin, founder and CEO of Plumery. “It inhibits economic participation as, without access to capital, individuals and micro-businesses struggle to start or expand operations, hindering entrepreneurship and local economic growth. An absence of financial services also leaves households vulnerable to economic shocks.”
With such a large portion of the population cut off from traditional means of banking, it is clear that fintech companies are changing the way in which people and small businesses can access financial services, with the hopes that it can effectively break the cycle of financial exclusion. Lauw puts it plainly: “From a consumer-facing standpoint, all you need to access many of these technologies is a mobile phone app. Digital fintech technologies can [therefore] give these users access to traditional financial products and services they did not previously have.”
Taiyabi agrees. Digital technologies, he emphasises, have also given rise to alternative lending solutions, such as peer-to-peer and micro lending, offering more opportunities to those typically denied access to loans due to a lack of credit history or collateral. This is a point that Goldin hones in on, making clear that “ultimately, these technologies empower communities to participate in the financial system without a need for extensive infrastructure or the intervention of formal financial institutions.”
Ecommerce = equality?
With new fintech innovations continuing to develop across the region, some claim that the industry has the potential to democratise commerce. However, is this really the case?
The answer may be both yes and no. As Lauw explains, “the industry definitely has the potential to lower barriers to entry, although whether there is ultimately a democratisation of commerce will also depend on the regulatory landscape.” He believes the regulatory landscape, especially within Singapore, is subject to change “if the government perceives that there is a need to protect consumers such as increased instances of fraud and criminal activity.”
Fraud also remains at the forefront of Taiyabi’s mind, where he is keen to stress: “With the increasing use of technology, cyber threats such as data breaches and online identity fraud have become major concerns. Implementing security measures to protect customer data privacy is crucial for fintechs in Southeast Asia to maintain their reputation.”
He continues: “Fintech has the potential to democratise commerce in the region. However, innovation and solutions must be developed for practical, real-world scenarios that address problems the community faces.”
Some of these problems include poor financial literacy among members of the underserved community, where a lack of financial education “makes individuals more vulnerable to predatory practices, such as loan sharks offering high-interest loans that trap borrowers in a cycle of debt,” says Goldin. The solution, he believes, may be found in financial literacy campaigns as well as “mobile apps and online platforms [that] can also be used to deliver interactive, localised educational content.”
Bryan Tan, partner at Reed Smith, looks at the industry through a different lens. Not only does he suggest that fintechs have already democratised commerce, he also predicts that with innovation, economic growth in the region “will be less akin to what you see in the West but more like what you see in South Asia, the Middle East, as well as Africa. It means that decades of progress may be accelerated in a fraction instead of waiting for the rollout of infrastructure.”
A promising future
However, as the saying goes, after every rise there is bound to be a fall. With fintech funding hitting a four-year low since its peak of US$6 billion in 2021, has the industry faced its final hurrah, or is there still room to grow?
Although Taiyabi agrees that funding levels have “moderated since the explosive growth in 2015 and acceleration from 2017 to 2022,” he remains optimistic that “companies with innovative solutions and strong fundamentals remain competitive.”
The industry, he believes, has instead evolved towards emerging technologies in AI and data, as well as innovations in sustainability, which he says act as driving forces for the industry to continue growing.
For Lauw, “the advancement never stops.” He clarifies: “Like any other part of the tech industry, there will always be a market for the best products out there.”
So with spirits remaining high for the continuation of this fintech frenzy that has engulfed the region, what new heights are firms setting their sights on?
“Firms are now working towards profitability through cost efficiency and sustainable pricing; focusing on existing markets; and enhancing product offerings and service efficiency through acquisitions,” says Taiyabi, going on to suggest that smaller banks may begin to integrate fintech solutions in their offerings to meet the changing demands of consumers.
He adds: “The population is also increasingly looking to GenAI and tech-enabled innovative solutions that new fintechs can provide, including AI-powered chatbots and robo-advisors.”
Tan also believes the industry is only just beginning to develop in ASEAN economies, where “big populations with increasing middle-income classes. Indonesia, Vietnam, Malaysia and Thailand [will become] lucrative in the coming years.”
Although Singapore remains at the forefront of fintech adoption, Indonesia, and Malaysia are already home to over 800 and 500 fintech companies, respectively, signalling a new age for the industry.
“The future of the fintech industry in Southeast Asia,” concludes Taiyabi, “is promising.”
However, with the emergence of fintech companies, and as innovations have flooded the region, Southeast Asian economies have experienced a surge in investments, funding, and growth. As more and more companies set their roots in Indonesia, Malaysia, and Vietnam (to name a few), how has this ‘fintech fever’ helped shape and change the region for the better, and what does this mean for the future of the industry?
Forces at play
“The start of rapid growth in the fintech industry in Southeast Asia can be attributed to a confluence of factors,” says Shadab Taiyabi, president of Singapore FinTech Association. Of these factors, he cites high rates of smartphone ownership and internet connectivity as some of the forces at play that have made Singapore, and on a wider level, Southeast Asia, the ideal hub for fintech innovation.
But why is this the case?
Financial technologies, such as electronic wallets and payments, offer better access to digital banking as well as encouraging a broader acceptance of cashless transactions. According to the Infocomm Media Development Authority (IMDA), smartphone penetration rates in Singapore are currently at 96 per cent, while the region as a whole is projected to reach 80 per cent this year.
Although estimates vary, when taking into account the global smartphone penetration rate of 67 per cent, Southeast Asia far exceeds the rest of the world. So why would fintechs not take advantage of this hyper-connected and tech-savvy population?
Taiyabi continues: “Additionally, Southeast Asia is seeing a rise in purchasing power from both corporations and individuals, driven by a growing middle class and rising incomes due to economic development.” This, coupled with what Nick Lauw, partner and head of Tech and IP, Asia at RPC, calls an “enabling regulatory environment” and increased funding support for start-ups, “it isn’t hard to see why the growth of the industry in Singapore in particular has been rapid.”
Yet, looking at the financial landscape, it is not possible to talk about the rise of fintechs without mentioning financial exclusion in the same breath. Despite overwhelmingly high smartphone and internet penetration rates, Macquarie’s 2022 report reveals that over 50 per cent of the Southeast Asian population remain unbanked with no access to traditional financial services.
“Financial exclusion perpetuates poverty,” explains Ben Goldin, founder and CEO of Plumery. “It inhibits economic participation as, without access to capital, individuals and micro-businesses struggle to start or expand operations, hindering entrepreneurship and local economic growth. An absence of financial services also leaves households vulnerable to economic shocks.”
With such a large portion of the population cut off from traditional means of banking, it is clear that fintech companies are changing the way in which people and small businesses can access financial services, with the hopes that it can effectively break the cycle of financial exclusion. Lauw puts it plainly: “From a consumer-facing standpoint, all you need to access many of these technologies is a mobile phone app. Digital fintech technologies can [therefore] give these users access to traditional financial products and services they did not previously have.”
Taiyabi agrees. Digital technologies, he emphasises, have also given rise to alternative lending solutions, such as peer-to-peer and micro lending, offering more opportunities to those typically denied access to loans due to a lack of credit history or collateral. This is a point that Goldin hones in on, making clear that “ultimately, these technologies empower communities to participate in the financial system without a need for extensive infrastructure or the intervention of formal financial institutions.”
Ecommerce = equality?
With new fintech innovations continuing to develop across the region, some claim that the industry has the potential to democratise commerce. However, is this really the case?
The answer may be both yes and no. As Lauw explains, “the industry definitely has the potential to lower barriers to entry, although whether there is ultimately a democratisation of commerce will also depend on the regulatory landscape.” He believes the regulatory landscape, especially within Singapore, is subject to change “if the government perceives that there is a need to protect consumers such as increased instances of fraud and criminal activity.”
Fraud also remains at the forefront of Taiyabi’s mind, where he is keen to stress: “With the increasing use of technology, cyber threats such as data breaches and online identity fraud have become major concerns. Implementing security measures to protect customer data privacy is crucial for fintechs in Southeast Asia to maintain their reputation.”
He continues: “Fintech has the potential to democratise commerce in the region. However, innovation and solutions must be developed for practical, real-world scenarios that address problems the community faces.”
Some of these problems include poor financial literacy among members of the underserved community, where a lack of financial education “makes individuals more vulnerable to predatory practices, such as loan sharks offering high-interest loans that trap borrowers in a cycle of debt,” says Goldin. The solution, he believes, may be found in financial literacy campaigns as well as “mobile apps and online platforms [that] can also be used to deliver interactive, localised educational content.”
Bryan Tan, partner at Reed Smith, looks at the industry through a different lens. Not only does he suggest that fintechs have already democratised commerce, he also predicts that with innovation, economic growth in the region “will be less akin to what you see in the West but more like what you see in South Asia, the Middle East, as well as Africa. It means that decades of progress may be accelerated in a fraction instead of waiting for the rollout of infrastructure.”
A promising future
However, as the saying goes, after every rise there is bound to be a fall. With fintech funding hitting a four-year low since its peak of US$6 billion in 2021, has the industry faced its final hurrah, or is there still room to grow?
Although Taiyabi agrees that funding levels have “moderated since the explosive growth in 2015 and acceleration from 2017 to 2022,” he remains optimistic that “companies with innovative solutions and strong fundamentals remain competitive.”
The industry, he believes, has instead evolved towards emerging technologies in AI and data, as well as innovations in sustainability, which he says act as driving forces for the industry to continue growing.
For Lauw, “the advancement never stops.” He clarifies: “Like any other part of the tech industry, there will always be a market for the best products out there.”
So with spirits remaining high for the continuation of this fintech frenzy that has engulfed the region, what new heights are firms setting their sights on?
“Firms are now working towards profitability through cost efficiency and sustainable pricing; focusing on existing markets; and enhancing product offerings and service efficiency through acquisitions,” says Taiyabi, going on to suggest that smaller banks may begin to integrate fintech solutions in their offerings to meet the changing demands of consumers.
He adds: “The population is also increasingly looking to GenAI and tech-enabled innovative solutions that new fintechs can provide, including AI-powered chatbots and robo-advisors.”
Tan also believes the industry is only just beginning to develop in ASEAN economies, where “big populations with increasing middle-income classes. Indonesia, Vietnam, Malaysia and Thailand [will become] lucrative in the coming years.”
Although Singapore remains at the forefront of fintech adoption, Indonesia, and Malaysia are already home to over 800 and 500 fintech companies, respectively, signalling a new age for the industry.
“The future of the fintech industry in Southeast Asia,” concludes Taiyabi, “is promising.”
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