These three trends will influence the evolution of fintech in ASEAN

Photo Credit: Wikimedia Commons

ASEAN’s unique market conditions put the region’s fintech development on a different trajectory from the West. These three trends will likely influence the future of fintech in the ASEAN region.

By Preetam Kaushik

Despite suffering catastrophic losses in the 1997 Asian Financial Crisis, Southeast Asian markets have charted a remarkable recovery over the last two decades. The financial sector’s growth has been particularly impressive, especially in countries like Indonesia and Thailand which were teetering on the brink of collapse in the late ‘90s.

Fintech startups are thriving, making it one of the world’s top destinations for investors. With a common market of over 630 million consumers and an annual economic growth rate of over 5%, there is massive potential for fintech’s future growth in ASEAN.

Fintech here will have a different trajectory than in other major markets

The US, EU, India, and China are the mammoth markets for global fintech startups. Each region has its own unique factors that dictate the evolution of the local startup scene.

For instance, Western markets are characterised by the high penetration of traditional banking services. Fintech startups here grow as an extension of, or in collaboration with traditional banks and payment solutions.

By contrast, China, India, and the ASEAN region house hundreds of millions of consumers without bank account access. But unlike India and China, the ASEAN region is unique as a group of nations not a single large country with financial and regulatory homogeny.

Fintech startups here have a vast pool of unbanked citizens to tap into. As a single economic bloc, the 10 ASEAN nations are comparable to the EU in terms of population size. But customers are fragmented across multiple national markets and economies.

Source: Brink

Geographic boundaries and local jurisdictions have and will continue to play a huge part in the development of fintech In Southeast Asia. The following trends will drive fintech’s growth in 2019 and beyond:

There will be a continued focus on cross-border collaboration

In recent decades, ASEAN nations have fostered closer economic ties. Though full economic integration along the lines of the European Economic Community is still a distant dream, things are moving in the right direction.

Fintech has become an important part of the dialogue. Central banking authorities in many ASEAN nations are looking at ways to nurture startup ecosystems and facilitate cross-border transactions.

The ASEAN Fintech Network (AFN), a joint initiative by six member nations, was launched in 2017 to increase cross-border collaboration and encourage local fintech startups in the region.

Another initiative called the ASEAN Financial Innovation Network (AFIN) created a common platform called API Exchange (APIX) in 2018. Aimed at fintech app developers in the region, the platform functions like a “dating site” that brings together fintech developers and regional banks, allowing developers to sell/license their fintech services to the latter. The AFIN was launched by the World Bank in association with the Monetary Authority of Singapore (MAS) and the ASEAN Bankers Association.   

In 2019, the MAS also signed a deal with its counterpart in Cambodia to facilitate cross-border collaboration in fintech and other areas of financial innovation. More deals like these can be expected in the near future, making it easier for local startups to draw on regional knowledge and quickly scale up beyond their home markets. 

Chinese influence will continue for the foreseeable future

India may have dethroned China as the premier destination for fintech funding in 2019, but the latter still holds enormous clout as a source of funding. With companies like Ant Financial raising US$14 billion in funding in 2018, Chinese investment into regional fintech startups will continue unabated.

In the ASEAN startup ecosystem, firms like Ant Financial (owned by Alibaba), Tencent, Didi Chuxing, and JD already have stakes in Grab, Go-jek, Mynt, Hellopay,  and Voyager.

The domestic fintech market in China is experiencing a downturn, largely due to increased regulatory oversight and pressure from authorities. This is encouraging entities like Ant Financial to look overseas for opportunities. Nearby Southeast Asia offers is awash with enticing investment opportunities. ASEAN’s fintech landscape will, therefore, continue to see heavy patronage from China for the foreseeable future.

Banks and startup collaboration will drive diversification

In their early life, fintech startups tend to focus on services like payments. But as the consumer base widens and the market matures, fintech startups will increasingly expand their offerings to include services like P2P lending and insurance.

Startup-bank relations will play a central role in expanding these offerings. Traditional banks initially perceived fintech startups as a threat. But this is increasingly changing as both sides explore ways to leverage the other’s strengths to their advantage.

Banks have the infrastructure, funds, and licenses on their side, while startups have an unparalleled reach to hitherto inaccessible customers (and their data).

Singapore is pioneering a new financial ecosystem where banks and fintech startups can coexist and prosper. The Singapore Quick Response Code (SGQR) is a global first that creates a unified mobile payments system for banks and fintech startups.

This has been further cemented by the Fast & Secure Transfer (FAST) service, a 24/7 payment system that provides fintech startups access to banks for transactions.

Other ASEAN nations are also witnessing growing levels of cooperation between banks and fintech startups. Indonesian banks like Bank Central Asia, Bank Mandiri, and Bank Rakyat have all ventured into fintech, either through venture capital funds or incubators.

In neighbouring Malaysia, RHB Bank has partnered with startup RinggitPlus, while a credit reporting agency called CTOS Data Systems is partnering with a startup called LenddoEFL for data analysis.

Similar changes are also playing out in other nations like Thailand and Vietnam, where banks have started similar fintech startup incubation programs. These initiatives will power fintech growth in areas beyond payments, like P2P lending, insurance, and more. 

Given the vacuum in the financial service sector in Southeast Asia, fintech has a massive role to play in the region. But startups cannot do it all on their own. The future evolution of the sector in ASEAN will be heavily influenced by the changes at the policy level, the flow of funding, and strategic partnerships with traditional banking.

About the Author

Preetam Kaushik
Preetam Kaushik is a Mumbai-based journalist covering business, tech and economy. A former freelance Mumbai correspondent for Business Insider India and freelance journalist for, his work has been published by The Times of India, The Huffington Post, Economic Times, WIRED, and World Economic Forum.