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EDITOR IN CHIEF- ABDULLAH BIN SALIM AL SHUEILI

Southeast Asia as the model for fintech innovation

Stefano
Stefano
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nyone who wants to see the future of fintech would do well to look to Southeast Asia. This dynamic region has been poised for technology transformation across many different sectors  — such as hospitality, e-commerce, travel and much more.


Several nations have become hotbeds of innovation and are especially receptive to developing blockchain activity and other disruptive technologies.


The level of innovation and development has pushed the region to what’s been characterised as ‘a digital war’ between traditional banks and those leading the way in the development and deployment of new technologies. The boom began in 2010 in the e-commerce sector, with companies such as Ensogo, Groupon and Zalora. Over the last few years, the focus has shifted to fintech  —  with some pretty exciting results.


Total of $3 billion was invested in startups in Southeast Asia in 2015 and the first half of 2016. Of this, $345 million went to fintech companies, which is an incredible 21.6 per cent of all funding. More than $2 billion was pumped into Asian fintech companies during the first quarter of 2018, according to CB Insights report. Asia’s online financial services market will be worth by 2020 $72 billion.


Here are factors that make Asia’s fintech landscape different:


n Asean (or Association of Southeast Asian Nations) is the world’s 3rd largest economy .


n Over 650 million people living across 10 countries with 70 per cent under the age of 40. It is estimated that around 58 per cent of global millennials live in Asia. 2014 survey revealed that millennials are more supportive of free markets than their previous generations with emerging markets like Vietnam and the Philippines coming out at the top.


n Smartphone usage and online connectivity are also on a rapid rise in the region. Southeast Asia is also witnessing growing social media penetration rates. Countries that come out at the top include the Brunei (86 per cent), Singapore (77 per cent), Malaysia (71 per cent), Thailand (67 per cent) and Philippines (58 per cent).


n Smartphones and access to Facebook and e-commerce websites are now commonplace, but the same cannot be said about access to formal financial services.


The use of these new channels and ecosystems means an explosion of data that offers completely new opportunities for banking services While China accounts for a big chunk of that, many experts say fast-growing Southeast Asia is the hotspot to watch. The first big growth area is people paying for things with their phone.


The best example are ride-hailing rivals Grab and Go-Jek launching digital wallets. As well as paying for rides, users can pay in selected stores and restaurants with GrabPay and Go-Pay.


GrabPay recently marked its expansion from Singapore into Malaysia by partnering with the state’s largest bank, Maybank allowing customers to use its wallet app within Maybank’s network of retailers. And the spending doesn’t stop here.


Go-Pay and GrabPay both let users tap into their digital wallets to pay for online shopping and other online services.


Long established as a financial centre, Singapore has become the leading startup hub in Southeast Asia thanks to a mix of ready capital and government policies.


According to Enterprise Singapore, the number of startups in the city-state increased from about 2,800 in 2003 to 4,300 in 2016. Venture capital funding jumped from $80 million in 2010 to $1.2 billion in 2017, according to KPMG.


While total investment in fintech companies worldwide in H1 2018 hit $57.9 billion across 875 deals, the $2 billion fintech market in the MENA region has only seen $150 million in investments in the last couple of years.


Research shows that fintech firms are now penetrating every segment in the region’s financial services sector, driving innovation, transformation, and disruption. This rise is being driven by the high percentage of the population that is unbanked, low SME lending levels, a growing e-commerce sector, and an increased customer appetite for digital services.


Fintech funding has been rapidly gaining traction in the past five years, reflecting investors’ rising interest in the fintech opportunity in MENA. This has supported the proliferation of new fintech startups: with six startups founded in 2005, the figure is expected to reach 252 by 2020.


Fintech Galaxy, the MENA region’s only fintech digital crowdsourcing platform, celebrated individuals and institutions through the “FinX —Excellence in Fintech” awards, that took place at the debut FinX 2018 event. The event creates global-local linkages necessary to promote the acceleration of the financial markets’ digital transformation and a culture of seamless collaboration among members, and within local and regional ecosystems.


The event also celebrated the signing of a MoU to establish a global fintech supercluster comprised of highly reputable fintech entities that are focused on promoting the global movement of fintech startups.


Stefano Virgilli


stefano@virgilli.com


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