This year’s ASEAN Business Summit in Bangkok was all about digitalization. Lawmakers, banks, startups, think tanks, everyone wanted to talk about how digital technology is going to shape the future of Southeast Asia’s economies.
One sector seems to be particularly important: Fintech. Justo Ortiz, Chairman of the Board of UnionBank Philippines, points out that about 77 per cent of the Philippine’s population is still unbanked today. Vietnam and Indonesia face similar challenges. Ortiz believes Fintech is one way to solve the problem.
High internet penetration, but 47 per cent don’t have a bank account
Southeast Asia’s governments have realized the Fintech opportunity and have put programs and incentives in place to accelerate the sector’s development. The Vietnamese government, for example, has announced the goal to reduce cash usage to 10% of all market transactions by 2020.
The market opportunity is enormous. Southeast Asia’s population comprises of about 644 million people, half of them are of the millennial generation. The region has one of the highest internets and mobile penetration rates in the world and the growing middle class is increasingly seeking access to digital financial services.
Still, according to CB Insights, only 47 per cent of adults have a bank account. That’s an issue because having no access to financial services means no formal employment and no opportunity to engage in e-commerce.
Fintech can provide easier and faster access to financial services
Easier and faster access to financial services will be a major boost for the domestic economies, not only because more consumers can engage in trade, but also because businesses can work more efficiently.
Today, only about one-third of small and medium-sized enterprises in the region have access to loans or lines of credit. Lack of financial resources limits them to scale their companies quickly and efficiently.
Fintech companies are seizing the opportunity and have started to offer digital loans, payment platforms, and other products. Services that focus on credit verification and speedy processing will help SMEs deal with demand surges and help them reach their true business potential.