The fintech scene in Southeast Asia is booming – with massive potential to reach underserved communities in the region
Digital finance services can be extended further with innovative adoptions of next-gen technologies
The fintech sector can be broadly viewed as the harnessing of emerging technologies to deliver digitized financial services and applications for both individuals and businesses.
In Southeast Asia, where reports say over 70% of the adult population are either underserved by traditional banking or do not have a bank account at all, fintech offerings represent an opportunity to provide financial services for a vast population that thus far played an extremely limited role in the global financial system.
The penetration of smartphones has brought the accessibility of the internet to previously disconnected populations in the Southeast Asian region, and fintech startups offering a smorgasbord of services– from money lending to insurance to e-payments– have sprouted up all around the territory to capitalize these new users’ needs.
The interest and the potential these services generate are the reason why fintech ‘unicorns’ are some of the best-funded digital startups in this part of the world, and are expected to generate upwards of US$38 billion in annual revenue across Southeast Asia by 2025, more than triple the US$11 billion generated in 2019.
As the region continues to progress with advances in connectivity and accessibility, applications of newer technology will take firmer root in Southeast Asia, and many will influence or accelerate the growth of fintech.
Tech Wire Asia looks at three emerging tech trends that may play a pivotal role in shaping the regional fintech industry.
# 1 | IoT devices
Usage of Internet of Things (IoT) connected smart devices such as smartwatches and smart bands had been picking up every year, with revenues from the smart home market in Southeast Asia reaching US$1,375 million so far in 2020.
Household penetration of smart devices is expected to eclipse 7.5% by 2023 with a promising annual growth rate of 26.7%, and with that growth we should see an increase in support for digital payments and transactions performed via smart devices.
There has also been interest in voice-enabled transactions and account services that leverage other tech such as predictive AI and natural language processing (NLP) to perform secure transactions, and these could see strong adoption once they are commercially ready.
# 2 | Artificial Intelligence
As mentioned, artificial intelligence (AI) and machine learning (ML) algorithms will be used to support other emerging applications in the fast-developing fintech sector, but AI and ML are already being tapped by fintech platforms to digitally analyse user data such as customer spending patterns and calculate personalized credit and lending products.
AI’s and ML’s contributions towards recognizing big data patterns and improving computational learning are useful for fintech firms that enable asset management and e-lending services, helping to project efficiency outcomes. Fintech apps like China-based JD Digits and Thailand’s Sunday Ins Co. Ltd. are leveraging AI in a similar manner.
# 3 | Augmented Reality
At first glance, augmented reality (AR) might not appear to align with fintech applications, as AR has more recently been used for next-generational promotional and marketing use cases.
However with the boom of mobile payments in the region following the effects of the coronavirus pandemic, fintech companies may be looking to provide a differentiated experience for their mobile users, enhancing their mobile user interface with AR like Latin American fintech Belatrix.
Fintech firms might also incorporate AR in how their financial data is presented, supplying data visualization enhancements that will allow their data analysis presentations to stand out from other similar services that display financial data.
As digital connectivity evolves in Southeast Asia, higher broadband access and better digital literacy will drive adoption of these technologies in the fintech space. What will be interesting to observe is what other digital trends will begin to impact financial services in the near future.