In the past few years, Southeast Asia’s emerging economies have become a launching ground for fintech companies, thereby changing the face of the financial industry. The new fintech trends have improved customer experience by providing convenient and hassle-free digital banking services. To this effect, there has been increased adoption of fintech in Southeast Asia as consumers prefer them to traditional banking services.
Southeast Asia is among the fastest-growing fintech markets worldwide, with an estimated $1 trillion USD market growth by 2025. A major contributing factor to this growth is the wide acceptance of fintech by the government and people in the region. A FICO survey found that two-thirds of Asia Pacific (APAC) banking customers are willing to use fintech or challenger banks’ services to enjoy customer-centric banking services.
Experts share how challengers banks can achieve success in Southeast Asia
Furthermore, a World Bank report shows that consumers in Southeast Asia have poor access to financial services. According to the report, only 22% of adults in Cambodia have formal bank accounts, followed by the Philippines (34%), Vietnam (31%) and Indonesia (49%). The insufficient financial inclusion and little to no access to wealth management and insurance services have prompted people in the region to take advantage of the growing fintech options.
With the advent of fintech and challenger banks in the region to bridge this gap, consumers can easily borrow, save and manage their finances, leading to increased adoption. The wide acceptance has created numerous opportunities for fintech companies and non-traditional lenders to establish themselves in the finance industry and provide innovative tools for the unbanked population.
Due to the high adoption rates, venture capitalists are willing to invest massively in the Southeast Asian fintech industry, seeing it as a goldmine. According to a KPMG report, fintech companies in APAC raised $11.6 billion USD in venture capital and private equity investments in 2020. These funds have helped finance companies to create systems and tools that eliminate stress for the local consumers, thereby increasing receptiveness.
So what exactly is it about fintech in the region that makes it so attractive?
Creation of customer-friendly products
Fintech trends in Southeast Asia are continuously evolving as they adapt to the ever-changing customer demands and expectations. The region’s consumers are willing to try out new services because they want tailor-fitted products, smooth digital onboarding processes, and improved product pricing.
The FICO survey also found that most consumers prefer to register their bank accounts via digital systems; however, 40% of them are willing to visit a bank branch if necessary. The region is slowly eliminating the need for in-person banking operations, with 65% of customers preferring to communicate with their banks through digital platforms.
According to the survey, customers also considered lower transaction fees and competitive interest rates important factors. The respondents stated that they were willing to give out additional financial information to get better deals.
They also pointed out that they were open to switching to providers that offer advanced and personalised tools that can enable them to view transaction histories, update personal details and reset passwords. These functions were particularly essential to ASEAN customers in Thailand, Malaysia, and Indonesia.
Advanced security features
Security is among the top reasons people use banking services and is a factor consumers consider when choosing a bank. Fintech companies in Southeast Asia have taken advantage of modern technology to provide advanced security tools, including two-factor authentication, one-time password, and biometric security.
These are necessary to combat the concerns in increasing fraud attacks caused by digitalisation. A 2020 study conducted by LexisNexis Risk Solutions found that Asian Pacific fintech companies experience higher cyberattack rates than those in Europe, Middle East, North America, and Africa.
A GBG report predicts that financial institutions in the Asia Pacific will spend $83.3 million USD to acquire new fraud prevention systems between 2020 and 2021. Furthermore, a Mastercard survey reveals that consumers in the region have more trust in fintech and established IT companies because of the security features provided.
In the past decade, Southeast Asia has witnessed incredible growth in the smartphone penetration rate, meaning consumers now have easy access to digital banking services. The increased connectivity has also enabled fintech and challenger banks to access data to create new systems and opportunities for customers.
With the data obtained, fintech companies can easily manage risks and build trustworthy brands. Furthermore, connectivity has helped increase financial inclusiveness as customers do not have to go through lengthy processes to use banking services. The ease of use has increasingly pushed consumers to choose fintech over traditional banking.
Fintech trends in Southeast Asia have evolved in the past few years due to customer demand and other factors. They will likely continue to drive the digital expansion and receptiveness of fintech in the region. There are still numerous challenges to overcome, but the ASEAN fintech industry will most undoubtedly witness more advancements in the near future.