ASEAN Fintech is Poised for Rapid Growth in 2020

Financial technology, or fintech for short, is a name well-known in today’s business world. However, for the uninitiated, fintech is the use of technology to improve products and services in the finance sector.

Nathan Daly
October 15, 2020

ASEAN Fintech is Poised for Rapid Growth in 2020

Financial technology, or fintech for short, is a name well-known in today’s business world. However, for the uninitiated, fintech is the use of technology to improve products and services in the finance sector.

As the benefits of fintech become more widely known, forward-looking financial institutions are eagerly harnessing it to provide better customer experiences. Acumen Finance, a commercial lending expert in Australia, counts itself among these pioneer adopters and eagerly anticipates ASEAN fintech’s revolution in the upcoming decade.

ASEAN: The Latest Fintech Hotspot

While fintech is leaving no country in the world unshaken as they disrupt the traditional banking systems, the ASEAN region is a prime candidate for change in 2020 for two key reasons.

Demographic: Housing more than 600 million people, ASEAN naturally provides a huge client base for fintech. As population and income levels rise, and consumers move online through extensive use of their smartphones, there is agrowing opportunity for the delivery of more fintech products and services. Innovation hubs like Singapore and Sydney, with their large numbers of tech-savvy workers, look set to lead the charge.

Technology infrastructure: There have been massive technological advancements outside fintech, which have integrated seamlessly to support its progress. For example, smart devices can aid online transactions and payments, while new 5G networks can enhance digital transaction speeds. This integration allows fintech firms to better meet the demands of today’s convenience-oriented consumer.

With such solid backing from both the region’s population and supporting infrastructure, ASEAN’s fintech industry can expect higher profit levels this year.

Success Stories

To illustrate the boom of fintech in ASEAN, here are four of its superstar achievers:

Airwallex: This Australian unicorn, helping consumers make cost-effective, speedy and transparent cross-border payments across numerous currencies, is valued at $1.5 billion USD. It is currently seeking $200 million USD in series D funding and has market leaders like WeChat and Inc. among its clientele.

Afterpay: Based in Australia, the company allows consumers to make online payments in interest-free instalments. Adopted by a reported 3.6 million users, its stock price soared more than 31% this January due to strong investor confidence.

M-Daq: Singapore-grown M-Daq prides itself on making cross-border trading accessible. It overcomes many investors’ fear of exchange rate fluctuations by allowing users to trade in their local currency. Recently, it even doubled in valuation and secured an undisclosed amount of pre-series D capital.

Up: Australia’s highest-rated banking app, Up empowers individuals to stay on top of their personal finances. Collecting 100,000 customers in just eight months of its launch, it is one of the most rapidly-expanding digital banks worldwide.

Promising Growth Areas: Credit Access and Online Lending

Small-to-medium sized enterprises (SMEs) constitute between 88.8-99.9% of all businesses in ASEAN and employ 51.7-97.2% of its working population. However, mainstream loan institutions still consider them a high-risk investment, making it much more difficult for SMEs to secure credit for business growth or liquidity. Successful capital sourcing also often depends on the availability of valuable collateral or the proof of abundant liquidity, both of which SMEs tend to lack due to their limited capacity and resources.

This chicken-and-egg situation has caused as many as 30 million SMEs to be underserved. Many face restricted access to even the most basic of financial services. The gaping credit hole of about $175 billion USD, while a heart-wrenching sight, could just be the big break for fintech companies focusing on access to credit and online lending.

Aside from timely market opportunities, national authorities such as the governments of Cambodia and the Philippines have been advocates of fintech that helps thin-file business owners. Conventional banking establishments in Singapore have also come on board, joining forces with fintech companies to create solutions. These exciting developments underpin the enormous growth potential of online lending and credit access sub-sectors.

The Coronavirus Impact

Aside from the usual factors, an unexpected event affecting fintech is the global Coronavirus outbreak. Effects could include:

Less revenue for businesses with location-based clients: As the virus spreads, people are thinking twice before going out. Less spending activity at physical shops means less transaction revenue for fintech companies whose products cater to offline stores.

Lower market investments: Severe fluctuations of share prices in recent weeks have caused many to fear an oncoming economic slowdown. In light of this uncertainty, consumers may choose the more conservative approach ofholding on to their cash. Online wealth managers and trading systems that usually make a living from asset management or transaction fees, could face diminishing business.

Business as usual for remote teams: For fintech firms who can work from home and offer off-premise solutions, their teams adapt much more quickly, and things, fortunately, remain largely unchanged.

Corporations turning to fintech to alleviate business exposure: In an attempt to mitigate business risk, many establishments with client-facing operations are starting to look to fintech software for answers. Fintech’s online capabilities allow organisations to keep in touch with their customers and manage their expectations during emergencies while still maintaining quality service standards.

Australia’s Outlook

Thankfully, whatever way the Coronavirus situation plays out, fintech in Australia is expected to grow. The sector has been flourishing over the past few years, with rocketing revenue growth of 80% from June 2018 to June 2019 alone. With the increasing global expansion and a rising adoption rate nationwide of 58%, it’s safe to say that fintech has successfully moved from being on the fringe to becoming a central player in the economy.

That’s why, we at Acumen Finance, have chosen to back up our commercial lending services with fintech-inspired, cutting-edge technology. Our diverse financing solutions cover the spectrum from traditional lending to private lending. Whether you are a business owner or own commercial real estate in Australia that you want to leverage on, we’ve got your back. Get in touch with us today to give your business the boost it needs.