Technology continues to transform every aspect of life. It has changed the way we communicate with our colleagues and loved ones. In addition, it has changed the way we consume various media. It has even changed the way we shop. Now, it is changing the way we are handling our personal finance.
Financial Tech in Southeast Asia
The adoption of financial technology (FinTech) had been slow in Southeast Asia, but more and more consumers have started to embrace it in recent years. From banking apps to mobile wallets, the use of digital financial services has increased as people gain access to affordable electronic devices and internet connections.
In fact, emerging economies that do not have widespread access to traditional banking are “leapfrogging” straight to digital financial services. Instead of opening accounts or applying for loans through brick-and-mortar banks, people prefer to use banking websites, apps, and mobile wallets.
Closer to 100 percent of all people in developed countries have a bank account. However, in emerging economies, the story is different.
In Singapore, 97.81 percent of the population has a bank account as of 2017. Meanwhile, 85.13 percent and 80.96 percent of people from Malaysia and Thailand access services from financial institutions.
In Indonesia, less than 50 percent of the population has a bank account. In the Philippines and Vietnam, only 31.80 percent and 30.02 percent of adults have a bank account. The lowest penetration is in Cambodia, with only 17.80 percent of the population over the age of 14 have bank accounts.
The pandemic further accelerates the adoption of digital financial services in the region. In 2020, as lockdowns and social distancing orders were put into place. About 40 million people went online in the past year across the top six economies. Now, close to 70 percent of the region’s population are now internet users. And, digital financial services are reaping the benefits.
The use of mobile wallets, in particular, has experienced growth in the past year. It accounts for 15 percent to 20 percent of transactions across the top six economies in the region in 2020. For comparison, in 2019, only 5 percent to 10 percent of all point-of-sale and e-commerce transactions were from mobile wallets.
The lack of financial infrastructure in emerging economies has been a challenge that made uptake of traditional banking services slow. However, mobile wallets and other digital financial services have no such problems. Because more people now use smartphones and the internet in Southeast Asia, it is easier for the public to access digital financial services.
S&P Global reports that there is more room for growth for e-money in emerging economies than with traditional banking.
How Southeast Asians Are Using FinTech
Southeast Asians utilize FinTech primarily to pay for purchases and transfer money.
In the past year, digital payments have overtaken debit and credit card payments for the first time as consumers choose contactless and cash-free transactions. In one survey, the majority of Singaporeans (66 percent) shared that they have developed the habit of using cash-free payment methods during the pandemic, and 78 percent stated that they prefer to go cash-free once the global public health crisis is over.
Moreover, migrant workers can send remittances to their loved ones in Indonesia, the Philippines, and Cambodia from Singapore or Hong Kong via smartphone apps. They no longer have to queue at remittance establishments in the hopes that their hard-earned income will cross borders and reach their families across shores.
Other companies are also now rapidly launching and making their financial products and services available online. Nowadays, consumers can find reliable licensed moneylenders on the internet. The entire application and approval process can be done electronically, making it easier for everyone to take out loans from trusted sources.
Insurance products, too, are going online to reach clients. For example, consumers can use different websites to compare different offerings from insurance companies to find the right products for their needs and financial capacities.
Why FinTech?
Access is the primary reason why Southeast Asians are embracing FinTech. While traditional banking has the reputation of having long-winded processes and being strict when it comes to approval, FinTech promises to be swift and easy. The option to submit applications and requirements via e-mail and digital forms on websites and apps is appealing because it is quick and convenient. It reduces the time and money spent on transactions as people no longer have to commute to the brick-and-mortar location and line up to speak to an institution’s representative.
Moreover, it is more inclusive. Often, these services have fewer requirements compared to traditional financial institutions such as banks.
FinTech is transforming personal finance in Southeast Asia. It creates opportunities for people in the region, where the use of banks is lower compared to developed nations, to access financial products and services with ease and convenience.
