Should Fintech be capitalized on in Southeast Asia countries?

Should Fintech be capitalized on in Southeast Asia countries?

Southeast Asia is a lucrative market for the investors’ community around the world because of its potential development, especially in Vietnam, Indonesia and Malaysia. For 10 years the technology in this region has been booming with many unicorn start-ups.

Especially in fintech, the field has never lost its attraction when the level of cash used in these nations is still high. According to a survey from 2020, around 45 percent of respondents in Southeast Asia preferred to pay with cash.

In this article, FinFan will give our opinion about the question: “Should Fintech be capitalized on in Southeast Asia countries?”

Southeast Asia, the lucrative market has been noticed by many big fintech companies.

In the article “What difference between Alipay and WeChat Pay”, FinFan mentioned about Southeast Asia is always a vibrant region, that in the competition of Alipay vs WeChat Pay, both of these giant fintech companies are craved to occupy.

What difference between Alipay and WeChat Pay?

What difference between Alipay and WeChat Pay?

According to the report of Deloitte Southeast Asia Innovation Team, Fintech funding in the region more than tripled to hit a record USD 3.5 billion in the first nine months of 2021, compared to USD 1.1 billion for all of 2020. In 2022, while tech companies all over the world grapple with a funding winter, fintech companies in SEA are continuing to raise huge capital.

These numbers of Deloitte Southeast Asia Innovation Team’s report show us the reality that not only the two biggest guys of China but also others from around the world such as Stripe and PayPal of the U.S. are noticing this region as prey for their hunt.

On the other hand, some of the biggest venture investment funds like Standard Chartered and Goldman Sachs have often made researches around these countries to find out the potential local projects to invest in. The most prominent event was the investment of Goldman Sachs in 2016 in the MoMo e-wallet in Vietnam. This investment contributed to turning MoMo into a regional unicorn.

Will the top fintech companies in the world easily dominate the Southeast Asia fintech market?

Although the big fintech companies around the world always want to dominate this market, they still have some difficulties to overcome for the first goal of entering the market.

The first one is customer behavior.

Vietnamese people have the idiom “Coming to someone’s home, using his/her rules (Nhập gia tùy tục)” for this problem. Whether more than 174 million people in Southeast Asia don’t use credit or debit cards or have bank accounts, Stripe and PayPal were built with a primary focus on credit and debit card payments.

On the other hand, the local fintech start-ups are very understanding of this behavior of those people. They focus to build platforms, in which people don’t need to add cards but are still possible to take payments by using QR codes or transferring money through registered phone numbers.

Moreover, local fintech companies can be faster than global ones in updating news, trends, or traditional consumption habits of local citizens.

For example, the campaign of Viettel Pay about sending money home, buying tickets to go home, buying presents to relatives, etc. during the Tet holiday in Vietnam named “The easier Tet with ViettelPay (Tết dễ dàng với ViettelPay” in 2020 was a huge success and helped ViettelPay to grow their users and transaction (increased 2.7 million new users, increased 7.8 million transactions in 2020).

ViettelPay campaign The easier Tet with Viettel Pay in 2020"ViettelPay campaign The easier Tet with Viettel Pay in 2020


The second difficulty is a faster connection with small and medium enterprises (SMEs).

Local fintech companies have more advantages to connect with SMEs, which are integral to the economic development and growth of ASEAN Member States.

For example, for the first period of the start-up’s life, MoMo had connected with many local groceries to become its trading points.

MoMo connected with local groceries in the first period of this start-up

MoMo connected with local groceries in the first period of this start-up

This was a very smart marketing campaign when it brought a Win-Win deal for both sides: these local groceries could be the free marketing tools for MoMo and on the other side, they took a little commission for new users and transactions on MoMo monthly.

The other successful connection with small and medium enterprises are the e-commerce trading floors like Shopee Pay and SenPay in Vietnam.

Starting with the e-commerce exchanges model, both floors have taken the advantage of users' strengths well when they encourage the shop owners and final buyers to use their e-wallet with many Attractive exclusive promo codes.

The last success story comes from Indonesian fintech unicorn Xendit works with popular e-wallets in Indonesia, and even offers offline payment solutions at local convenience store chains, Indomaret and Alfamart.

The last one is the laws of the ASEAN countries.

This region has many developing countries with laws that have not been updated to keep up with the development of technology (even an advanced country like the U.S.).

Moreover, taking advantage of loopholes in the laws, many crooks have established fraudulent fintech forms to appropriate citizens’ properties such as the My Aladdin project.

Should fintech be capitalized on in Southeast Asia countries?

For those reasons, fintech in Southeast Asia should be capitalized strongly. However, if you are the representative person of the venture fund, you’ll need to be carefully screened the markets and find out the companies, which have transparent financial reporting and business models with growth potential x5 even x10 in the future.

One tip for you is that you can invest in NEOBank companies because this is a fairly new model and has a lot of growth potential. One of these companies is FinFan, which has been approved by SBV for cross border money transfers. This is a top infrastructure integrated with all local banks, ATM networks, telco, e-wallet providers, etc. as an aggregator in Vietnam.