Southeast Asia witnesses an uprise of the fintech revolution in its region

The region is currently viewed as a significant fintech incubator and a rising cryptocurrency powerhouse thanks to the emergence of grants, programs, laws, and legislation.

A man reads a newspaper with an advertisement of the Gojek-Tokopedia merger in Medan, Indonesia, on May 18. The resulting multibillion-dollar company, GoTo Group, is an emerging player in Southeast Asia’s fintech space. Photo: EPA-EFE

A guy reads a newspaper with advertising for the Gojek-Tokopedia merger in Medan, Indonesia on May 18. GoTo Group, the resultant multibillion-dollar business, is a rising participant in Southeast Asia's finance industry. EPA-EFE photo


While traditional markets battled to remain afloat amid the Covid-19 epidemic, cryptocurrency has surged. Bitcoin reached a record high of slightly over US$60,000 in April, over ten times its value a year earlier.

In an unstable environment, retail and institutional investors are starting to see the asset class as a potential substitute. DBS, a banking behemoth, established a bitcoin exchange last year. Traditional institutions, such as BlackRock, are increasingly adopting digital assets, which is improving industry confidence and legitimacy.

Southeast Asia, much like the rest of the globe, has experienced an increase in digital asset engagement, with trading volumes on the DBS Digital Exchange nearly doubling in the first quarter of this year. Southeast Asia already has one of the world's largest pools of bitcoin users, and its bloated mobile penetration rate of more than 100 percent makes it a natural hotspot for digital asset uptake.

The region's US$108 billion digital economies, pioneered by unicorns like as Grab Holdings and Sea Limited, as well as GoTo, a combination of Gojek and Tokopedia, has gained a footing as a financial innovation incubator. In addition, the area is a rising bitcoin powerhouse.

Its awards, programs, rules, and laws also aid to attract fintech companies. Singapore's S$300 million (US$222 million) award for in-depth tech projects initiatives, as well as S$12 million to encourage blockchain innovation, provided a springboard for pioneering enterprises, and developed a robust fintech ecosystem. Fintech licenses, such as those issued by Malaysia's Labuan International Business and Financial Centre (IBFC), allow start-ups to penetrate Southeast Asia.

Last year, Labuan IBFC authorized a record amount of fintech licenses, ushering in three digital banks and 19 cryptocurrency trading platform providers to the province. Earlier this year, Indonesia also granted regulatory approval for the trade of 299 cryptocurrency assets.

An increase in Southeast Asia's fintech investments is witnessed to reach US$1.6 billion in 2019.  Fintech start-ups in Singapore received 355 percent more investment in the first quarter of this year. Foreign investors are driving much of the investment in Southeast Asia's fintech start-ups.

Understandably, the number of fintech companies has increased significantly. Singapore's digital start-ups have multiplied tenfold since 2015, while Vietnam's financial start-ups have expanded 179% since 2017. Fintech start-ups in Indonesia raised over 84% of total financing last year.

Acceptance of digital assets is a logical next step given Southeast Asia's burgeoning fintech origins. With the region's online economy surpassing US$100 billion, digital payments remain a critical market. Therefore, it's not a surprise that bitcoin use has increased throughout Southeast Asia.

Southeast Asia, which accounts for 8.5% of the world's population, is youthful, with a median age of 30.2 years. With more millennials putting their confidence in technology, the area is primed to seed cryptocurrency's future.

Only 30 years ago, Southeast Asia was among the world's poorest areas, with more than half of the population living under the poverty line. Its fast-increasing middle-class customers are expected to number 50 million by 2022, with a combined disposable income of US$300 billion.

The accomplishment of the region can be attributed in part to the “tiger cub economies” of Indonesia, Malaysia, the Philippines, Thailand, and Vietnam, so named because they follow the blueprint of the “Asian tiger” economies in their approach to mass industrialization and economic growth through hi-tech, export-driven policies.

This is demonstrated by Vietnam's economic prowess throughout the epidemic, as its forward-thinking policies and hyper-tech drive drew in more digital businesses. This has contributed to Vietnam's status as Asia's best-performing economy throughout the epidemic, surpassing even China in terms of economic growth.

A worker scans and checks an item on the shelves of a warehouse in Ho Chi Minh City, Vietnam, on May 24. Photo: Bloomberg

A worker scans and checks an item on the shelves of a warehouse in Ho Chi Minh City, Vietnam, on May 24. Photo: Bloomberg

Southeast Asia has fostered some of the most inventive tech disruptors, and these companies have contributed to the region's growth and development by speeding and reinforcing its digital economy.

The West has frequently been the de facto center in directing the path of global technology, but Southeast Asia's increasing importance in fintech now positions it as a potential challenger in influencing tech direction. Southeast Asia is a potential powerhouse for the future of finance due to its geographical location in the core of the Asia-Pacific, active digital ecosystem, and favorable legislation.