Impressive growth . . .
Southeast Asia’s digital economy continues to grow at an unprecedented pace. It hit US$100 billion this year and is expected to reach US$300 billion in 2025. Changes in consumer behaviour, rapid adoption by the emerging middle classes, and e-commerce and ride-hailing services are leading this growth. The region’s digital economy, bolstered by high smartphone penetration, will see an expansion of digital financial services, especially digital payments. A recent report projects that digital payments will account for US$1 trillion in gross transaction value by 2025 and that digital financial services have the potential to generate US$60 billion in annual revenue.
Fragmented landscape . . .
Indonesia and Vietnam are the two fastest-growing digital economies in the region. But the high degree of fragmentation, in which an increasing number of new players are disrupting the market and endangering the survival of established players, means there are no clear winners in Southeast Asia’s digital financial sector. Only 26 per cent of the population in Southeast Asia has full access to banking services and 24 per cent of the population is “underbanked,” meaning they have unmet financial needs, including inadequate funding and no access to credit cards. Those people with no access to banking – the “unbanked” – account for 50 per cent of the region’s population.
Opportunities to be tapped . . .
The majority of the “unbanked” population resides in rural areas and has low financial literacy. National governments, banks, and telecom companies are all collaborating to increase services to these people and to expand their markets. As these stakeholders transform their service offerings, opportunities are likely to emerge for extra-regional partners like Canada with strengths in the fintech sector.