According to a recent study by Google, the digital payments market in Southeast Asia is poised for impressive growth by 2022. Transaction value is predicted to achieve $2 trillion by 2030, a three-fold increase in comparison with the previous decade. The principal drivers of this rapid growth are fintechs and digital banks.
The annual report by Google, Singaporean investor Temasek Holdings and management consultancy Bain & Co examines trends within the digital economy in six exciting regional markets, including Indonesia, Malaysia, the Philippines, Singapore, Thailand and Vietnam.
Southeast Asia is becoming a fierce battleground for digital payments corporations. Adyen, based in Amsterdam, and Stripe, based in San Francisco and Dublin, have change into key players within the region, bringing innovation and exciting competition.
In the digital banking arena, technology corporations are competing to realize mass market share and reach underserved users, hoping to tap right into a large customer base.
One example is Grab, a ride-hailing and food delivery service provider, which recently launched a virtual bank in partnership with Singapore Telecommunications in September. This virtual bank has been specifically designed to achieve gig economy employees and the younger generation. They also plan to expand their presence to the Malaysian and Indonesian markets this yr.
Last yr, Ant Group, the fintech subsidiary of Alibaba Group Holding in China, also launched a wholesale digital bank in Singapore. Additionally, large banks corresponding to Standard Chartered and Singaporean retailer FairPrice Group have also entered the virtual banking market, attracting 100,000 customers in 10 days.
However, Florian Hoppe, partner and head of Bain’s Asia-Pacific digital practice, notes that recent digital banks will face challenges in competing within the high-yield segment because established banks have stronger customer relationships with them.
On the opposite hand, startup funding within the region also remained exceptionally strong in the primary half of the yr, with deal value increasing by 13% in comparison with the identical period last yr. Meanwhile, the digital financial services sector has seen significant growth, raising $4 billion in the primary half of the yr. Investors are very optimistic concerning the payments and consumer credit sectors, seeing huge potential there.
By 2023, the digital payments market is predicted to achieve a complete transaction value of $226.50 billion. The continued upward trend is predicted to deliver a compound annual growth rate of 14.16% during 2023-2027. At this rate, the projected total transaction value will reach $384.70 billion by 2027. The digital commerce sector is already leading this market, with a projected total transaction value of $193.70 billion by 2023.
Projections for the event of the region’s web economy indicate that its value will reach USD 330 billion by 2025, which is barely lower than the previous estimate of USD 363 billion. However, Google’s Stephanie Davis noted that that is the primary time the report has downgraded its forecast, which shows the impact of disruptions to global supply chains in the course of the pandemic.
Meanwhile, amongst Southeast Asian countries, Indonesia continues to steer as the most important digital economy. Online spending in Indonesia is predicted to achieve $130 billion by 2025, followed by Thailand, Vietnam, the Philippines, Malaysia and Singapore, indicating significant growth potential within the region.
Indonesia has emerged as a serious force within the ASEAN digital payments market. In 2020, payment volumes grew by almost 40%, and e-commerce platforms doubled the variety of transactions to roughly 430 trillion rupees (roughly $30.1 billion).
The efforts of the Central Bank of Indonesia contributed to this achievement. Successfully implemented the Indonesia Quick Response Code Standard (QRIS), a compulsory national QR code system, to encourage the adoption of digital payments available to 65 million micro, small and medium-sized enterprises (MSMEs), in addition to consumers with difficulty or limited ability to access bank cards and other popular financial services.
Micro, small and medium-sized enterprises (MSMEs) account for 61% of Indonesia’s economy but still struggle with access to credit. A $50-70 billion financing gap within the small and medium-sized enterprise sector resulted in a lack of as much as $130 billion in value.
In the Philippines, the story is comparable. While there are still distant and rural areas that usually are not yet connected to the digital economy attributable to limited infrastructure and skills, using digital technologies continues to grow rapidly. Almost all digital merchants (97%) now accept digital payments, and around two-thirds have opted for digital lending. The survey results show that access to digital platforms is crucial for 40% of sellers to survive the pandemic.
Reference:
Suruga, Tsubasa (2022). ASEAN digital payments market to achieve $2 trillion in 2030: study. Asia.nikkei.com
Statistics. Digital Payment – ASEAN. statista.com
Bloomberg. Open for business The digital payments revolution in Southeast Asia. Bloomberg.com
