Technology has made financial services more accessible to users in the region, and it is projected to expand further to reach 100 million Southeast Asians with limited access to financial services today, according to a report published by Google and partners.
The adoption of digital payments in Southeast Asia has reached an inflection point and is expected to grow from $600 billion today to cross $1 trillion by 2025, according to the «e-Conomy Southeast Asia» report published on Thursday by Google, Temasek and Bain & Company.
The surging levels of digital payments adoption and usage are in line with other Internet economy sectors such as ride-hailing and e-commerce, and will account for almost half of all money spent in the region by 2025, the report said. In addition, e-wallets are expected to grow even faster, from $22 billion in 2019 to $114 billion in 2025.
Increasing Access a Priority
Access to basic financial services remains poor because the adoption and usage of financial services business models enabled by technology are still limited in Southeast Asia, the report says. Only 104 million of the region's 400 million adults are «banked,» meaning they have full access to financial services. There are 98 million «underbanked» – with a bank account but limited access to credit, investment and insurance. The remaining 198 million are «unbanked.» Small and medium enterprises also face large funding gaps.
The report explained this as a result of high costs in a region lacking physical infrastructure, as well as the absence of public registers, identification systems and reliable credit information. In addition, tight regulations have stifled competition and innovation. However, it said that payments, remittance, lending, investment and insurance are «ripe for transformation».
Role of Policymakers
For digital financial services to grow, governments and policymakers have an active role to play in providing supportive regulations. «The biggest drag on investment levels is the uncertainty surrounding regulations and the risk that entire business models may suddenly become unviable,» the report said.
«e-Conomy Southeast Asia» is a multi-year research program that looks at the internet economy in the region's six largest markets: Indonesia, Malaysia, the Philippines, Vietnam, Thailand and Singapore. The report notes that the internet economy has, for the first time, crossed the $100 billion mark – a 39 percent increase from $72 billion in 2018.
