Spire Research & Consulting COO Jeffrey Bahar, shares his insights on the digital banking industry in Southeast Asia with DealStreet Asia.

The growing smartphone penetration is stoking the growth of digital banking in Southeast Asia (SEA). There are 300 million unbanked adults in SEA. Smartphones enable financial services to reach the unbanked and underbanked in these countries.

Two categories of contenders are emerging from this developing industry:

1. Ecosystem players, which are backed by tech companies and integrated with existing platforms. These players leverage the large customer bases of adoption platforms such as Grab, GoTo and Sea’s Shopee, who are already familiar with financial products, in hopes of converting them into active banking users.

2. Non-ecosystem players are backed by commercial banks or financial institutions. Non-ecosystem players will need hyper-personalized products and are likely to focus on higher-value purchases.

Spire’s Chief Operating Officer, Jeffrey Bahar, posited that banking services lay a foundation for tech firms to gain profit. Though they start with gaining fee-based income from payment transactions, their ultimate goals would be to lend or loan, where the biggest profit lie. This also explains the strong emergence of buy now, pay later in markets like Indonesia.

Although Southeast Asia presents many opportunities for digital banking, low digital and financial literacy of customers in the region pose a challenge. Companies will need to invest in market education and awareness building to encourage the adoption of digital banking.

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Marie Teo
Manager, Group Marketing Communications
Spire Research and Consulting
Phone: (65) 6838 5355
E-mail: marie.teo@spireresearch.com