South East Asia is at an inflection point in FinTech. With a rising middle class in a population totaling over 600 million people, as well as widespread mobile internet penetration, FinTech startups are finding fertile soil in which to build innovative financial services at scale.
The largest internet economy in the region is Indonesia, which has more than quadrupled in size since 2015 to reach $40 billion. Startups are capitalizing on the opportunity.
Some are following in the footsteps of China’s ‘super-apps,’ Tencent’s WeChat and Alibaba’s Alipay. Both of these platforms first found product-market fit in verticals having nothing to do with financial services social media and e-commerce, respectively and have since expanded to provide comprehensive financial services to consumers and businesses.
In the same vein, a number of Southeast Asian startups are moving from their primary lines of business into FinTech.
For example, Indonesia-based ride-hailing giant Go-Jek (disclosed funding of $3.4 billion) started as a pure-play transportation and delivery company, and has since expanded into payments. In 2018, the company’s mobile wallet Go-Pay saw transaction volume of $6.3 billion, and is used by over 240,000 online and offline merchants in Indonesia.
FinTech startups are moving out of niche use cases and are beginning to operate at scale.
Where they once catered to specific demographics, the sector is now providing services across the financial services value chain to all demographics, in a much larger playing field. And after proving product-market fit in their home geographies, the most successful FinTech companies are testing altered products in new geographies with unfamiliar regulations.
In addition, these players are continuing to build out a tech-first financial infrastructure. Echoing other sectors, FinTech companies first ‘unbundled’ incumbent offerings and are now ‘rebundling’ them in an entirely reimagined financial stack, according to ‘ Start Path and CB Insights 2020 Trend Report - Mastercard 2020’.
All of this comes as funding to global venture-backed FinTech companies has continued to set records.
FinTech funding in 2019 has already surpassed 2017’s total, coming to $24.6 billion through the end of Q3’19.
However, FinTech deals are expected to fall of short of 2018’s record with a continued pullback in early-stage FinTech investing.
This comes as the maturing sector is seeing increased deal flow at later stages.
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