The Southeast Asian fintech ecosystem has grown substantially over the last decade. This expansion has been propelled by increasing smartphone adoption, a rising middle class, and the influx of capital from venture funds. Initially, ‘pure-play fintech’ firms thrived by digitising financial services traditionally offered offline, leveraging online apps, and tapping into alternative data to underwrite financial products.
However, the landscape is evolving, and a new generation of fintech companies is emerging. These companies are innovating in critical areas such as embedded finance, CFO tools, and cross-border solutions for MSMEs, and financial infrastructure. Despite challenging funding environments, the region’s fintech sector is expected to grow, particularly in these key domains.
Embedded finance: Deeper integration with digital ecosystems
Embedded finance has become a buzzword in fintech, but it extends far beyond merely integrating lending and insurance products into online platforms for lead generation. True embedded finance involves the deep integration of financial services into digital
ecosystems, transforming how customers interact with financial products.
In the lending space, embedded finance can enhance underwriting capabilities through the use of transaction data. For instance, customers can be pre-approved for loans based on their historical digital footprint. Collection mechanisms, such as integrating
loan repayments into borrowers’ cash flows within a digital platform, or securing collaterals uploaded in a system, further reduce credit risk.
In the insurance domain, ecosystem data enables companies to personalise offerings. A great example is the use of telematics in auto insurance, where real-time driving data is used to adjust premiums. Regional tech giants like Grab and Shopee have successfully embraced embedded finance. Grab has leveraged its data ecosystem to offer loans and other financial solutions to drivers and merchants, while Shopee’s PayLater service uses transaction data to underwrite consumer loans. Nevertheless, smaller platforms often lack the resources to build fintech capabilities from scratch.
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Consequently, fintech-as-a-service providers are stepping in, offering APIs that enable seamless integration of tailored
financial services like onboarding, underwriting, disbursement, and collection. This innovation is expected to unlock the potential of Southeast Asia’s digital economy, especially by providing access to underserved populations.
CFO tools for MSMEs: Beyond payments
The fintech sector in Southeast Asia is also witnessing the rise of business payment solutions tailored to MSMEs. Payment gateway providers offer localised solutions that allow businesses to accept various payment methods including e-wallets and cards. In cross-border payments, fintech players have created seamless, cost-effective global payment corridors, allowing MSMEs to open business accounts in multiple markets and transfer money effortlessly.
Yet, the financial needs of MSMEs go far beyond payments. Business owners and finance managers face daily challenges such as transaction reconciliation, cash flow forecasting, treasury management, and tax reporting. As MSMEs’ digital footprints
expand and their trust in fintech strengthens, there is a growing opportunity to offer them broader CFO tools. These tools could provide comprehensive solutions that address their financial management needs.
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While monetising SaaS solutions has been challenging in this sector, fintech companies that can offer seamless, data-driven CFO tools stand to capture significant market share. The key to success will be creating intuitive, accurate, and integrated solutions
that help MSMEs manage their finances more effectively.
Financial infrastructure: Unlocking collaboration with incumbents
In the early stages of Southeast Asia’s fintech boom, there was optimism that fintech startups could dethrone incumbent financial institutions and dominate the financial services landscape. However, it has become evident that incumbents possess significant structural advantages, such as lower costs of capital, a large existing customer base, and extensive product offerings. Consequently, collaboration between tech startups and traditional financial institutions has become critical.
One of the challenges in these collaborations has been the differing tech architectures, policies, and expectations between startups and incumbents. However, regulatory tailwinds are now helping to facilitate these partnerships. Indonesia’s National Open API
Payment Standard (SNAP) initiative and the Philippines’ Open Finance Framework are examples of government-led initiatives aimed at standardising APIs for payment initiation and data sharing.
As these frameworks mature, there is a growing demand for fintechs to build the infrastructure that will connect tech platforms and established financial institutions. This will allow financial services to be seamlessly integrated into digital platforms, where consumers are already spending their time. Such collaborations are essential for bringing sophisticated financial services to a broader audience and ensuring that these services are easily accessible.
Fintech’s evolution continues in Southeast Asia
The fintech landscape in Southeast Asia is undergoing a transformation. From embedded finance that integrates deeply into digital ecosystems to CFO tools for MSMEs and innovative financial infrastructure, the sector is brimming with opportunities.
While the challenges of macroeconomic uncertainty and stiff competition from incumbents persist, fintech companies that focus on collaboration, innovation, and accessibility are well-positioned to drive the future of financial services in the region.
As Southeast Asia digital economy grows, fintech firms that successfully navigate these trends will not only scale but also bring financial inclusion to millions of underserved consumers and businesses.
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