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APAC’s Top Fintech Trends to Watch

Allison Karavos

March 28, 2023

Asia Pacific (APAC) is home to diverse markets with different levels of maturation. But whether the market is emerging or mature, fintech innovation is booming across the region. Fintechs had their strongest year yet in 2022, with a record-breaking $50.5 billion invested into the industry – this level of investment is propelling APAC’s continued growth even when other regions are seeing slowdowns.

So what are the ideas driving this growth? Where is disruption happening now and where can we expect to see it develop as technology progresses? Provenir’s Bharath Vellore shares his insights on APAC’s hottest trends to watch for Indonesia, Malaysia, Singapore, the Philippines, and Australia.

Indonesia: Buy Now, Pay Later (BNPL)

Despite the recent negative press around BNPL, there’s good news for the industry in Indonesia, where it grew by 70% to reach almost $4.5 billion in 2022. The outlook for medium to long-term growth remains very strong, with projected growth of 32.5% to reach an expected market size of $25 billion by 2028.

Why has BNPL had such success in Indonesia? It has helped the country to fill a significant lending gap. Nearly 65% of the population is unbanked and credit card penetration is in the low single digits – the need for financially inclusive credit is broad. And the ways BNPL is being used are broad as well. Similar to usage around the world, the payment option is now breaking up the lowest value grocery runs and other everyday transactions to expensive luxury retail purchases.

Some fintechs pushing forward Indonesian BNPL include:

Malaysia: Digital Banking

In 2022, Malaysia’s Central Bank awarded 5 digital banking licenses for the first time, with the intent to drive financial inclusion in the country. With digital banks now in play, consumers can access convenient and flexible financial products. A dynamic space to watch will be how these digital banking entrants will grow, given the position of the traditional lenders and banks that have been entrenched in the space for a significant period of time with large customer bases.

Provenir partner Credolab agrees, also pointing out the importance of fraud mitigation:

“A digital banking transformation is accelerating in Malaysia, amid stiff competition from other countries in the region. To manage the associated fraud risks, banks offering digital services will have to take appropriate measures and collaborate with best-of-breed Fintechs to help fight fraud.”
Steve Thurley, Managing Director – APAC, Credolab

We believe that the digital banks that find success will create a path to profitable growth by finding low cost customer acquisition models and delivering new products to market rapidly. The best way to do this is find customers through partnerships and networks, and develop financial products on a low-code/no-code platform that allows business users to be agile and responsive to market needs. The fintech difference? These products should be highly personalized and feature-rich to offer consumers elevated digital banking experiences they can’t get from traditional banks.

The financial groups launching banks are:

Singapore: Embedded Finance

Unlike Indonesia, Singapore has a very mature financial ecosystem. Banks are quite well entrenched in the economy and have even proactively adopted digital services, making room for digital banks, embedded finance, and hyper-personalized financial products. Adopting embedded finance helps organizations that aren’t traditionally financial service providers to provide financial products, reaching new market segments and simplifying the customer experience.

The biggest opportunities for innovation in embedded finance include instant payments, cross-border transactions, and micro lending. Embedded finance products for SMEs are also gaining traction, helping small businesses with accounting and managing ledgers, while providing working capital loans. Micro credit loans, such as retail financing for e-commerce, merchant loan offers based on sales volumes, and embedded payment options in apps are streamlining financial products into everyday processes and changing the way consumers are engaging with money.

These fintechs are embedding themselves as top embedded finance providers in Singapore:

The Philippines: SME Lending

Micro, small, and medium-sized businesses are the lifeblood of the Philippine economy. Almost 36% of the GDP is generated by the SME sector and 63% of workers in the country work at one. Despite the enormous presence in the country, SMEs remain largely underfinanced, which limits their – and the economy’s – ability to grow. Enter: fintechs.

As digital loans are becoming a more viable and attractive option, fintechs are extending credit to SMEs through online platforms that small business owners can access from anywhere in the country. As big data becomes more available, SME lenders are able to tap into that ecosystem to build alternative credit scoring models. There is not great coverage from the bureau point of view, as the majority of SMEs have thin files or no credit report at all, so the lack of financial data is a huge gap for traditional lenders who don’t have enough information to make accurate decisions. Big data is providing access to alternative data such as customer reviews, income flows, and more to make lending decisions – this area is primed for significant growth.

Companies driving SME lending innovation include:

Australia: Open Banking

Consumer Data Right (CDR) legislation was introduced in Australia in 2020. Phase one mandated the country’s four biggest banks to share access to consumer data; phase two did the same for small banks; last year’s phase extended to energy and utility companies; and next year’s final phase brings non-bank lenders under CDR. What happens when you’re combining datasets across banking, energy, and nonbanking? Consumers access lending products across the ecosystem and are able to take advantage of the best deals on financial products.

Provenir partner SEON highlights the importance of payment speed as well:

“Open banking allows innovation in multiple areas, including payments, credit checks, loan applications, and more. The most exciting is open banking payment initiation, which provides instant access to cash flow on a faster payment rail (funds sent and received in 2-10s) at a fraction of the cost of credit cards.”
Daniel Sebes, Strategic Director, SEON

Currently, Australia has 115 data holders of consumer data and 24 active data recipients who can receive consumer data. The number of data recipients will grow tremendously, catalyzing fintechs to build innovative financial products that push one another ahead through competition while empowering consumers to find the best products available. For this reason, CDR and open banking will be a very interesting space to keep an eye on.

Active data recipients in Australia include:

It’s clear that fintechs have disrupted almost every aspect of financial services across the APAC region. Many of these trends will continue to inspire new ways to disrupt the way we manage and access credit, whether it’s through new ways to pay for goods, the data that paints financial health, or how the small businesses driving economic growth stay afloat. Whether the trends have staying power or will evolve as technology and regulation develops, only time will tell. What we do know is we’ll be watching.