The number of start-ups in Asean has grown at a quick clip in recent years, as conditions have gotten more conducive for the entrepreneurs with the idea and the zeal wooing the markets with better offering or creating new ones altogether.

Throw in an eager mix of capital owners happy to fund many of these new upstarts. And with some serious money and growth, Credit Suisse tabulates that there are now 35 unicorns — the venture capital nickname for start-ups worth north of US$1 billion ($1.35 billion) — galloping across the various Asean countries.

The unicorns are largely based either in Singapore or Indonesia, with those from the FinTech sector leading the pack with 26% of the total in this rarefied club. E-commerce and logistics unicorns trail at 20% and 11% respectively.

The Swiss bank notes that thus far, Asean’s public markets have yet to provide as much support for startups as seen in other regions, leaving this job largely to private money. This might soon change.

“We believe public markets will soon be following the private lead and that tech start-ups can realise the potential of an integrated Asean market in ways other sectors have not,” notes Credit Suisse in its recent report on Asean unicorns.


So, what are the prevailing market conditions that make Asean a fertile ground for FinTech unicorns to grow? Plenty, so it seems. For a start, around a quarter and half of Asean’s adults are deemed “underbanked” and “unbanked” respectively. They are either so-called “informal workers” or they work or run “micro-SMEs” that the traditional banks probably will not be too eager to on-board.

The ongoing pandemic has the effect of foisting upon a speedier adoption of financial services, and these trends are expected to remain in the longer term given the convenience and lower costs.

“Regulatory backing and infrastructure developments can also provide further support, while players can leverage tech to narrow the gap in financial inclusion,” notes Credit Suisse.

Now, investors and the start-ups can be aligned, but when considerable markets are to be won over, the role governments play is critical. This level of influence is seen in how some governments have already started introducing policies promoting non-case usage in digital payment transactions — seen as one the most critical aspect where FinTech players can play.

Asean need not look for role models in the payments space. Over the last five years or so, China and India are the two large Asian economies that have been at the forefront of increasing the adoption of digital payment.

China, notably, has Alibaba’s AliPay and Tencent’s WeChat pay which helped convert practically the whole country to adopt mobile payment with minimal government intervention.

The Indian government has taken a more active approach. It has introduced various government initiatives such as Unified Payments Interface and de-monetisation, and by doing so, has helped drive adoption.

The way Credit Suisse sees it, Asean already has the “basic building blocks” for digital payment to take root and grow. For one, smartphone penetration is relatively high and mobile data network infrastructure prevalent.

Asean governments are seen to be pushing for greater adoption of digital payments as well — although they do so with different policy goals in mind, given how they are at varying levels of economic development.

Singapore, Malaysia and Thailand, according to Credit Suisse, are looking at mobile payment as a means to increasing non-cash usage in the economy. Indonesia and the Philippines, on the other hand, view it as a means to also increase financial inclusion, considering their low penetration of traditional banking services.

Regardless of the underlying goals, industry players can look forward to handling a ballooning volume of transactions. Euromonitor estimates that the size of Southeast Asia’s e-wallet market, at around US$39 billion in 2020, will grow at a compounded annual growth rate (CAGR) of 7% to hit US$138 billion by 2025.

Payments aside, there are several familiar segments of the financial services market that will see their own multi-fold growth as well, as they all ride on the growing FinTech ecosystem.


According to Credit Suisse, besides payments, there are a few other key market segments where the new offerings from the broader FinTech ecosystem can be applied to generate good growth, given how they are relatively under-penetrated.

For example, the insurance sector was a beneficiary of the digitalisation trend that accelerated last year with the pandemic. Face-to-face sale of policies, so effectively deployed for decades by the insurers via their armies of agents, had to involve remote interactions with clients.

On the other hand, demand for life and health insurance coverage grew amid the pandemic. “This trend is expected to remain in the longer term as consumers recognise the convenience and value of going digital over the traditional offline channels,” notes Credit Suisse, adding that companies such as Grab are muscling into this market, offering so-called microinsurance that is easily sold over the app.

In a joint study, Google, Bain and Temasek expect the insurance sector’s annual premium equivalent/ gross written premium to grow from US$2 billion in 2020 to US$8 billion in 2025, a CAGR of 31% over the period.


According to Credit Suisse, remittances also witnessed a jump in adoption amid mobility restrictions, as app downloads of digital remittance platforms more than doubled year-on-year in 2020. This trend is further reinforced by employers turning to digital channels to pay migrant workers, who then go on to transfer the funds to their families.

The way Credit Suisse sees it, again, convenience and value are key drivers in ensuring that these behavioural changes remain in the longer term. Some 40% of total remittance value will be transacted online by 2025. Remittance flows are expected to grow from US$15 billion in 2020 to US$35 billion in 2025, a CAGR of 18% over the five-year period.


Now, with relatively poor financial literacy across many parts of the region, the digital wealth management sector is at a relatively nascent stage compared to other sectors of the financial services industry.

However, Credit Suisse observes that there has been a rise in consumer interest in robo-advisers and online wealth management, while adoption continues to grow as consumers feel increasingly at ease with investing online.

At the same time, the likes of Grab are pushing for more takeup of investment products over their platforms. They do so by lowering the required minimum investment amount and thereby making these investments a lot more accessible.

Google-Temasek expects digital investment assets under management to grow from US$21 billion in 2020 to US$84 billion by 2025, a CAGR of 32% over the period.


Lending, last but not least, is seen as another growth area — given how the micro businesses and workers in the “informal economy” across the region are deemed “underbanked” for lack of proper infrastructure.

Lenders, on the other hand, are hesitant to extend the loans, given the general lack of credit history for both individuals and businesses alike.

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To this end, the likes of Gojek and Grab have introduced a range of financial services such as micro-loans for SMEs, “buy now pay later” schemes for consumers, and so on, as part of the overall drive for this segment to grow.

According to Credit Suisse, if and when infrastructure, such as an electronic know-your-customer check can be in place, the conditions are ripe for this sector to take off. Citing the same Google-Temasek study, digital lending volume can reach US$92 billion come 2025, a CAGR of 32% over the preceding five-year period.

Photo: Bloomberg