Heli-Recaps: Digital Lending in Southeast Asia

In this issue of The Heli-Pad, we focus on digital lenders in Southeast Asia (SEA) and explain why these originators are rapidly closing the gap versus their traditional lending peers.

While most tech-enabled alternative lenders in SEA are less than 10 years old, the larger platforms have been strengthening their position as a disruptor of traditional bank financing models thanks to technological innovation, high mobile usage, and increasing internet access. Their main differentiator from traditional alternative lenders has been their ability to leverage millions of alternative data points from loan applicants to strengthen their underwriting processes and shrink disbursement timelines.

As a result, digital lending is growing into an important enabler of financial access for MSMEs, individuals, and micro-entrepreneurs who have been long underserved by traditional banks, especially for those located in more rural or remote locations.

A growth in digital financial services – with digital lending leading the way

Enabled by technology, digital financial services (Payments, Remittances, Lending, Investments, and Insurance) have the potential to increase access, reduce costs, and deliver more inclusive financial opportunities for all Southeast Asians, particularly for the large numbers of underbanked and unbanked individuals. According to the “Future of Fintech in Southeast Asia” report in 2020, there are 570 million people and 360 million internet users in SEA, yet as many as 50% of the region’s consumers are unbanked, and 70% are either underbanked or unbanked, which provides a huge market opportunity for further growth in digital financial services.

In 2020, as COVID-19 moved consumers and business online, digital financial services including remittances and investments saw higher than expected adoption rates. The updated “e-Conomy SEA 2020” states that digital investments AUM increased by 116% from 2019 to 2020 primarily driven by Robo-Advisors and Online Wealth Management platforms (see Figure 1).

Figure 1: Post-COVID 19 SEA Digital Financial Services Growth Projections (US$ Billion)

Find out how COVID has accelerated the adoption of digital financial services as well as the growth projection for Digital Lending in our Heli-pad Blog. Read the full article below!