The Rise of E-wallets: What it Means for Lenders

Southeast Asia is rapidly going cashless, and the numbers tell quite a story. Visa reports show that 72% of Southeast Asian consumers have tried going cash in 2023. What’s more – e-wallets are giving cash a run for its money, with 79% of consumers (especially in Indonesia and Philippines) using mobile wallets compared to 77% still sticking to cash.

Digital wallet adoption rates across individual countries paint an even more impressive picture. Indonesia is leading the charge with 92% of consumers embracing e-wallets, while the Philippines and Malaysia aren't far behind at 87% each.

Why Are E-Wallets Such a Hit?

While other digital modes of payment like cards and net banking are making their mark, e-wallets have emerged as the digital equivalent of cash – one that doesn't require a bank account. This simplicity is particularly significant in the region, where financial inclusion remains a challenge: Indonesia sees over 74% of its population unbanked or underbanked, Malaysia reports 55% (15% unbanked, 40% underbanked), and in the Philippines, despite significant progress, about 30% remain financially excluded. By bridging this fundamental gap, e-wallets make for a less complicated and increasingly popular option for digital transactions.

More Than Just a Trend

The shift extends beyond consumer preferences. An entire ecosystem is taking shape, with both merchants and governments actively participating. The Visa report states that 44% of merchants are now accepting cashless payments, particularly in everyday sectors like dining, retail, and groceries.

Governments across the region now leverage e-wallet to drive financial aids and policies too. In 2023, Malaysia channeled MYR1 billion (USD 212 million) in financial assistance through e-wallet providers. Similarly, digital wallets are playing a key role in enabling flexible cross-border payments between major ASEAN countries.

The Big Question: What's in It for Lenders?

The e-wallet boom is creating a goldmine of data-driven opportunities for the lending sector:

• Better risk assessment: Every e-wallet transaction leaves a digital footprint, providing real-time insights into potential borrowers' financial behavior. Consider this scenario: a young professional who conducts 90% of their transactions through e-wallets. Their daily coffee runs, utility payments, shopping habits, income patterns, and even credit card repayments paints a comprehensive financial picture of the user. For lenders, this isn't just data – it's a legitimate source of truth for creditworthiness. As e-wallets increasingly become the preferred transaction mode for specific demographics, these digital footprints could effectively replace traditional credit assessment methods.
• Tapping new markets: The unbanked and underbanked consumers are now building traceable financial histories through their e-wallet usage, presenting a substantial new customer base for lenders.
• Innovation opportunities: The potential for new products is substantial. Consider instant credit to merchants based on their daily e-wallet sales, or micro-loans tailored for high-volume e-wallet users. New credit products can integrate seamlessly with popular e-wallet platforms.
• Building customer relationships through sachet loans: E-wallet transaction patterns open up opportunities for micro-credit products – think small, easy-to-manage loans based on spending patterns. These sachet-sized loans serve as perfect entry points for new-to-credit customers. A user who consistently manages these small loans responsibly establishes a foundation of trust, creating opportunities for a meaningful banking relationship. It's a win-win: customers access financial products that suit their current needs, while lenders can better understand and serve their customers' financial journeys.
• Lending more, confidently: With e-wallet data complementing traditional credit assessments, lenders can make more informed decisions based on a holistic view of financial behavior. The comprehensive nature of transaction data helps identify responsible borrowers who might have been overlooked by conventional criteria, enabling lenders to serve a broader customer base while maintaining prudent risk management.

What's Next?

The shift is clear – e-wallets are reshaping the financial landscape in these markets, and smart lenders are positioning themselves to capitalize on this transformation. The opportunity spans from reaching new customers to developing innovative products and making sharper lending decisions.

For lenders in the region, the future of lending is increasingly digital, data-driven, and deeply intertwined with e-wallet ecosystems. Those who can adapt and innovate in this space won't just survive – they'll thrive.

Curious to know how your business and leverage e-wallets to drive innovation in lending? Let’s talk!