Often overlooked amidst neighbouring economic powerhouses like India and China, the Southeast Asia market holds immense potential for financial services. India’s success in digital lending and financial inclusion can be directly applied to Southeast Asia, given the region’s widespread internet and smartphone adoption, a large underserved population, and the utilization of big data.

The demographics in Southeast Asia mirror those of India – a young, digitally native, and technologically savvy population that has historically lacked access to financial services.

Let’s delve deeper into this and explore the tremendous opportunities for digital finance that lie within.

Population and technology adoption

With over half of Southeast Asia’s population under 30 years old, the region’s working-age population is projected to grow rapidly, driving about 70% of the consumption growth. Moreover, the region boasts high rates of smartphone ownership and internet penetration, with countries like Indonesia having 75% smartphone ownership and a 70% internet penetration rate.

Financial services penetration

Despite being technologically advanced, over 70% of the population in the six largest Southeast Asian countries remains unbanked or underbanked. For instance, in Indonesia, less than half the population has a bank account, and credit card penetration is low. The pandemic accelerated the shift towards digital payments, highlighting the need for digital financial services.

Utilizing big data for digital finance

The combination of digital adoption and low financial services penetration created a significant opportunity for digital finance in Southeast Asia. Leveraging big data from the digitally sound population can power innovative digital finance solutions, enabling wider access to credit and insurance products.

Expanding credit access through alternative data

Alternative data, sourced from non-traditional sources, can be utilized by digital finance providers to underwrite consumers for credit products. The rise of digital payments has enabled the creation of big data that can be harnessed for risk assessment, bridging the gap in the financial ecosystem and promoting credit inclusion.

Payments as a catalyst for credit inclusion

Rising digital payments data can be leveraged by digital finance providers to offer credit products to users. Business users can use digital payments to track cash flows and demonstrate creditworthiness, thereby facilitating digital credit inclusion. This data-driven approach creates an ecosystem where real-time data informs the extension of digital finance through super apps.

Southeast Asia presents a unique opportunity for digital credit inclusion, where the proliferation of the internet and digitalization, combined with an inefficient financial ecosystem, sets the stage for innovative digital finance solutions to flourish.

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