Fintech firms should target SMEs in South-east Asia: Report
Financial technology companies hoping to carve out an edge in South-east Asia will have to target the small and medium-sized enterprises (SMEs) in the region.
These SMEs remain a largely underbanked segment in most Asean markets, according to a regional report on the future of digital financial services by consultancy firm Bain & Company, Temasek and Google yesterday.
The digital financial services the report studied were payment, remittance, insurance, investment and lending.
Four in five of the 240 SMEs in Indonesia surveyed needed to borrow money but lacked access to affordable credit, it added.
The focus on SME lending comes as researchers find that revenue from digital financial services is set to jump to at least US$38 billion (S$52 billion) by 2025 from US$11 billion last year.
High interest rates were cited as the main reason for them not borrowing, followed by troublesome processes, uncertainty over where to go to borrow, and rejected applications.
Banks face higher risks and costs when they lend to SMEs, which traditionally lack credit information and history.
Some researchers said: "Digital advances are rapidly opening up new business models to serve this fragmented, underserved and potentially huge market... SME merchants have been inadequately supported by established financial services players."
THREAT OF NEW PLAYERS
They added that existing financial institutions risk losing underserved SMEs to new players that can use non-traditional forms of data sources such as users' consumption habits to determine customers' creditworthiness.
"SME merchants will likely become the main digital financial services battleground in South-east Asia in the years ahead."
Fintech companies will need to come up with integrated solutions to do well in the region, the report noted. - THE STRAITS TIMES