Over 290 million Southeast Asians remain unbanked, presenting a huge opportunity for fintech-only startups, digital banks, and e-wallets to grow in the region.
This is according to a recent report conducted by venture capital firm Golden Gate Ventures, which also predicts more fintech-only unicorns being founded in the next decade as a result of the region’s improving digital infrastructure.
The report also shows that e-commerce, fintech, and entertainment and media are the top three verticals with the highest number of startups (>$50M in financing) in the past 10 years. Meanwhile, food and transportation, fintech, and logistics are the three fastest-growing verticals in terms of startup funding over the last five years.
In fact, there has been rapid growth in overall SE Asia startup valuations over the last few years, with mega deals (>US$100 million) and later stage (C and above) rounds driving up the total capital deployed.
In the fintech space, the report highlights that there is a huge opportunity for disruption in the following areas: neobanks, buy now, pay later (BNPL), and financing products.
Investments have also increased, with the number of active ASEAN-based venture capital companies tripling from 115 in 2010 to 393 in 2020.
According to a report from Reuters, private equity transactions sparked a record amount of regional M&A in the first half of 2021, with regional deals reaching $124.8 billion, up 83% from a year earlier.
Fintech is the region’s major investor magnet, bringing in up to $1.6 billion in 2019, as opposed to just $0.2 billion five years ago. Much of the increased investment in Southeast Asian fintech-only firms is due to foreign investors, who have more than doubled in number since 2017.
Where are SE Asia’s most successful startups?
For many years, Singapore has dominated the region’s venture capital market, capturing 90% of it in 2010. The country’s share of the pie has declined to 40% today, as neighboring Indonesia and other countries in the region find better footing.
In fact, Indonesia has surpassed Singapore to become the country with the most well-capitalized startups. Most of the unicorns in SEA as of 2021 are based out of Indonesia. These include Bukalapak, Gojek, Tokopedia, and Traveloka.
From 2022 and beyond, analysts from Golden Gate believe Vietnam will emerge as a major startup ecosystem. “We expect to see stronger signs of SEA-focused VC funds putting more effort into early stage investments in Vietnam,” they said.