Razer’s recent exit from Southeast Asia’s e-wallet scene and into B2B payments is confirmation that the e-wallet market is crowded, with the likes of GrabPay, Google Pay, Singtel Dash, and AliPay already in tight competition.
According to Razer’s head of fintech Lee Li Meng, they had burned a lot of cash in their e-wallet business, especially in Southeast Asia, where their e-wallet has been present for two years. The good news is that Razer’s financials have grown significantly in 2022, and the e-wallet closure is expected to have a small impact on revenue.
Across the rapidly digitalizing region, fintechs have been exploring other offerings that will potentially catapult them to success. While the following list is not exhaustive, these are some of the trends to watch out for:
1. Security token offerings (STOs)
Security token offerings or STOs are touted as the next major wave in cryptocurrency. STOs enable tokenized securities – real financial assets that a company or organization issues in the form of digital tokens.
Two weeks ago, Southeast Asia’s largest bank DBS announced that it is building up its pipeline of potential security token offerings (STOs). In June, the DBS Digital Exchange listed its inaugural STO in the form of a S$15 million digital bond.
2. Digital banks and neobanks
Singapore has been leading the charge towards banking liberalization in Southeast Asia. In December 2020, they granted four digital bank licenses and were expecting them to start operating by early 2022.
Meanwhile, the Philippines recently announced that two more digital banks were approved for operations this year. Both Tonik and UNObank joined state-owned Overseas Filipino Bank, which was awarded a license last March 2020.
Malaysia, Thailand, and Indonesia are all planning to hand out digital licenses in the next year or two.
3. Embedded finance
Embedded finance is where financial services are integrated into other products such as mobile wallets, e-commerce sites like Lazada or Zalora, and even dating apps like Tinder.
One good example is the Grab app, which enables users to buy and access financial products while staying within Grab’s ecosystem, such as payments, insurance, investments or loans.
Joel Yarbrough, Vice President of Asia Pacific at Rapyd, says that it is still early days for embedded finance in Southeast Asia.
“Finance in this diverse region will be driven by digital natives who care deeply about the needs of their communities,” he said.
4. BNPL or Buy Now, Pay Later
Like many fintech users in Southeast Asia, Indonesians are increasingly turning to online lending services, according to Adrian Gunadi, chairman of the Indonesian Joint Funding Fintech Association, a government-backed association of online lending service providers. In 2020, BNPL services grew at 20% and disbursed more than $5 billion in loans across the country.
The Southeast Asia region is one of the fastest-growing economies globally, but it has also been notoriously difficult to enter. But as trends change and new technologies arise, there are a few areas that fintechs can focus on for success. E-wallets have now become the domain of a few, and other innovations are fast taking shape. Fintechs trying to break into the Southeast Asian market will need to consider these four trends, which will have an impact on how finance moves forward in 2021 and beyond.
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