Southeast Asia is Ripe For a Cashless Revolution

12th October, 2018 – Southeast Asia’s rapidly rising internet and smartphone penetration rates means that cashless solutions will make a significant impact on the region’s financial ecosystem.

Thanks to new FinTech advancements, we’re now better positioned to create smarter ways of using the money. But while governments and banks are racing to develop cashless solutions to drive down large cash management costs, the cashless revolution hasn’t quite taken off as anticipated.

But the region is home to over 600 million people, with more than 70 per cent of the unbanked. This means that cashless solutions can generate a meaningful and transformational impact on Southeast Asia’s cash ecosystem and its people.

Powering ASEAN’s Vital SME Sector

SMEs are the backbone of Southeast Asia’s economy. Depending on which country you’re in, they can make-up between 50 per cent and 99 per cent of all enterprises.

But many of them are credit-constrained as financial incumbents are risk-averse and disproportionately favour larger and more reputable enterprises – meaning that it can be hard for smaller players to secure the financing they need to grow their business or even start it.

This isn’t because a lack of initiative by governments; many have had programmes designed to empower underbanked SMEs, such as Indonesia’s business credit programme which has been running since 2016, but they aren’t enough due to infrastructural and logistical difficulties. Hence, there should be alternative lending channels to supplement such solutions instead.

P2P lending is becoming more popular as a small business tend to view it as a more accessible avenue for financing. It’s a way for individuals or businesses to request funds from investors via a digital platform, which also acts as a ‘middleman’ between the requestor and the investor. Due to its P2P nature, multiple investors can contribute their funds towards a request – essentially making it much easier to link borrowers seeking financing to investors seeking attractive returns.

While P2P lending’s origin the UK and US may make it seem unsuitable for the still-maturing ASEAN landscape, it’s worth pointing out that the concept’s initial foray into Asia mostly began in China – when a similar microfinancing model was targeted at farmers before being extended to consumers seeking to borrow small sums.

It’s like bringing a bank to your doorstep – especially for people living outside of urban centres.

Written by Entrepreneur Asia Pacific

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