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Big Tech to encourage growth in Southeast Asia’s digital banking industry

Article by William Dale, Regional Vice President, Mambu Asia Pacific

While 2022 was initially expected to be a year of recovery, it ended up being anything but for many Southeast Asian businesses, particularly in the tech sector.

Extensive job losses, funding droughts, and restructures took center stage, with many startups and tech companies implementing hiring freezes, mass redundancies, and strategy pivots to try and survive.

Despite this turmoil, digital banking across Southeast Asia continued to grow, and 2022 saw the launch of a wide range of innovative new brands, products and services developed by a growing number of fintech and financial service providers that are now operating across the region.

In 2023, we expect this growth in digital banking to continue, with greater competition across the industry as new digital banking licenses come into play in some countries, and mainstream banks continue their own push toward digital transformation.

Big Tech to bolster digital banking in Southeast Asia

While globally the digital banking scene is dominated by fintech startups, digital banks in Southeast Asia have, to date, been predominantly launched by conglomerates made up of existing successful businesses, most notably Big Tech organizations and existing banks. This proliferation of Big-Tech-led conglomerates is the result of regulators across the region seeking to encourage competition and innovation while also minimizing risk. While this approach may have stifled startup innovation somewhat, it has meant that the emerging digital banking industries across Southeast Asian countries are being built on a solid financial foundation.

Big Tech

William Dale, Regional Vice President, Mambu Asia Pacific

Apart from having money in the bank, the intrinsic tech focus of the Big Tech organizations, coupled with their existing customer databases, gives them a significant advantage when it comes to launching customer-centric digital banking products and services. Big Tech organizations know their customers very well, and this ability to provide hyper-personalized services is well-received by consumers. In 2023, we expect to see many more organizations leveraging cloud-based data analytics and market insights to develop more of these personalized customer experiences.

Evolving customer expectations and the influence of Big Tech are predicted to make a significant impact on digital banking this year, and, combined, will force incumbent banks to put more resources behind their own digital banking transformations.

Across Southeast Asia, we have already seen a number of Big Tech companies move into the financial services space, including Grab, AEON and the SEA Group which are all now part of conglomerates that have secured digital banking licenses. Globally, Big Tech companies like Apple, Amazon and Facebook have already made a significant impact in financial services, and we expect to see much more of this in 2023.

Embedded financial services to make life easier for all

Banks and fintech are starting to realize and reap the benefits – both to business and the consumer – of embedding services into merchant and super-app platforms, creating an ecosystem of services that work together seamlessly. This enables consumers to manage all their financial, work, health, social and ‘general life admin’ tasks in one place.

Embedded finance will continue to be a hot topic in 2023, as more and more companies integrate financial services into non-bank products and business processes. The capacity of embedded finance to enable organizations to offer innovative, convenient, and cost-effective financial solutions to consumers is something that will see this sector continue to prosper, with effective, mutually beneficial collaborations between banks, fintech and retailers, or other service providers an essential component.

By embracing embedded finance, retailers, B2B, B2C and other businesses with a heavy digital footprint (i.e. data collection capabilities) have the opportunity to add profitable new revenue streams by tapping their existing customer base. However, these perceived advantages to a business may also see the industry become saturated with competitors, and only the strong will survive!

Mobile and online payments to surge

Online, digital, and mobile-based payment solutions have experienced a phenomenal increase since the start of the pandemic, with Southeast Asia seeing one of the most enthusiastic uptakes of digital wallets and online payments in the world. As the payments sector matures, we can expect to see a shift in focus for banks and payments providers, who must now concentrate on building and launching their own branded interfaces – aiming to build customer loyalty via engaging and personalized apps – rather than utilizing existing platforms.

Embracing emerging technology in financial services will continue to be vital for all organizations looking to make a splash in Southeast Asia’s digital banking scene in 2023.