As investments in fintech continue to surge globally and throughout Southeast Asia, the region may be on its way to solving the divide between mobile connectivity and financial inclusion.
While the region has a 133% mobile connectivity rate (meaning some users own more than one SIM card or mobile phone), only 27% of Southeast Asians have a bank account. Cambodia enjoys the highest mobile connectivity in Southeast Asia, at 173% – but only a 13% banked population, according to a 2017 Asian Development Bank report.
That presents a barrier to loans and saving cash. But banking apps and other fintech products could provide solutions for unreached individuals and smaller businesses.
Globally, it’s estimated that payments made via mobile and contactless systems will reach $95 billion by the end of 2018 and will lower the cost of basic financial services by up to 90%, according to a 2017 study by PwC and Startupbootcamp.
Cambodian fintech guru Ros Khemera has seen an increasingly cashless future for the region and is prepared for big changes in how business is done and how people pay for basic necessities such as food and transportation.
“I just came back from Penang [in northwest Malaysia], where I saw a street vendor selling coconuts in his cart along the street accepting QR code payment,” said the busy fintech professional who is associated with the Mekong Business Initiative, the Asian Development Bank and the e-commerce startup Kiu Global. “In Vietnam, I saw a vending machine that allows people to buy stuff using QR code or biometrics… In Cambodia, cashless transactions are growing too, with Wing [Cambodia] introducing a tap-and-pay card – thousands of factory workers signed up and used it to pay their public transportation fee.”
Global funding of fintech ventures peaked at $46.7 billion in 2015 as ewallets and other financial platforms rushed to market, but it fell to $24.7 billion by 2016. Singapore is the region’s fintech king, with a total of 490 fintech startups host to $141m in investment in 2017.
The rest of the region shows promise and interest in playing catch-up, said Khemara: “The next fintech unicorn can come from the Philippines, Indonesia, Malaysia or even Vietnam or Thailand. Maybe from Cambodia, too.”
500 Startups of Silicon Valley is one entity investing in promising startups throughout the region through its 500 Durians platform. Country-specific venture capitals are also popping up to support fintech – such as Cambodia’s Ooctane, launched in late June to support local entrepreneurs.
The fintech sector is ready, but one of the biggest challenges remains educating people to encourage them to transition from cash payments to cashless wallets
Still, fintech’s growth in Cambodia and the rest of the region also depends on “cultural habits” and user experience, explained Matthew Tippetts, the CEO and co-founder of Cambodian fintech startup Clik.
“A cashless society already exists in China, but in countries with very high banking penetration like Singapore, 15% to 20% of payments are still made in cash,” said Tippetts. “It’s a cultural habit, so I doubt they will go completely cashless anytime soon.”
Educating consumers remains a hurdle to mass adoption of digital financial transactions, insiders agree.
“The fintech sector is ready, but one of the biggest challenges remains educating people to encourage them to transition from cash payments to cashless wallets,” Tomas Pokorny, CEO of Cambodia’s Pi Pay digital payments startup, said at a conference last year. “Step by step, people will adopt the new technologies.”
Potential users just need to learn the benefits fintech can offer them, insisted Tippetts.
“The pros of going cashless, when done properly, is reduction in costs, risks, fraud, seamless payment – no more manual effort, superior user experience [and] improved accountability,” he said. “What will change is how we use cash, and its utilisation will indeed decline, but not disappear.”