The future of fintech in Southeast Asia

Ties are growing between the Southeast Asian and European tech ecosystems, and collaboration is key to success. This new report in partnership with Finch Capital and MDI Ventures, shows how with large growing markets, talent, capital, regulatory leadership and relative political stability, Europe and Southeast Asia are competing and succeeding on the global fintech stage.

Report - The Future of Fintech in Southeast Asia

$108 billion ecosystem

The combined value of all startups in Southeast Asia has reached $108B in 2020. Indonesia and Singapore are the most valuable nations with tech ecosystems worth $60B and $35B respectively, and each home to 6 unicorns valued at over $1B. 

Fintech is Southeast Asia’s largest venture capital investment category by number of backed startups. Last year, $1.6B was invested in fintech startups, compared with only $0.2B five years ago. Much of the increased investment in SEA fintech startups is driven by foreign investors which have grown by 7x since 2015. 


Fintech exit landscape: $10 Billion unrealised value in the pipeline 

There is at least $10B of unrealised value in VC-backed fintech startups in Southeast Asia. Strategic M&As with local tech companies have been the most common startup exits in the region so far, with payments and Wealth Management startups the main acquisition targets. However, new targets emerged in Insurtech and Enterprise Software in 2020. 

Interestingly, Southeast Asian startups have a faster journey to exit than startups in Europe or the US. In fact, 76% of the exited startups were founded 1 to 6 years ago, compared to 53% in Europe and 46% in the US. 

The growth of Southeast Asian internet economy outstrips US and Europe. 

There are 570 million people and 360 million internet users in Southeast Asia (Indonesia, Singapore, Malaysia, Philippines, Vietnam, Thailand), with 22 million people joining the mobile internet every year. 

When compared to Europe and the United States, Southeast Asia has the most engaged mobile audience, the highest internet economy and GDP growth. 

Hans de Back, Managing Partner at Finch Capital states: “Indonesia has all the ingredients in place to play a pivotal role in the adoption of financial technology in Southeast Asia. The combination of favourable demographics, collaborative financial institutions, active local and foreign investors and digital savvy customer base, drives significant opportunities for entrepreneurs throughout the region.” 

Southeast Asian-European collaboration

Cross continental tech and fintech ties are growing between Southeast Asia and Europe. Investment by Southeast Asian investors into European startups is at record levels, and many established European fintechs are expanding services and office presence to Southeast Asia.

Many are spotting that Covid-19 will accelerate the digital revolution of financial services in Southeast Asia. Today cash is still the primary means of transactions. 70% of SME merchants accept only cash in 2019. The Covid-19 outbreak has drastically accelerated SEA’s shift to a cashless world, with unprecedented growth in the number of e-payment transactions amid a sharp decrease in cash withdrawals and deposits. 

Though market growth has been impressive, it seems it could still be just the beginning. Adrian Hartanto, VP of Investments at MDI Ventures said: “Despite the rise of the fintech industry in SEA that have managed to produce multiple Centaur-level startups including some of our portfolios such as PayFazz, FinAccel, and Nium in a relatively short period of time, we firmly believe that we are still just getting started.”

Report - The Future of Fintech in Southeast Asia