Can fintech solve the problems of rural areas in Southeast Asia?

As the Fintech market rapidly expands internationally, Southeast Asia seems to be the next hub of innovation and international collaboration. In 2018, Southeast Asia saw the greatest number of fintech deals, a trend driven largely by seed and angel stage investments in countries such as Indonesia, Malaysia, the Philippines, Singapore, Thailand and Vietnam. With Southeast Asia digitalising faster than ever, fintech firms are quickly mushrooming throughout the region.

Payment preferences in Southeast Asia

Although the development of fintech in Southeast Asia has been growing very fast, there is a large population of unbanked segment. This means that they do not have the access to the services of a bank or a financial institution. A study made by KPMG, discover that in 2016, 27% of Southeast Asia population has a bank account.

This is probably due to the placement of the population such as in rural area, making it difficult for them to have access to such services. It seems that rural area is still lacking of technologies and services compared to the urban area.  

According to the statistic, in 2016, population of urban area in Southeast Asia is 51.67% with the lowest rate is Timor Leste (32.9%). This shows that 48.33% leaves in suburban and rural area. Some say that it depends on the development of the country to imply technologies to their country.

We take Indonesia as example on how they solve fintech problem among rural area. Although Indonesia has a high number of unbanked people, but the country still rising their internet penetrations rate. According to a survey by the Association for Internet Service Providers in Indonesia (APJII), internet penetration in as such in these areas:

  • Urban areas – 72%
  • Rural-urban areas – 49% areas
  • Rural areas – 48%

Nowadays, gadgets such as smartphone and laptop getting cheaper with variety of internet plan with affordable price make it more and more people getting exposure with fintech world. This also explains the emergence of payment gateway in Southeast Asia that provides offline payment to help people from the rural area to shop online and pay over-the-counter.

Mobile development in Southeast Asia

The good news is that mobile device dominance is rampant in Southeast Asia, with over four in five online consumers accessing the internet daily on their smartphones, as estimated by research firm GfK. Mobile connections in the region are actually higher with 124% than the global average which is 103%. The result is mass consumer readiness to adopt financial solutions on mobile such as e-commerce, payments, P2P transfers, lending, etc.

The first step to address the problem around fintech in rural area is to make cash digital, enabling the sending and receiving of currency via the internet  and mobile-based. Many fintech startups are leading the way, relying on tokenized-form data, bitcoin, and the blockchain to enable the transfer of money over mobile. But, for digital to succeed, these online-to-offline elements need to be in place.

Again, we take a look at Indonesia effort to solve fintech problem in rural area. One of the fintech companies Amartha has provided financial services to small businesses using a peer-to-peer business model in rural areas of Indonesia. The business model is deemed peer-to-peer because Amartha connects investors and lenders directly to the applicant. Amartha has also developed a system that measures the credit scoring of an individual through unbanked financial transactions in rural areas.

Fintech in Southeast Asia cannot rest until it gives every person financial access through innovative technologies especially in rural areas. People deserve basic access to financial services.