Digital investing in Southeast Asia heats up as Grab, Gojek enter the fray

Humans are content to have robots clean their houses, run their trains, even serve them food. But would they let robots manage and invest their money as well?

Grab and Gojek certainly think so. The former is slated to launch its micro-investment solution AutoInvest later this month while the latter launched GoInvestasi, a gold-investment feature, earlier this year.

These Southeast Asian super apps are entering a competitive space. Singapore alone has at least 10 robo-advisors, and one of them, StashAway, raised US$16 million in a series C round in July.

There have already been casualties of this digital gold rush. In March, Singapore-based Smartly said it was winding down operations due to “intense” competition.

But interest in the sector looks only to rise with the looming IPO of Chinese behemoth Ant Group, which houses a substantial investment tech business.

Sizing the pie

When we talk about digital investments, there are two broad types.

Robo-advisors automate the investment advisory process through algorithms, with minimal human interaction. This provides ordinary individuals with access to more sophisticated investment advisory services that would traditionally be offered only at a higher cost.

Micro-investments, on the other hand, allow users to slowly accumulate wealth by investing a small amount of money at multiple intervals over a period of time. While the two concepts are distinct, micro-investments could have a robo-advisory element to them, which boils down to the nature of the product or service offered.

A number of structural trends are driving the digital investment market in Asia. First, the region has a relatively high savings rate. Second, the region as a whole is projected to experience high income growth. Third, many countries in Asia Pacific, including Japan, Singapore, and Taiwan, are rapidly aging, raising concerns regarding retirement adequacy and planning.

The upshot is increased wealth and the need to invest it, which provides digital platforms with a large and steadily growing pool of assets.

Robo-advisors generally take a percentage cut of the assets they manage on behalf of clients. As such, potential assets under management (AUM) serves as a good proxy for the total addressable market (TAM). The Google, Temasek, and Bain & Company e-Conomy SEA 2019 report projects the AUM of the digital investments sector in Southeast Asia to be US$75 billion in 2025.

Yet this estimate is too conservative, according to StashAway co-founder and chief investment officer Freddy Lim. He predicts that by 2025, the AUM of digital wealth under management in Southeast Asia could be up to US$250 billion. Does that number make sense?

The three challengers

How are they doing?

The big boys join the party

Where the money is