How Southeast Asia might be remade in China’s image

China leads the world in fintech adoption, according to a 2017 index by Ernst & Young.

Given the report’s finding that fintech adopters tend to be the most active users of other online services such as content streaming and the sharing economy, one can infer that China has made great strides in those areas, too.

While Southeast Asia doesn’t lack for innovation in fintech and other areas, it does face unique challenges. Compared to China, it’s smaller and more diverse. “Because the region is fragmented, it has a larger array of niche solutions,” says Varun Mittal, co-founder of the ASEAN Fintech Network and founding head of the Singapore FinTech Association.

Clearly, comparing Southeast Asia to China is no straightforward task. We can, however, assess how Southeast Asia might follow China’s lead on the technological front.

The merger of ecommerce and fintech

At the Money20/20 Asia 2018 conference, Shailendra Singh, managing director of Sequoia Capital India, spoke of how ecommerce firms in Southeast Asia may need to partner up with financial services providers – or even start one – to become sustainable. He explained that ecommerce companies can monetize their consumer base through lending, financial products distribution, insurance, and so on.

This is already happening in China, where online consumers have leaped from using cash to e-wallets, thanks to e-tailers offering online financial services. Alibaba has Alipay and JD has JDPay.

Both giants have further evolved into providing consumer loans, installment terms, and deferred payments. They’ve even launched virtual credit cards in cooperation with traditional banks.

Southeast Asia is not far behind in the use of mobile payments and online wallets, given the high density of online payments in the region. In 2017, one in three Southeast Asian fintech companies engaged in the payments space, not including remittance.

This makes sense because the region has a lot of unbanked individuals and underserved small and medium-sized enterprises, coupled with heavy internet and mobile usage. These same factors drove fintech growth in China.

On the other hand, internet consumer lending hasn’t taken off in Southeast Asia yet. But it appears to be on the horizon: Fuse Lending, the loans arm of Philippine fintech firm Mynt, recently launched GScore, which assesses a person’s eligibility for microloans.

The Chinese giants are rolling up their sleeves to make consumer lending a reality in Southeast Asia. In September 2017, JD, JD Finance, Provident Capital, and Thai retail conglomerate Central Group established two joint ventures: one for ecommerce and another for fintech.

Online to offline (O2O)

Microinsurance and microloans

Paying for content

Super apps