South-east Asia's digital financial services could rake in US$60b by 2025: poll

REVENUE from South-east Asia's digital financial services could hit US$60 billion by 2025, but only if the region's financial players can crack barriers to lending in the SME (small and medium-sized enterprise) space.

While interest from the region's 64 million SMEs are high - around 80 per cent of small retailers need credit - they remain underserved by established players, according to a report by Google, Temasek and Bain & Company on Wednesday. More than half of the SMEs surveyed noted that high interest rates are the greatest deterrence to borrowing.

Fresh figures from the report showed that SME loans make up 60 per cent of SMEs' contribution to overall GDP (gross domestic product) in Singapore, Malaysia and Thailand, higher than that in the high-income OECD economies (50 per cent). But for the SMEs in Indonesia, Vietnam and the Philippines, loans make up less than 20 per cent of their overall GDP contribution.

The base-case revenue projection from the region's digital financial services stands at US$38 billion by 2025. To achieve the full potential of US$60 billion, more needs to be done to solve the multiple SME business needs through digital means, said Aadarsh Baijal, a partner at Bain & Company.

"Many merchants want access to capital, primarily to drive growth, but do not have that as loans are perceived to be too expensive. That's really one of the things that's changing, with the advent of much better credit scoring (systems) by leveraging the different sources of data that the fintech players can offer," he told reporters at the media briefing on Wednesday.

"An effective credit bureau is going to be absolutely critical if you want to fully realise the SME opportunities in the region," he added.