As the Association of Southeast Asian Nations (ASEAN) turns 50 this year, the economic strides that have made the regional bloc the world’s seventh-largest economy will set it up for sustained growth, increased prosperity and exciting prospects for the next half century.
Technology, and how it will continue to change the way people live, work, shop, dine, travel and save, is perhaps one of the most fascinating advances in recent times, and one that presents vast opportunities ahead. China gives us a glimpse of the transformative power of online and mobile innovation in a young, increasingly affluent, and tech-savvy population. From a standing start in 2003, the country has become the largest e-commerce market in the world.
ASEAN, with its 10 member countries, holds some of the same potential that can already be witnessed in China. At 630 million or so, ASEAN’s population numbers less than Wechat’s user base. But 15 years from now, the region will have added another 120 million inhabitants — the equivalent of one-and-a-half Germanies. ASEAN’s population is also one of the world’s youngest, with half of the population of the Philippines, and over 40 per cent of Indonesians, under 25 years old.
Meanwhile, disposable incomes are gradually rising in much of the region. ASEAN will have 125 million middle-class households by 2025 – roughly double the number in 2010. For businesses, bankers and investors, ASEAN offers a large, dynamic and eager consumer base – one they can tap and service increasingly easily via digital tools and mobile handsets.
Take internet penetration. Last year, only about 260 million ASEAN inhabitants were internet users – but that number is expected to soar to 480 million by 2020. Similarly, in much of the region, cash-on-delivery, rather than digital payments, still dominates when it comes to paying for online purchases: an estimated three-quarters of transactions are still paid by cash. While Asia-Pacific accounted for 40 per cent of global e-commerce sales in the first quarter of 2017, the vast majority of those sales went to China, Japan, Korea, Australia, and India rather than Southeast Asia. But that leaves plenty of room for growth, and positions the region as the next frontier for e-commerce and digital payments.
Meanwhile, it is easy to see that ASEAN’s young consumers, just like their “millennial” counterparts in China, the US or Europe, are highly likely to want to incorporate online and mobile innovation into multiple aspects of their lives. As internet and mobile penetration pick up, they too will come to take for granted a world in which they can chat with friends online 24/7, shop and access banking services (from remittances and payments, to foreign exchange and stocks, credit cards and personal loans) via their phones easily and securely around the clock.
It’s already clear that people in the region are receptive to digital tools. A recent HSBC survey found four in five home buyers in Malaysia used online channels to research their recent property purchase, and over three-quarters went online for financing options.
Amid all this change and potential, it’s no wonder that ASEAN has begun to spawn a number of fintech companies. In Indonesia, the highly popular Go-Jek platform has started to add digital payment functions to its core transport services. In Thailand, there is Omise – a payments platform that has already raised US$50 million in funding.
Traditional banks are starting to invest significantly in their digital capabilities to offer a simpler, better, faster and more secure banking and payments experience. This includes working more and more with nimble fintech start-ups to ensure that their services meet the demands of a young, tech-savvy consumer base.
Some ASEAN governments are working to enable innovation. Singapore is leveraging its status as an established financial centre to take a leading role in fintech development, with support from the Monetary Authority of Singapore. ASEAN is on the cusp of an all-encompassing digital transformation, with technology promising to offer a new way of life and better experiences for consumers in this dynamic region. The opportunities are numerous and ripe for the taking; the challenge is to be quick, bold and flexible to change.
Article by Kevin Martin, Asia-Pacific head of retail banking and wealth management at HSBC in SCMP.