The fintech industry in several Southeast Asian countries has been growing rapidly, offering a broad range of services that include remittances, payment gateways, consumer loans and equity crowdfunding.

Indonesia has long been identified as one of the most promising markets in the region thanks to its large and young population, but after years of rapid domestic growth, some firms are looking for greener pastures overseas with untapped potential.

One of these firms is buy now, pay later (BNPL) service provider Kredivo.

“The growth potential of the [BNPL] industry is predicted to be US$25 billion,” Kredivo marketing and communications vice president Indina Andamari told the Post, although she noted that the growth rate varied significantly between different markets.

Indina, citing an InfoBrief report from the International Data Cooperation (IDC) commissioned by credit card service company 2C2P, said that BNPL users would “increase 8.7-fold in Indonesia and 23-fold in Vietnam by 2025”.

She said that Kredivo’s motivation for expanding abroad was the large number of people in ASEAN that lacked access to banking services.

“In Southeast Asia, two-thirds of the population can be categorized as underbanked or unbanked,” she explained, adding that credit card penetration was particularly low in Vietnam.

Meanwhile, Xendit, which has been offering payment gateway services since 2016, referred to the same regional growth potential when it decided to expand to the Philippines in 2020.

“Xendit believes in the potential of the digital economy in Southeast Asia,” said Xendit COO and cofounder Tessa Wijaya. “In a world region with one of the youngest populations and highest technology penetration, Xendit can stimulate growth in the digital economy,” she added.

“We have several reasons for expanding overseas, like customer demand, availability of human resources […] and how fragmented payment is in Southeast Asia.”

Indonesia’s first fintech company offering payment gateway services, DOKU, set foot in the Malaysian market for the first time by acquiring senangPay in July. Shortly afterward, the company injected $7.5 million into the newly acquired entity.

“The recent acquisition of senangPay marks the beginning of DOKU’s expansion overseas and its effort to reach a wider business segment, especially [small and medium enterprises],” DOKU COO Nabilah Alsagoff told the Post.

In its 2021 report, the United Overseas Bank (UOB) states that the ASEAN fintech sector hit an all-time fundraising high of $3.5 billion in the first three quarters last year. The same report highlights Singapore’s maturity in terms of its financial market and regulatory authorities.

The report also notes Indonesia’s attractiveness to investors with its large market, while other ASEAN nations are developing the local fintech landscape to become equally attractive, offering a major opportunity for cross-border expansion.

Financing Societies, the Singapore-based parent company of Indonesian lending platform Modalku, expanded internationally years earlier.

Founded in 2015, it now operates in Indonesia, Singapore, Malaysia, Thailand and Vietnam, or half of the 10 ASEAN member states. Since its launch, the group has lent Rp 36 trillion to more than 5.1 million micro, small and medium enterprises (MSMEs) in those countries.

“MSMEs’ potential in Southeast Asia is great, but they are facing financing problems. The financing gap in ASEAN is relatively huge [...] around $300 billion,” said Modalku CEO Reynold Wijaya.

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Despite the different entry points and operational approaches, these fintech companies are all banking on the same regional ambition.

Momentum Works, a venture outfit that closely monitors developments in the region, agreed that tapping new growth potential was a key motivation behind the expansion trend among the region’s fintechs.

But pressure from rising competition in domestic markets was another, as many fintechs were “still venture-funded with an imperative for growth”, Jianggan Li, CEO of Momentum Works, told the Post.

Li also explained that the idea to expand across borders was almost never wrong, but the real challenges lay in the practical issues of leadership, people, organization and products.

“[It] is worth noting that the grass is almost never greener on the other side, as managing multinational operations can be very complex and demanding for the leadership and organization, especially in Southeast Asia, where each major market is distinctly different,” he stressed.

He added that the ongoing expansion trend was not a race to build regional monopolies.

“We do not think the Ant-Tencent duopoly in payment and digital financial services in China could be replicated in any country in Southeast Asia, as the realities are very different in each of the region's major markets. We believe the expansion is mainly aimed at enlarging the total addressable market, achieving the corresponding business growth, and eventually reaching profitability,” he said.

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Li also revealed that FinAccel, Akulaku and Atome were also among the fintechs actively pursuing regional expansion, which sometimes entailed offering new products and services.

“Akulaku even expanded its BNPL offering to Europe. In payments, companies like Xendit are also expanding their offerings beyond the core market, not to mention the fintech arms of Grab and Sea Group, which are already regional companies,” he said.