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4 in 10 Singaporean adults ‘underbanked’; SE Asia ripe for picking by digital financial firms: Report

SINGAPORE — Despite Singapore’s reputation as one of the world’s top financial centres, a new report released on Wednesday (Oct 30) on the future of digital financial services in South-east Asia found that about four in 10 of adults here are “underbanked”.

A report showed that the high penetration of smartphones in South-east Asia meant a potential boom in digital financial services that offered big opportunities for digital firms.

A report showed that the high penetration of smartphones in South-east Asia meant a potential boom in digital financial services that offered big opportunities for digital firms.

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SINGAPORE — Despite Singapore’s reputation as one of the world’s top financial centres, a new report on the future of digital financial services in South-east Asia found that about four in 10 of adults here are “underbanked”.

Titled Fulfilling Its Promise – The Future of South-east Asia’s Digital Financial Services Industry, the report which was released on Wednesday (Oct 30) said that South-east Asia’s Internet economy is growing at a “blistering pace” and that digital payments are set to grow strongly — a market largely untapped by established financial institutions.

The report also found that while digital financial services are expected to generate US$38 billion (S$51.8 billion) in annual revenue within the region’s six largest markets by 2025, the full potential could increase to US$60 billion with the “right regulatory support, financial market infrastructure development and scaled investments”.

The markets examined in the report were: Indonesia, Malaysia, the Philippines, Singapore, Thailand and Vietnam.

The report found that traditional banks will continue to play a role but that given the widespread use of smartphones, new players in digital financial services could make major inroads in the region.

Here are the key findings of the report, which was a joint effort by global consultancy firm Bain & Company, technology giant Google and Singapore investment company Temasek Holdings.

How many people in the region lack access to financial services? The study stated that about 75 per cent of adults in the region are either underbanked or unbanked.

What does it mean to be underbanked or unbanked? Being underbanked refers to adults who are not well-served in financial services, or have unmet financial needs such as lacking access to credit cards or not having a long-term savings product.

Unbanked customers are those without access to a basic bank account.

What’s the situation in Singapore? At 60 per cent, Singapore has the highest percentage of adults of any country in the region whose financial needs are well-served.

However, a sizeable percentage (38 per cent) of adults here were found to be underbanked. The other 2 per cent are unbanked.

How do the other countries fare?

  • Malaysia – Unbanked: 15 per cent; underbanked: 40 per cent; banked: 45 per cent.

  • Thailand – Unbanked: 18 per cent; underbanked: 45 per cent; banked: 37 per cent.

  • Indonesia – Unbanked: 51 per cent; underbanked: 26 per cent; banked: 23 per cent.

  • The Philippines – Unbanked: 65 per cent; underbanked: 13 per cent; banked: 22 per cent.

  • Vietnam – Unbanked: 69 per cent; underbanked: 10 per cent; banked: 21 per cent.

Why are there so many adults in the region without proper financial services? Mr Aadarsh Baijal, a partner and leader of Bain’s digital practice in South-east Asia, said that the underbanked are under-served for many reasons.

“It’s not that established banks haven’t tried to go after this segment before or are not interested,” he said.

One factor, he explained, is the high cost to serve this demographic due to current banking models. Other reasons include a potential customer’s limited credit history, low savings rate and “limited awareness” in terms of insurance or investments.

As for the unbanked, he said that they are going to be a “relatively untapped opportunity in this time frame up to 2025”.

One difficulty in serving them lies in their financial literacy — many adults in the region prefer not to be part of a formal banking system and are even wary of established financial institutions, Mr Aadarsh said.

Other reasons similarly include the high cost to serve them, and the “low revenue-potential in the medium term”.

What does this vast untapped market mean? The report said the underbanked segment of the South-east Asian market, which the study estimates to comprise about 98 million adults across the six countries in the Association of Southeast Asian Nations, “represents the biggest potential and the true growth engine” for companies dealing with financial services.

This is a segment that consumer technology platforms are able to serve, unlike established financial services players, the report said. It cited Chinese giant Alibaba as an example of a consumer technology platform — where buying and digital payments were rolled into one platform.

By offering a range of digital financial services such as payments, remittance, lending, insurance and investments, these platforms will be able to provide the convenience, value and access that the underbanked need, the report added.

The report also said that consumer technology platforms have some “distinct advantages” such as leaner cost structures that are supported by a broad suite of products, no antiquated legacy technology systems, access to rich data sets and digital native customer engagement.

However, the report noted that digital financial services “will not be a panacea” for reaching the unbanked population.

One reason, Mr Aadarsh said, is “simply because of the lack of connectivity”, which is an important element in financial service transactions.

The report noted that governments and telecommunications companies would need to roll out the necessary infrastructure to efficiently serve the unbanked and underbanked markets.


  • Merchants of small- and medium-sized enterprises (SME) are likely to become the “main digital financial services battleground” in South-east Asia. The report found that 80 per cent of SMEs in the region “need to borrow money” but lack access to affordable credit.

  • Other reasons stated by SME merchants for not borrowing money: High interest rates, a troublesome process, not knowing where to go and having their applications rejected.

  • In 2018, only 30 per cent of SME merchants said that they would accept cash and digital payments, while 70 per cent said that they would accept only cash. The study found that 15 per cent of the merchants said that they are likely to accept digital payments next year, while 46 per cent said that they would do so by 2022.

  • The report predicted that consumer technology platforms that are able to offer integrated solutions beyond financial services will be able to gain a significant share of this market. These platforms will then be in a position to cross-sell other financial services such as lending and insurance.

Related topics

digital financial service digital payment banking SME market

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