Revenues from digital financial services in six of Southeast Asia’s largest markets are forecast to soar to at least US$38bn by 2025, up from US$11bn in 2018, according to a joint report from Google, the Singapore state investment fund Temasek, and management consultants Bain & Company.

Entitled Fulfilling its Promise – The Future of Southeast Asia’s Digital Financial Services Industry, the study draws on research and analysis by the three sponsor companies, including a survey of more than 2,500 consumers across Indonesia, Malaysia, the Philippines, Singapore, Thailand and Vietnam.

It suggests that the headline figure of US$38bn could grow even further to US$60bn over the next six years if the region realises its full potential with supportive regulation, better infrastructure and scaled funding and investment.

According to the report, among various services, digital payments is the most advanced and will exceed US$1 trillion in transaction value by 2025, while both digital payments and digital remittances are said to be at inflection points.

Other services – including lending, investment and insurance – are still emerging, but each should grow by more than 20% annually through to 2025, the report also predicted.

“Southeast Asia’s internet economy is growing at a blistering pace and is set to reach US$300bn by 2025,” said Stephanie Davis, Google's managing director for Southeast Asia.

“Alongside e-commerce and ride-hailing, digital payments have reached an inflection point and is now emerging as a gateway to greater digital financial inclusion,” she said.

A major factor underpinning the forecast growth of digital financial services in the region is the fact that around three-quarters (75%) of consumers are currently “underbanked” or “unbanked”.

And this means that digital financial services offer “accessibility” to this potential consumer base, given the region’s high smartphone penetration and engagement.

The underbanked alone account for about 98 million people across the six Southeast Asian markets and represent “the biggest potential and true growth engine of the digital financial services market”.

“We anticipate growing consumer acceptance of fintechs and consumer tech platforms in Southeast Asia, with new entrants closing the trust gap to established players, particularly in the fast-growing markets like Indonesia and Vietnam,” said Aadarsh Baijal, partner and leader of Bain & Company's digital practice in Southeast Asia.

However, he said that “for Southeast Asia to realise its full potential, there must be supportive regulations, a strong financial infrastructure and scaled funding in place.”

Sourced from Bain & Company, Google, Temasek; additional content by WARC staff