Singapore to become Southeast Asia's leading digital lending and wealth market
Singapore is projected to be the biggest digital lending market in Southeast Asia this year through to 2030, according to a report published on Wednesday by Google, Temasek and Bain & Company.
It is also expected to be the biggest digital wealth market in the region, growing from US$26 billion in 2023 to about US$150 billion in 2030.
These estimates are made as the revenue from Southeast Asia’s digital economy is expected to reach US$100 billion this year, across digital financial services, e-commerce, travel, online media, food and transport sectors.
The region’s digital economy is also projected to hit US$218 billion this year in gross merchandise value, an 11 % growth year on year from 2022.
One of the main drivers of growth is in digital financial services, noted the report, which sees digital payments making up more than half of the region’s overall transaction value.
“The irreversible offline-to-online behaviour shift continues to drive growth in digital financial services adoption,” said Google, Temasek and Bain & Company in a press statement. “Digital lending is the single biggest driver... due to high lending rates and consumer demand, as underbanked consumers and small businesses participate in the digital economy.”
There is potential for growth in Singapore’s digital financial services space, said Mr Florian Hoppe, Bain & Company partner and Asia-Pacific head of Bain’s digital delivery platform Vector.
“Growing affluence and increasing digital familiarity in the Republic has created new opportunities in digital financial services, particularly in wealth management and digital banking,” he noted.
“Winning players will tailor their offerings to meet banking priorities and user experience expectations for the emerging middle-class segment,” Hoppe added.
The report noted that some 90 per cent of consumer payments in Singapore are made digitally, but that growth areas remain in financial services like wealth and insurance.
The digital economy is a bright spot for Singapore and is expected to outpace its single-digit gross domestic product growth, the report said. The Republic’s digital economy is expected to grow 12 % this year to hit US$22 billion, and it is projected to reach about US$30 billion in 2025.
Travel recovery has driven growth here, the report added, while noting that e-commerce – Singapore’s largest digital sector – continues to boost growth as well.
Hoppe pointed out that artificial intelligence (AI) is also a high-growth enabler and critical for companies.
“You can’t have demand-supply matching on food delivery or transport platforms without AI helping to provide that. Getting that to the next level, opening things up to a wider group... I think it unlocks a new level of dynamism, next level growth and wider extension of services, and new business models emerging, which will again make for a much more dynamic kind of funding business landscape here.”
Google South-east Asia vice-president Sapna Chadha said: “With the digital economy projected to take the front seat in Singapore’s growth, more can be done to support the adoption of digitalisation in businesses, including traditional financial institutions. This will help strengthen consumer confidence and fuel further growth.”
Amid overall growth, the report noted that private funding in the region has dropped to its lowest level in six years, which is in line with global shifts towards the high cost of capital and issues across the funding life cycle.
Such issues include a broader correction in valuations compared with the highs of 2021, the uncertainty surrounding the profitability of some companies and a challenging capital market environment.
Yet, dry powder, which refers to the portion of undeployed capital out of the total committed capital of a fund, rose from US$12.4 billion in 2021 to US$15.7 billion at the end of 2022, the report noted.
This means that there is still fuel available to propel South-east Asia’s digital economy to the next stage of growth, said the press statement.
“To leave the funding winter behind, South-east Asia will need to prove its digital companies have a clear pathway to profitability, and investors have dependable exit pathways,” the report noted.
Singapore has a key role to play in growing the region’s digital economy, noted Temasek’s South-east Asia head Fock Wai Hoong.
He said: “As a tech hub and regional gateway for funding and talent, Singapore can play a catalytic role to drive the next phase of growth for South-east Asia’s digital economy.
“Singapore’s vibrant ecosystem enables innovation that can spur sustainable growth of the digital economy across the region.”
