Why South Asia and SEA will lead the future of fintech lending

Fintech in Asia has steadily grown over the past decade, with local markets embracing new technologies at an impressive pace. In terms of fintech lending, South and Southeast Asia are emerging as the subregions with the most potential for future growth. Despite different levels of development and digital adoption, these regions present vast opportunities for fintech growth.

As revealed in UnaFinancial’s recent study, which compares four subregions of Asia, South Asia shows the biggest promise for the industry. Its index of fintech lending potential equals 1.152. This index was calculated as a multivariate average of 14 indicators impacting fintech lending, which were converted into a single numerical scale. The higher the index, the more promising the region is.

While South Asia shows a lower penetration of digital payments, smartphones and the Internet, it has other strong drivers for fintech lending. For instance, the region is characterised by a large population and a high share of young people. Its fintech sector is thriving with 43 incubators supporting new alternative lending companies and 118 funding rounds fueling growth. These numbers highlight the region’s potential to create a new wave of alternative lending services tailored to the needs of the underbanked population.

Southeast Asia ranks second with an index of 0.806. The region benefits from strong digital adoption, with 59% of the population using digital payments, 82% of Internet users and 62% smartphone owners. While the average income per capita of $42 is lower than in other regions, the digital infrastructure and high level of fintech activity point to significant growth opportunities. The presence of 24 incubators for fintech startups ensures that innovation will continue to flourish, paving the way for new lending models tailored to people’s needs.

West Asia ranks third in fintech lending potential with a score of 0.773, just slightly ahead of East Asia. The region has only 182 million people aged 15 and older, and only 60% hold bank accounts, which signals less readiness for fintech adoption. A fewer number of fintech incubators also makes it harder for new companies to thrive. However, West Asia has strong points: it leads in investment in alternative lending with $2.3 billion, boasts high smartphone (71%) and Internet (93%) usage. There is also a strong demand for borrowing, providing opportunities for alternative lending companies to grow.

East Asia has the lowest score of 0.698. Meanwhile, it excels in mobile connections, high income per capita ($86), and widespread use of digital payments. The region also leads in the share of people using bank accounts. Despite these strengths, challenges remain. Heavy reliance on loans from formal institutions makes it difficult to shift towards alternative lending. The region also has a smaller young population and an underdeveloped fintech sector, with fewer startups, incubators, and investments. These factors limit East Asia's growth potential in alternative lending, despite its strong traditional finance base.

In conclusion, every subregion of Asia has its strengths and challenges, but South and Southeast Asia are well-positioned to lead the future of fintech lending. The combination of supportive ecosystems in these areas sets the stage for continued growth in alternative lending solutions.

Ivan Adamovich is the deputy CEO and chief financial officer at UnaFinancial, delivering frictionless financial services to the underserved.