Helping Asian Wealth Management Communities interact

Digital & Technology

S&P report reveals that E-Commerce Firms May Be at the Forefront of South East Asia’s Digital Banking Revolution

A S&P Global Market Intelligence report has stated that for both new digital banks and incumbent banks, establishing links to technology platforms serving large pools of consumers and small businesses is potentially key to their success and longevity.

For branchless digital banks, according to an article by FinTech News Singapore, partnering with e-commerce companies could be “the quickest way to gain scale” because these platforms are already linked to many consumers and merchants.

The prospect of affiliation with e-commerce firms is similarly appealing to digital banks in the Southeast Asia region in which e-commerce sales for the six largest economies are projected to grow from USD41.28 million in 2019 to USD79.29 billion in 2022.

Evidence supporting this trend of e-commerce companies in digital banking comes in the shape of e-commerce firms, such as Shopee and Lazada, entering the digital finance landscape through engagement with shoppers and merchants through digital payments and lending.

These e-commerce firms also have established a vast online and offline payments acceptance infrastructure by acquiring electronic money licenses and forging alliances with financial institutions and fintech companies, according to the FinTech News Singapore report.

Both e-commerce companies have affiliates that have applied for digital banking licenses in Singapore.

With a digital banking license in hand, the Sea-led consortium could tap into the many lending opportunities arising from its e-commerce business and begin providing, for example, online point-of-sale (POS) financing plans, the report says.

Furthermore, by offering banking services as part of e-commerce, these companies can shift consumers away from cash-based payments and drive greater activity on their platforms, resulting in a virtuous circle, it says.