Why Digital Ecosystems Are Key for Incumbents to Tap a US$25 Billion Opportunity
by Fintech News Singapore August 30, 2021In Southeast Asia, the emergence of fintech startups and the entrance of bigtechs and platform services providers into the financial services space are shaking up the industry, forcing traditional financial services businesses to collaborate with other ecosystem participants and venture in adjacent segments to create a one-stop, integrated experience for consumers. This is resulting in an evolution from digital transformation initiatives to the creation of digital ecosystems, according to a new report by EY.
In a report titled Building successful digital ecosystems in Southeast Asia, the consulting firm delves into the region’s booming digital ecosystems and looks at how incumbent businesses are responding to the trend.
According to the report, traditional incumbent businesses across the region are recognizing the digital ecosystem revolution and rising up to the challenge: traditional retailers are partnered up with e-commerce and delivery platforms to offer digitalized shopping experiences; hospitals are teaming up with tech players to enable remote patient interactions and telemedicine; and banks are venturing into online services through digital banks.
Southeast Asian financial incumbents’ digital ecosystem moves
In the financial sector, incumbent banks and other traditional financial services providers are partnering with fintech companies and non-financial segments to create appealing ecosystem journeys and achieve sustainable growth.
Digital transformation to ecosystem journey for financial services sector, via Building successful digital ecosystems in Southeast Asia, EY, 2021
In Singapore, DBS Bank launched in 2018 an online property marketplace that aggregates listings from property websites EdgeProp and Averspace.
The DBS Property Marketplace is intended as a one-stop shop where home buyers can browse listings and link up with utilities providers, as well as renovation, cleaning and moving services.
It also comes with Singapore’s first home financial planner that helps first-time home buyers determine their “affordability” price range based on their monthly cashflow, calculated from both their CPF and cash deposits.
In addition to the DBS Property Marketplace, the bank also provides the DBS Car Marketplace, a direct seller-to-buyer car marketplace in partnership with sgCarMart and Carro, and the DBS Electricity Marketplace, a platform that allows consumers to seamlessly switch electricity retailers.
In 2020, the Asian Development Bank (ADB) established a new venture platform to support and invest in startups offering impact technology solutions that contribute to the achievement of the sustainable development goals (SDGs) in Asia and the Pacific (APAC).
So far, ADB Ventures has invested in companies in the fields of supply chain management, electric vehicles, energy, as well as mobile loans and payments, among other areas.
In Thailand, United Overseas Bank (UOB) launched its digital banking offering TMRW back in 2019. In just six months, TMRW managed to triple its customer base, thanks to its focus on deepening customer engagement and an aggressive ecosystem partnerships strategy to provide customers with tailored services and solutions across all areas of their lives. TMRW launched in Indonesia in August 2020.
And in Vietnam, VPBank and the Be Group, a ride-hailing services provider, partnered up to launch in January 2021 a digital banking offering called Cake. Accessible through the Be app, Cake provides a variety of products and services similar to a traditional bank, including account opening, money transfers, bill payments, savings accounts, and a debit card.
Southeast Asia’s digital ecosystems: a US$25 billion revenue opportunity
In Southeast Asia, digital ecosystems are becoming the competitive game-changer as super apps including Grab and the GoTo Group, the technology group formed by the merger of Indonesian tech giants GoJek and Tokopedia, are redefining how products and services are distributed and consumed.
By bringing multiple segments onto a single platform, these companies are able to increase user stickiness through cross-selling and up-selling, and offer opportunities for consistent customer engagement.
These platforms now act as the gateways to consumers, providing anything from ride-hailing, logistics and food delivery, to digital payments and loans, to meet the daily needs of consumers and encourage them to interact regularly with the platform throughout the day.
Singapore tech giant Grab claims it has 25 million monthly transacting users, or unique users that have paid for a product on its platform, and completed 1.9 billion transactions last year. It’s currently working on a public listing in New York through a blockbuster US$40 billion merger deal with a special purpose acquisition company (SPAC).
In Indonesia, the GoTo Group claims a total of 100 million monthly active users, more than 11 million merchants and over 2 million drivers in an ecosystem that represents 2% of the country’s US$1 trillion gross domestic product (GDP).
Between 2016 and 2019, Southeast Asia’s super apps attracted investments worth US$43 billion, according to the EY report. This upcoming space has the potential to generate revenue opportunities of US$23 billion by 2025, from about US$4 billion in 2019.
Featured image credit: Photo by Sherise VD on Unsplash
