The investors are ambitious not only to expand to new markets but also implement their developments comprising blockchain technology.
The potential application of blockchain has not been encapsulated in the financial realm. There’re more and more projects to apply blockchain technology in insurance, copyright protection, and other fields. However, it’s successful or not is a future story when there isn’t any markable achievement. The only field Blockchain technology turns to be more realistic in existing fintech companies.
We all know most countries in SE Asia ranked in low base effect. Banking services and traditional payment system can only penetrate with a very low rate. For example, the ratio of having transaction accounts is only 27 percent in the Philippines and 31 percent in Vietnam. They majorly have no credit history meaning that you can’t trace their traditional lenders. In addition, although there’re too many banks in their countries, they only converge in large cities. The rural areas and small entrepreneurs are get used to using cash. But with blockchain technology, these weaknesses can possibly turn into a huge advantage comprising a promising audience for microfinance and p2p lending companies.
Thus, the development of new financial technologies will be special in SE Asia when it much more relevant to SME. Small business usually brings 45-55 percent of GDP in this region. While the sector of services takes the first place in the US and The EU meaning only most big companies demonstrating the highest efficiency can survive in this highly competitive environment, the agriculture and craft industry involve most of SMEs in SE Asia. They live with outdated equipment and low productivity. As a result, people in these areas hardly access bank loans and being trapped in the circle of fogginess due to the lack of credit to the modernization of production.
But, the new generation can escape from the maze which confined their parents. They are familiar with modern technologies and the Internet is growing fastly in rural areas. Which provide SMEs a specific opportunity to raise funds in the p2p lending market independently. Due to blockchain technology, the size and cost of transactions being minimized giving lenders right to hedge risks by diversification. In addition, smart contracts, a product of blockchain technology will protect investments from the scam. They now can expand their business to other areas including where they can’t come usually. It’s win-win cooperation for both farmers and investors.
Fintech companies can make a significant contribution to the development of the financial system with support from the government and the success in reaching a fundamentally new audience. According to a study made by the Institute for Development of Economics and Finance (INDEF) and the Indonesian FinTech Association (Aftech), there are more than 250,000 jobs created in Indonesia and contributed up to the US $1.7 billion of GDP growth only by the online lending field. It is a substantial rate even higher than in the US and EU.
The cost of financial institutions can be reduced by the introduction of calculations based on the blockchain. However, such opportunities often face bureaucratic issues. Fintech is doing well in SE Asian countries, they have advantages to get the adaption of legal requirements to new realities much easier than in the US and EU.
Widespread Internet penetration is now a notable trend in Southeast Asia. For example, the population of Vietnam is around 90 million people and 61 percent of them are active Internet users, and most of them use the internet through mobile devices. While people in the US and EU mostly have their own smartphones, Southeast Asian countries are still in the state of growth. They are predicted to lead the volume of sold smartphones in 2018-2022, according to an analytical company DigiTimes Research.
The mentality of users has been significantly altered by the impetuously expand access to the Internet. While sending a message in a messenger takes a few seconds, why we have to wait hours even days to make a transaction? The world becomes smaller due to the development of the Internet, time for transaction seems too long now and we need a faster way. Therefore any companies making these process shorter will get a huge advantage to gain their market share. Blockchain shows up as one of the brightest factors to ruin these burden process, representing are payment systems and e-wallets.
Another reason for the spreading mobile Internet is the desire to get a familiar set of services anywhere. Successful fintech companies have a character in common, they quickly outgrow the business on the scale of one country and start establishing foreign affiliates. However, there are many cases that companies don’t allow clients to use the services of its branch in another country. You can use this service the same in Singapore and Thailand but have to begin again with vouchers or points. This is so inconvenient for customers though it may be caused by the difference in policy. Realizing the need to upgrade, some companies priority to connect their market together by e-Wallet. Meaning that clients can pay for this service by unique coin even they move to another country. For example, Go-jerk and Grab competing in several market sectors have already opened branches in most SE Asian countries and use digital currency linked to fiat currency rates in Go-Pay and Ovo e-wallets respectively. These companies can preserve common standards of service, provide clients with an opportunity to pay for goods and services in different countries with funds from their accounts in the company due to the implementation of a distributed ledger. The historical record if interactions with clients are also kept completely.
The p2p lending platforms and related industries have faced quite critically by the business community all the time. But the fascinating development of blockchain in Southeast Asia has become a sharp change in this biggest economy in Asia.
Southeast Asia is a huge potential neighbor of China with a wide range market, young and cheap workers and a past growth every year. Many large corporations in China have noticed this area and established their own branches or acquired a number of successful fintech companies here. In October, Executive Chairman of Alibaba Group Jack Ma, known to be an advisor to the Indonesian government on e-commerce, announced his plans to train up to a thousand of tech entrepreneurs by establishing an institute in the country early. His announcement became the beginning of the era of Chinese tech companies to invest in Southeast Asian countries. They not only aim to expand to the new market but also implement their developments comprising blockchain.
The wave of investment in SE Asia leads to the most innovations, which will allow the entire region to take the leading positions on the global financial market. No doubt that Blockchain technology will play an important role in this stage.
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