The digital transformation has set its sights firmly on the financial service industry. Though it has been computerized for decades, it has not given significant changes. But, now the rise of fintech has promoted alternative peer-to-peer (P2P) lending.
Southeast Asia presents a massive opportunity for P2P lending. That because of the advantages P2P lending provided. That includes lower transaction costs and more convenience. Southeast Asia’s high mobile subscription rates and the young population are the key to success.
Lessons from P2P Lending in China
China’s retail loan penetration rates is around 20 percent. That is among the lowest in the world. Its banking sectors typically prioritize state-owned enterprises. They ignore SMEs and the broader retail market. As a result large segment of the population left underserved.
Although China’s average income is relatively low, the middle-class size is large. It is roughly similar to the Europe population.
P2P lending appears to respond to the market gap. There were outstanding P2P loans up to 1.22 trillion yuan ($180 billion) in December 2017.
Lack of regulatory oversight may hamper the P2P lending firms to access credit scores. It can be worsened by operators who do not know how to run P2P lending properly. The result can be a disaster. That triggers widespread defaults and loss of billion dollars’ worth of investor saving.
In 2018,the number of P2P operators dropped by more than 50 percent to 1,021. By the end of 2019, the number could drop to 300 firms.
Read more: Shopee Ranks No. 1 in Q1 2019 in Southeast Asia
It’s Important for Southeast Asia
The five most populous South Asian countries, Indonesia, Thailand, Vietnam, Myanmar, and The Philippines have large number of youth. The total number goes over 90 million. Yet, there is a high percentage from them that left unbanked.
Governments and private sectors are stepping to tackle the gap. Indonesia, for instance, has supported the Fintech Offices and launched National Payment Gateway. From what happened in China, Southeast Asia Government should integrate the stakeholders involved.
