For the past decade or so, Fintech has been one of the cornerstones of the bustling tech industry in Southeast Asia. Even through the entire pandemic, the fintech sector stood strong and witnessed a constant rise of startups and unicorns across the region.
However, in 2024 it is facing some of the most difficult situations yet. From geopolitical tensions to labour shortages, whether fintech and especially the digital assets sector will be able to face these difficulties head-on is yet to be seen.
SEA Needs a Better Political Climate
The entire fintech ecosystem in Southeast Asia (SEA) is highly dependent on foreign investments for its growth. However, in recent years, the rate of investments has slowed down, leading to a stagnant situation. While on one hand, the ability to provide quick profits is a reason for reduced investments due to risk perception, lack of sustainability, and regulatory concerns, the rise of geopolitical tensions is also adding to the cause.
Be it the constant feud between China and the United States, the Israel-Palestine situation in the Middle East, or the Russia-Ukraine war; these situations are leading to Western investors looking at startups from other regions that are more peaceful.
There is also a constant threat of supply chains being disrupted in the process, and thereby the inevitable increment in costs. Overall, if the political climate in SEA and the larger ASEAN region does not become peaceful soon there are very less chances of investments becoming a staple source of growth for the fintech industry in this region.
The US has also been going through a severe economic crisis in recent times. To combat this situation, the federal reserves have raised the interest rates leading to a recession across Southeast Asia. Add to this the increment in energy production costs and you have a situation where most investors are highly unlikely to invest in a tech-heavy sector such as fintech.
There Are Still Chances to Bounce Back
While these problems are not entirely unique to SEA, their impact will be maximized in the region. The entire world’s GDP is set to fall to 2.4% in 2024, but in comparison, SEA’s GDP is expected to stay at 4.6%.
If the startups in the fintech segment are able to prove that they can indeed provide a sustainable model for their businesses, investors will most likely return to support them. With labour shortages reaching an all-time high, this will prove to be difficult, but as per many analysts, it is achievable.
Fintech companies also need to consider having a foot in helping stall climate change by providing solutions for offsetting carbon credits. These actions will help the overall industry be more investor-friendly and survive the difficult time that lies ahead.
