The Southeast Asia (SEA) region is in the midst of a banking evolution. Digital banks are proliferating across SEA countries on the back of favourable regulatory changes, market liberalisation and enhanced digital penetration on the part of consumers. Further, smartphones are now becoming an indispensable part of people’s lives and emerging as a socio-economic tool to bridge the technology divide, thereby promoting the digital banking ecosystem. The rising smartphone penetration has also led to substantial growth in e-payment solutions. This has steered a strong regional appetite for digital financial products.

Digital banking adoption is growing across the region. While Singapore’s digital banks are expected to go live in 2022, the Philippines also recently issued digital bank licences. Across the causeway, in Malaysia, roughly 40 parties registered their interest in Bank Negara Malaysia’s digital banking licence. Furthermore, Indonesia plans to clarify digital bank regulations by end 2021. The Covid-19 pandemic has only further augmented this trend.

A look at the uptake in digital banking in various SEA countries…


In early December 2020, the Monetary Authority of Singapore (MAS) announced that four organisations have obtained digital banking licences. According to MAS, these four digital banks will begin operations by early 2022. Two types of digital bank licences are provided – digital full bank licence (DFB) and digital wholesale bank licence (DWB). Two DFB licences were awarded to the Grab-Singtel consortium and the Sea Group. Meanwhile, two DWB licences went to Alibaba’s fintech affiliate, the Ant Group, and a consortium comprising Greenland Financial Holdings, Linklogis Hong Kong and Beijing Cooperative Equity Investment Fund Management.

According to industry reports, Singapore’s financial institutions had the largest increase in digital banking investment of around 25 per cent in response to Covid-19. The lack of options forced customers to adopt digital tools and services. In tandem, banks quickly found ways to deliver the services. Going forward, the establishment of a strong digital ecosystem through cooperation with reputable partners will play an important role in realising the future of cashless payments.


As digital adoption has increased in Indonesia, the growth of digital payment and e-commerce platforms is also accelerating. According to data from Bank Indonesia (BI), the value of electronic money transactions reached IDR 201 trillion in 2020, an increase of 38.62 per cent from IDR 145 trillion in 2019. The bigger driver of digital transactions in the country remains retail (28 per cent), followed by transportation (27 per cent), grocery orders (20 per cent), e-commerce (15 per cent) and bill payments (7 per cent).

On the industry front, in February 2021, Indonesia’s Bank Jago established a strategic partnership with Gojek, paving the way for the country’s first all-digital bank. The move was significant, as until then Indonesia was the only country that had not obtained a digital banking licence among all SEA countries. Further, in July 2021, Jakarta’s Payfazz announced that it had obtained an e-money licence from BI. This could help the company in expanding its operations to Indonesia’s large unbanked population. Besides Payfazz, other companies have also obtained e-money licences in Indonesia, such as online retailer Shopee, which has obtained the licence through its parent company, the Sea Group. In June 2021, Japan-headquartered Line, in collaboration with Bank KEB Hana Indonesia and LINE Financial Asia, launched a digital banking platform. According to LINE, it plans to expand the range of products to include loans, partnership loans, and QR payments.


In June 2021, the Bangko Sentral ng Pilipinas awarded two more digital banking licences to Sequoia India-backed Tonik Digital Bank and Singapore-based UNO Bank. They join state-backed Overseas Filipino Bank, which obtained a licence in March 2021. Going by the current activity, the country is likely to have its first purely digital bank by 2022. Meanwhile, the central bank’s willingness to on-board foreign players signals a promising growth in digital payment services, which are still at a nascent stage.


Similar to other SEA countries, the future of finance in Myanmar is digital. While the digital money ecosystem is nascent at present, the rapid adoption of smartphones and digital uptake across regions will drive growth in the future. The digital payment ecosystem is also attracting attention from international investors. Myanmar presents an ideal environment for the growth of digital payments ecosystems, as it offers low financials and high levels of cash utilisation. In November 2020, Singapore-based Bank-Genie partnered with Australia’s Cufa to implement digital banking solutions with 23 credit unions and customers in rural Myanmar. The solutions will be implemented through Bank-Genie’s product BanqIn, an all-in-one digital banking platform for microfinance institutions, credit unions and thrift banks. Meanwhile, Ant Financial announced plans to invest $73.5 million in Myanmar’s digital payments platform, Wave Money.


Vietnam used to be one of the world’s largest cash-dominated economies. However, as technology has become more reliable and secure, Vietnam is now fast adopting digital payments. According to IDC, the number of mobile transactions in Vietnam is expected to increase by 400 per cent from 2021 to 2025. This will mainly be due to the significant growth in mobile payments. Besides, development of digital banking has also been accelerated by the rapid adoption of the fintech ecosystem and the booming e-commerce industry. The Covid-19 pandemic has only acted as a shot in the arm for the country’s digital banking space.

Rapidly changing customer behaviour is forcing banks to accelerate their digital transformation. In September 2020, Vietnam’s Tien Phong Bank announced a partnership with digital-first banking platform Backbase. Further, Vietcombank has launched its new digital banking service, VCB Digibank, which integrates its online trading platform. Much of this growth can be attributed to the initiatives of local telecom players, one of the key drivers in the mobile money space. Over the years, Viettel, the Vietnam Posts and Telecommunications Group, and FPT have all introduced e-wallets and encouraged people to get on to the digital money bandwagon. Meanwhile, the government is also doing its bit by promoting the advancement and adoption of technology in the banking and financial sectors. To this end, the government has listed the promotion of cashless payment, digital banking and green banking as the three major industry priorities for the period 2020-25.

According to industry reports, the total number of cashless transactions in 2020 via Vietnam’s State Bank’s finance switching system increased by 76 per cent, as compared to the same period in 2019. Going forward, with 94 per cent of new digital consumers set to continue using at least one digital service post-Covid-19, these online behaviours are likely to stick.

The way forward

Net, net, with low penetration of traditional financial products and rising digital preparedness, the countries in SEA are ripe for digital disruption. According to BCG, since 2015, the number of digital banks in the region has grown by 190 per cent, supported by significant investment and positively evolving regulation. Further, Google and Temasek Holdings estimate that the size of SEA’s internet economy will more than triple from $72 billion in 2018 to $240 billion by 2025, led by mobile internet services. This promises big growth opportunities in the region’s digital payment services segment. Further, increasing smartphone penetration, a surging internet user base and a growing tech-savvy generation will continue to fuel this growth. In addition, governments in SEA countries will play an important role in promoting the concept of a cashless economy.

By Shikha Swaroop