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4 FinTech Trends to Watch Out For in 2021

Guest Contributor

Guest Contributor

Last updated 23 June, 2021

What's going on in the fintech (financial technology) arena now? Here are a few trends that are leading the way.

COVID-19 has disrupted businesses everywhere. Many industries are feeling the pinch from the pandemic, with tourism and aviation taking the hardest hit. But the e-commerce market is an exception; digital sales rode on the pandemic boom.

According to the South China Morning Post, the e-commerce sector in Southeast Asia was already tracking massive growth, increasing by US$5.5 billion in 2015 to US$38 billion last year, and it is a trend that is now accelerating. Furthermore, research firm PPRO expects Southeast Asia’s e-commerce market to grow by 5.5% in 2021, with Singapore, Malaysia, Indonesia, Philippines and Vietnam being the top five Southeast Asian markets leading the charge.   

New users are coming online at a blistering pace. Out of the six largest economies in Southeast Asia, 400 million out of the 580 million population are online, which translates to 70% of the region’s population, as Google, Temasek and Bain & Company reveal in their 2020 E-conomy SEA Report.

Last year alone, 40 million new users joined the Internet compared to the 100 million that came online throughout 2015 to 2019. Of this, more than one in every three digital service consumers started using the service due to COVID-19.

Screenshot 2021 03 18 at 12.25.51 PM

 Source: e-Conomy SEA 202 report by Google, Temasek, Bain & Company

With 94% of the new users intending to continue with the service post-pandemic, it is no surprise then that digital services are here to stay. In particular, let’s take a look at four financial technology (fintech) trends that are leading the way.

1. P2P (Peer-to-Peer) Lending

Peer-to-Peer (P2P) lending is FinTech that at its core uses cutting-edge technology to connect credible borrowers with investors via a single digital platform. This technology-driven lending method removes traditional financial intermediaries like banks and other established financial institutions (FIs) from the credit process.

According to the World Bank IFC, there still remains a US$320 billion SME funding gap throughout Southeast Asia today. This exists because of the structural problem in emerging markets, whereby traditional financial institutions (FIs) are structured to better serve corporates and consumers instead of small businesses. As a result, such small businesses typically go to P2P lenders who have the proprietary technology to disburse financing fast, while the traditional financial institutions are comparatively slower.

When P2P lenders first disrupted the credit market especially in Southeast Asia, they were considered as competition to existing incumbents. But they are now seen as complementary to traditional FIs – the former providing technology and speed, while the latter providing long standing reputation and a wide network.

Recent research report by the Cambridge Centre for Alternative Finance in collaboration with Asian Development Bank Institute and fintechSpace, over 30% of the 208 surveyed fintechs within the ASEAN region operate on the Digital Lending business model – the most popular model – beating out first and second runners-up like Digital Payments and Capital Raising Crowdfunding.

2. Buy now, pay later (BNPL)

Buy now, pay later (BNPL) is a payment service that has gained popularity in recent years. It allows consumers to purchase goods and services now, but pay for them later by installments with no interest or no fees. Because this payment option seeks to make it hassle free to apply for installment plans without the need for a credit card, it has high potential in Southeast Asia where there is still a significantly underbanked population.

As of October 2020, about 38% of Singaporeans have used a BNPL service. Furthermore, a 2021 Global Payment Report by WorldPay reports this as the fastest-growing online payment method in Singapore, which is on track to grow to 13% of the online payment market in 2024 from just 3% today. Seeing that the rise in Southeast Asia’s e-commerce scene is not slowing down, the BNPL service looks set for exponential adoption alongside the digital economy boom. Common vendors in Singapore include hoolah, Atome, Rely, Split, OctiFi which have seen unprecedented growth locally.

Outside of the region, BNPL has also been attractive globally. In the United States, a survey by revealed that 48% of consumers would not shop at merchants that do not offer BNPL options at checkout. It is expected to be the fastest growing form of digital purchasing in the years ahead, with transactions projected to reach nearly US$350 billion worldwide by 2025.

3. Digital Wallets

Digital wallets allow payment for goods and services through a mobile app. Scenes where people would need to whip out cash for payment in-store are becoming few and far between. Today, most would take out their credit card to do the same, but digital wallets now allow consumers to take that further and skip the need to carry a physical credit card or wallet at all; money can be transferred to merchants simply via a mobile phone either by tapping it on a compatible POS system terminal or scanning a QR code.

In Singapore, digital wallets are poised to overtake credit cards to become the most popular online payment method in 2024, while globally, digital wallets remain the payment method of choice amongst e-commerce users, comprising 44.5% of e-commerce transaction volume in 2020. Between 2017 and 2019, the number of e-wallet users exploded from 500 million to 2.1 billion, with India and China accounting for 70% of these users.

The pandemic and its aftermath in the new normal is expected to prompt many more Southeast Asian households to embrace digital payments. A survey by Boston Consulting Group’s Center for Customer Insights predicts that wallet penetration amongst the region’s unbanked will surge to 58% by 2025. This is accelerated by the fact that digital wallets remove the need for physical bank branches in order to open or maintain a bank account, thus being able to connect individuals and businesses in rural areas.

Regulatory agencies across Southeast Asia have shown support for e-payment infrastructure – Singapore’s SGQR launched in 2018 allows different mobile wallet providers to incorporate a new standardised code for merchants and consumers so as to simplify e-payments, while Thailand’s PromptPay by Bangkok Bank is a real-time retail payment system that allows for free money transfers with high levels of security.

4. Embedded Finance

The concept of embedded finance allows non-financial companies to significantly increase or transform their value proposition through embedding associated financial products and services onto their platform. For example, we see ride-sharing companies and telcos whose main offerings are non-financial services, but now have their own suite of payment methods for consumers to make payment directly through their platform, keeping the user within their own ecosystem from start to end.

China’s super-app WeChat produces more than 1 billion daily commercial transactions on its WeChat Pay platform. During the height of the pandemic in March to May 2020, its transactions soared to 521.6% in leisure and entertainment, and 216.2% in catering. Closer to home, 77% of overall transactions on Grab’s platform in Singapore was conducted via GrabPay.

This disruptive trend is increasing in Southeast Asia due to high smartphone penetration and engagement in the region. With an expected 663 million new mobile internet users across Asia Pacific by 2025, APAC paves the way for the adoption of embedded financial services.

lighthouse forecast embedded finance

According to The Embedded Finance Explainer by Insider Intelligence, more than a third of fintech professionals expect Big Tech firms to distribute financial services to consumers by 2030. Lightyear Capital forecasts the embedded finance market to generate almost US$230 billion in revenue across the wealth, consumer lending, insurance, and payments sectors.


The fintech landscape is rapidly changing in the face of COVID-19, and this is especially so in Southeast Asia. A Digital Consumer Behaviour Study by Facebook and Bain and Company initially expected that there will be 310 million digital consumers by the end of 2025, but the increase in number of shoppers brought on by the pandemic may potentially outpace this growth.

Screenshot 2021 03 17 at 7.11.10 PM

Source: Facebook and Bain & Company
Straits Times Graphics 

By 2025, digital financial services are expected to generate a whopping US$38 billion in revenue. Moving forward, we will see the increased importance of collaboration between traditional financial institutions and technological disruptors.

Disclaimer: All third party trademarks product and company names are trademarks or registered trademarks of their respective holders. Use of them does not imply any affiliation with or endorsement by them.

This article was first published on Funding Societies.

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