Jakarta (VNA) – PricewaterhouseCoopers(PwC) has predicted that the financial services sector in ASEAN will outpace that ofmore mature markets, according to the ASEAN Post.

Anarticle on “The future of ASEAN financial services” on the ASEAN Post onSeptember 19 highlighted economic achievements of the Association of SoutheastAsian Nations (ASEAN) over the past 20 years.

Afterthe financial crisis of 1997 swept across Asia devastating many, includingthe Southeast Asian community, the ASEAN has strived to pull itself backtogether and has since flourished as an economy, the article said. The bloc nowhas a combined GDP of 2.4 trillion USD and is collectively the third fastestgrowing Asian economy after China and India.

Thefinancial crisis that damaged the region has proven to be a blessing indisguise, it reads, with most countries going on to build strong foundationsfor economic growth.

Onesuch driver of growth is the region’s rising financial services sector, whichhas grown rapidly since 2005. Within 10 years, the sector has contributed morethan 20 billion USD to the economies of the Philippines, Thailand, Singapore,and Indonesia. In 2016, Indonesia leapfrogged Singapore to become the largestfinancial services market in ASEAN in terms of financial gross value added(GVA), it said.

Accordingto PwC, one of the world’s leading audit firms, the growth of the financialservices sector is driven by three key factors – the increase in theutilisation of banking services, the advancement of fintech, and continuedASEAN integration.

Currently,there are 87 million middle class households in Southeast Asia, with the numberexpected to reach 116 million by 2020 as the regional economy continues to grow.The rising disposable income for this demographic will increase the demand forfinancial instruments that can facilitate the purchase of services andhigher-value products.

Foreseeingthe demand for financial services, many fintech firms have begun setting upshop in the region. This, combined with the region’s ever-growing smartphoneusage and internet penetration rate, digital banking services will experienceexponential growth, the article added.

Thefuture may look bright for the region’s financial services sector, but thereare still some hurdles to be overcome. One major problem is the lack of accessto banking, insurance, and asset management services. Indonesia, the Philippines,Vietnam, and Cambodia are lagging behind in terms of banking penetrationcompared to Thailand, Malaysia, and Singapore. 

Theexpansion of digital wallets and digital services may help the unbankedpopulations of these countries, but such services can only do so much. Withoutproper banking and financial infrastructure in place, access to financialservices for citizens will remain low.

Thelack of financial access will create other problems as well for the sector. Thefinancial services industry relies largely on non-cash transactions, which can eitherbe digital or made via debit and credit. Since many in the region do not havefinancial access, this has created a society that still prefers cash as their mainmode of payment. The PwC report highlighted that three key challenges totransitioning from cash to debit or credit card – the lack of point of sale(POS) penetration, low interoperability, and low payment volumes.

Rightnow, the region’s financial services sector has the all the right ingredientsfor it to flourish, but there are still major gaps that need to be plugged.However, it is not the responsibility of any one particular entity – such as theGovernment or banks – but for each component in the ecosystem to play theirroles effectively to ensure continued growth, it noted. –VNA