Asean e-payments market could be worth US$1.5 trillion: report

ONLINE payment providers could nab a market of at least US$1.5 trillion in the region, a recent report on the financial technology (fintech) sector has estimated.

Fintech players were also tipped to break into the Asean insurance market through online sales channels, which could be "an exceptionally high-margin business".

That's as third-party payment firms are projected to capture a large slice of cash and card payments, as well as retail transfers, in the Asean-6 economies of Indonesia, Thailand, Singapore, Malaysia, the Philippines and Vietnam.

The relatively low cost of funds in Asean makes payments profitable at a gross margin level, JPMorgan analysts suggested in a global report on Wednesday - with Vietnamese banks charging fees of as little as 0.2 per cent to 0.4 per cent of e-wallet top-up value.

With cash making up an estimated 70 per cent to 80 per cent of retail transactions in Asean, "online payments can see significant growth from cash".

But even as payments make up the bulk of online financial services, the report also noted that this segment is "intensely competitive and fragmented", as banks, insurers, telcos, e-commerce firms and other platforms all play for revenue.

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So, with the online payment market already crowded and growing, the report has now identified lending and insurance as the next frontier for fintech disruption.

That's even though the analysts found that Asean fintech firms tend to offer short-term loans with interest rates of between 2 per cent and 5 per cent a month - "a significant premium" to regional banks' rates - with the risk of bad debt relatively high.

"High rates, but risk management is key" was how the report described this segment.

In insurance, JPMorgan estimated that online market share could rise from 3 per cent to 7 per cent in Asean by FY2021, generating about US$800 million in sales commissions.

And third-party distributors of financial products could enjoy gross profit margins of as much as 90 per cent, the analysts said, citing precedent in the Chinese market.

Besides low-coverage and low-premium term life, critical illness and health insurance plans, online sales are also driven by micro-insurance products such as motor and travel insurance. The report observed the entry of startups such as Thailand's Sunday, whose online offerings are cheaper, customised and more competitive.

"Remittances, wealth management, personal finance, regulations and crypto are the areas where digital solutions are being scaled up," the report added.

The analysts believe that incumbent banks hold advantages from deposit franchise, risk management and regulation, but also suggested that there will be "a drawn-out path towards competition and cooperation" in digital solutions.

"The endgame is the better ability to create value in the course of delivering financial services," the report concluded.