What to expect from Southeast Asia’s virtual banking future?

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What to expect from Southeast Asia’s virtual banking future?

In a new study by Bain & Co., Google and Temasek Holdings Pte Ltd featured here, digital financial services are expected to generate at least US$38 billion of annual revenue across Southeast Asia by 2025, more than tripling from US$11 billion in 2019.

The report further notes that online lending will comprise about half that total for the region. The growing smartphone penetration in the region has opened up new avenues for more Internet-based services, such as insurance and other underserved-services to more than 70 per cent of the adult population. 

And the most notorious underserved scheme lies with our traditional banks.

Financial inclusion and digital banking will dominate the new decade, as seen with the applications for Singapore’s digital bank licence by some of the most well-known names in the industry like Grab, Razer and Ant Financial. This confirms the future of virtual banking, and it is here to stay.

As far as we can tell, the virtual banking sector is still fragmented but it's shaping up. Malaysia recently followed suit by releasing a similar digital banking policy, signaling a growing welcome and openness to the virtual payment scene. 

As the region is warming up for a virtual banking future, here are some of the keynotes of the big shift and what to expect from the changes.

Traditional banks to join the trend

Banks that operate traditionally have access to capital. This puts them in a strategic position to adapt to the virtual payment system. Rohit Sipahimalani, joint head of the investment group at Temasek, said that legacy lenders like DBS Group Holdings Ltd and United Overseas Bank Ltd are teaming up with Gojek and Grab, respectively, towards this end.

Another notable example is Thailand’s Kasikornbank, partnering up with Shopee to leverage the e-commerce platform’s network and hand out virtual loans to sellers.

These findings show that e-commerce players may be leading Southeast Asia’s digital banking revolution, with S&P Global Market Intelligence noting in its recent report that for banks, traditional or otherwise, working with technology platforms “could be key”.  

This Forbes article noted that traditional banks with big capital can adopt low operating costs and readily-accessible services, such as virtual bank accounts and virtual bank apps, from digital-only banks. 

If anything, the ongoing all-virtual payment onboarding should give Southeast Asian banks the chance to offer their services at lower costs - virtual banks can automate manual processes like client onboarding, leading to fewer errors and faster liquidity.

As Sipahimalani put it: “Fintech companies will need to partner with banks to be able to have access to balance sheets. And banks will need to partner with consumer fintech companies because they don’t have the reach to tap into the underbanked population.” 

The rise of multiplatform QR codes

QR code is the new norm, the new casual. With the boom in fintech and virtual banking, we can expect it to be ubiquitous.

The innovation that awaits the QR code sector would be a comprehensive QR code system that can be used on multiple platforms for virtual payments from diverse sources, including mobile wallets as well as anything powered by UPI, a systems infrastructure widely utilised in the industry. Paytm, an Indian fintech that just raised US$1 billion in funding at the end of 2019, has introduced its special QR code, as reported by Pymnts. 

Vijay Shekhar Sharma, founder and CEO of One97 Communications, Paytm’s parent firm, also stated that businesses can leverage the potential of one QR code that understands multiple payment apps. This QR code can appear on battery packs and chargers to enable fast transactions that will help widen the reach of different virtual payments and financial services, especially to the underserved.

Gearing up for virtual cross-border payments

Virtual banking also opens up ways for more cross-border transactions. With many entities setting up offices in Singapore and Malaysia, this decade will see more virtual cross-border payments without a hitch, adopted by big players to empower wider transactions.

As Forkast News put it, going cashless does add convenience and speed for users, especially when it comes to wiring money across countries. 

In the case of Southeast Asian virtual payment itself, the least the region can do is to have a united Asean economy, which can be achieved by improving the virtual cross-border payment system. Cross border virtual payments must be the backbone of any plan to take the region to unprecedented collective economic growth, and this can be accelerated by the advent of digital banking.

Room to experiment

You must have heard about sandbox policies in Malaysia, Singapore and Thailand that allow room for fintech and virtual banks to experiment under regulatory supervision. 

This could be monumental for the growth of virtual banks, and the trends are closing in on the practice. This openness and acceptance of virtual banking will be a challenge for Southeast Asian policymakers in the next decade, balancing and devising methods to regulate, not diminish, the innovative value that virtual banks bring.


At the time of writing this article, we touched only on the vibrant digital banking scene (or preparation for it) in Southeast Asia. The truth is digital banking has gained much traction in Asia and beyond. 

Enter Hong Kong, the freest place to do business, with its 8 virtual banks announced in 2019. See also our partnerships with Alipay and WeChat Pay HK and you will notice a trend: industry players are leveraging the huge Chinese and Hong Kong markets through cooperation in the virtual space.

There is no shortage of superlatives when it comes to fintech, and virtual banking is no different. Fintech giants recognise the potential of virtual banking and its importance to the future of the sector, guaranteed by a borderless world and a tech-centric business model. 

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