A Landscape Review
As a sector-focused fund based in Southeast Asia, we at Dymon Asia Ventures often skip right to talking about why we find the opportunities in fintech, insurtech and digital health so compelling, and allow others to explain why the region is ripe for growth and disruption. But sometimes it’s worthwhile to take a step back and survey the macroeconomic, demographic, and technological trends in the region, and how they intersect with the sectors that we’re excited about. Click on this link to see the data pack, but we’ve summarized the main points below.
Southeast Asia is a region of outperformers, as a recent analysis by McKinsey Global Institute proves 18 emerging markets have driven global growth over the last 50 years, and 8 countries on that list are ASEAN.
It’s not just growth at all costs. In a world where more and more capital is required to drive ever- diminishing returns, Southeast Asia continues to be a source of economic profit.
And it’s easy to see why. We already know about Southeast Asia’s vaunted emerging middle class, its relative youth (more than 50% of Southeast Asians will still be below the age of 34 by 2030), its rapid urbanization, and its Internet-engaged, mobile-first population with a high willingness and propensity to transact online and via mobile.
How does this affect our chosen sectors? In fintech, despite gains in the last 5 years, large pools of demand remain under-addressed, with 50% of Southeast Asia’s population still unbanked, and 24% of the population having access to little more than a simple bank account. Combined with the explosive growth of the Internet economy, rising smartphone penetration and the steps that regional governments are taking towards building real time payments systems, this is a massive market opportunity, to drive both profit and impact. We’ve written elsewhere about the rise of “Fintech 2.0.” Driving financial inclusion becomes easier and more scalable once financial services can be embedded across industries and disseminated widely.
In insurtech, it’s clear that both insurance penetration (premiums as % of GDP) and insurance density (insurance premiums per capita) in the region remain far behind global averages. But we believe that the infrastructure gains made by fintech in the last few years have laid the groundwork for growth, including eKYC, digital payment rails, and fraud detection. From an impact perspective, expanding coverage for underinsured populations is vital. Southeast Asia’s rising middle class might be confident about its future prospects, but it remains on shaky ground. In some countries, more than 50% of the population remains in informal employment, and one study notes that 48% of patients diagnosed with cancer in the region face financial catastrophe within a year. Driving insurance penetration will help secure the gains of the middle class, protecting Southeast Asia’s macroeconomic growth engine.
In healthtech, demand for more and better healthcare services will rise, in response to both “pull” factors such as growing workforces and rising incomes, and “push” factors such as the growing burden of chronic and lifestyle diseases. As we’ve written elsewhere, addressing healthcare demand will require bringing together the interests of multiple stakeholders (the trifecta of patient, payor and provider). Credit and insurance will be key to solving healthcare access and affordability in the region. Digital health technology can help to bridge this supply/demand gap with better data, more automation, and more scalable, lower-cost distribution.
In the last few years, the startup ecosystem in the region has been maturing rapidly. The global tech companies choosing to locate regional headquarters here, and the homegrown unicorns, are incubating a ready pool of founder talent for the next generation of startups. They’re attracting more and larger players into the market, so exit opportunities improve and capital can be recycled. The pieces are falling into place for Southeast Asia “Finhealth” to take the next step forward.