The Future of Fintech in Southeast Asia

September 2020
Thematic investor focused on
Southeast Asia’s financial Europe
technology enablers.
Finch Capital is a thematic VC in financial technology with
combined 30 years of operational experience and 25 years of
investing experience in both Europe and Southeast Asia. Southeast
Finch Capital today manages over $200 million AUM across Asia
two funds, having invested in more than 30+ companies with
4 exits.

In Southeast Asia we focus on Indonesia, Vietnam, Singapore

and Malaysia where we invest in early stage Seed - Series A
companies with Fintech & Embedded Fintech themes. Our
unique investment & portfolio strategy accelerates companies
product-market fit and scalability through collaboration.

Our regional HQ is located in Jakarta, Indonesia, where the

SEA team leverages Finch Capital’s global infrastructure in
Amsterdam and London.
Global multi-stage venture capital firm
backed by Telkom Indonesia.

Investing in seed to growth-stage startups throughout multiple

Independent Associated Fund across various sectors and taking a
thesis-driven investment approach.

MDI Ventures manages over USD 790 million in assets across three
funds with portfolios spanning over ten countries through three
international offices in Jakarta, Singapore, and San Francisco.
Some of our prominent portfolios including Payfazz, Kredivo, MPL,
aCommerce, Nium and Wavecell.
Global intelligence about promising
companies, from startups to unicorns.

Dealroom.co is the foremost data provider on startup,

early-stage and growth company ecosystems in Europe
and around the globe.

Founded in Amsterdam in 2013, we now work with many of

the world's most prominent investors, entrepreneurs and
government organizations to provide transparency,
analysis and insights on venture capital activity.

Our offerings include data sets via SaaS and API as well as
custom reports and bespoke ecosystem platforms.
 Growing ties between the Southeast Asia provides massive
Southeast Asian and European opportunity for both local and
tech ecosystems. European fintech scaleups People, moving to Internet users and
big cities growing fast

Focus is shifting from USA to Asia. The USA Covid-19 is only accelerating the digital
has traditionally been the destination of adoption of financial services in Southeast
choice for scaleups, given its big market, Asia.
talent, capital, and political stability. Unrealised fintech
With 22 million people joining the mobile Unbanked
population exit value in pipeline
Today, those ingredients are equally age every year, Southeast Asia is among
available in Europe and Southeast Asia; fastest growing regions in the world.
perhaps even more so.
Highly engaged mobile audience with high
To succeed in Southeast Asia, collaboration propensity to adopt new technologies
(E-money transactions in Indonesia Annual growth of Internet economy
with established players is key.
internet economy size by 2025
skyrocketed 173% from Jan 2019 to Jan
2020)

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The Future of Fintech in Southeast Asia

Table of contents

Southeast Asia’s booming Internet & Fintech economy

Spotlight on Indonesia, Vietnam and Singapore

VC investment in Southeast Asian Fintech

Exit landscape: $10 billion unrealised value in the pipeline

Southeast Asia’s booming Internet & Fintech economy
The Future of Fintech in Southeast Asia

Growing ties between the Southeast Asian and European tech ecosystems.

Southeast Asian VC funds are investing into European (fintech) scaleups are expanding into
European startups at record levels, led by Southeast Asia, a massive and underserved
Singapore mobile-first population
$1.3B $1.3B

$1.0B
$0.9B
$0.8B
$0.5B
$0.4B $0.4B
$0.3B

H1 H2 H1 H2 H1 H2 H1 H2 H1

2016 2017 2018 2019 2020

Source: Dealroom.co

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The Future of Fintech in Southeast Asia

570 million people and 360 million internet users in 6 Southeast Asian countries.
22 million people joining the mobile age every year.

Population per country as of 2019

United States 325M

Indonesia Internet users 264M

Urban population: 37%
Philippines 105M Capital city: Hanoi
Vietnam 96M
Urban population: 47%
Germany 82M
Urban population: 51% Capital city: Manila
Capital city: Bangkok
Thailand 69M

United Kingdom 66M Urban population: 77%

Capital city: Malaysia
France 65M Urban population: 56%
Urban population: 100% Capital city: Jakarta
Malaysia 32M
Singapore
Netherlands 17M

Singapore 6M

Source: Digital 2017-2020 wearesocial, Hootsuite

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The Future of Fintech in Southeast Asia

Booming internet economy, driven by a fast growing, engaged, young, and

mobile-first audience.
The most engaged mobile audience SEA has the biggest upside
Hours per day using mobile internet Internet GMV as % of GDP

SEA 4.3 USA 11%

USA 2.4 Europe 6.7%

Europe 1.7 SEA 3.7%

Booming internet economy Solid macro growth

Internet GMV growth (2015-2019 CAGR) GDP growth (2015-2019 CAGR)

SEA 32% SEA 6%

USA 12% USA 4%

Europe 9% Europe 3%

Source: Fulfilling its Promise, the future of SEA’s digital financial services. A report by Bain, Google and Temasek.

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The Future of Fintech in Southeast Asia

Covid-19 will accelerate the digital revolution of

financial services in Southeast Asia.
The current pandemic is leading to increased
access to (and need for) digital banking
Banking Payments services. As many as 50% of SEA consumers
% of population being Share of cashless
banked transactions are unbanked; 70% are either underbanked
or unbanked.
█ South East Asia
Today cash is still the primary means of
█ Benchmark (US/UK) transactions. 70% of SME merchants accept
only cash in 2019. The Covid-19 outbreak has
50% 95% 40% 84% drastically accelerated SEA's shift to a
cashless world, with unprecedented growth
in the number of e-payment transactions
amid a sharp decrease in cash withdrawals
Lending Insurance Investment and deposits.
Consumer loans as % of Non-life insurance gross Mutual fund assets under
GDP written premiums as a % of management as a % of GDP
GDP Banking, digital payments and
loan-financing services greatly propelled the
economic wheel forward throughout the
lockdown. Since many fintech firms are
startups, their agility to pivot their
operations to provide specialized services as
13% 24% 1% 6% 12% 55% customers needed them strengthened the
industry.

Source: Fulfilling its Promise, the future of SEA’s digital financial services. A report by Bain, Google and Temasek.

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The Future of Fintech in Southeast Asia

Valuation of the Southeast Asian tech ecosystem is now $108B.

Name HQ Founded Valuation

Valuation of Southeast Asian ecosystem *
#1 Singapore 2012 $14B

$108B #2 Indonesia 2010 $10B

$102B
#3 Indonesia 2009 $7.0B

#4 Singapore 2009 $4.9B **

$65B #5 Indonesia 2017 $2.9B

#6 Indonesia 2011 $2.5B

$46B
#7 Singapore 2012 $2.2B

$21B #8 Indonesia 2012 $2.0B

#9 Singapore 2010 $1.1B

2016 2017 2018 2019 2020E Indonesia/

#10 2014 $1.0B
Philippines

* Source: Dealroom.co. Cumulative sum of the estimated value of all startups in the ecosystem.
** Valuation at IPO
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The Future of Fintech in Southeast Asia

Indonesia and Singapore are the most valuable ecosystems.

Singapore Indonesia Vietnam Philippines Malaysia
Combined
valuation
$60B $35B $5B $4B $4B

$1B+
companies

$250-1B

$100-250M

$0-100M

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The Future of Fintech in Southeast Asia

Indonesia, Singapore and Vietnam are the most

attractive immediate opportunities.
Indonesia’s internet economy has more
Internet users 2019 Internet GMV than quadrupled to more than $40 billion
152M $40B
in 2019 and is well on track to reach $130
Indonesia Indonesia
billion by 2025.
Philippines 68M Singapore $12B
The runner up is Vietnam with $12 billion
Vietnam 61M Vietnam $12B in 2019 with a projected $43 billion by
2025.
Malaysia 26M Malaysia $11B

5M Philippines $5B The biggest contributors are the

Singapore
e-Commerce and Ride-Hailing sectors.
Particularly in Vietnam, homegrown
Internet GMV growth Fintech VC invested since ‘15 marketplaces like Sendo and Tik, who
compete with the likes of Lazada and
Indonesia 49% Singapore $2.6B Shopee, are their key economic drivers.

Vietnam 38% Indonesia $0.8B

Singapore continues to dominate funding
32% $0.6B and is the #1 regional base for fintech firms
Philippines Philippines
with $2.6B raised since 2015, led by big
Malaysia 21% Vietnam $0.5B gains in funding to payments and
insurtech startups.
Singapore 17% Malaysia $0.2B

Source: Fulfilling its Promise, the future of SEA’s digital financial services. A report by Bain, Google and Temasek.

Page / 14
Fintech in Southeast Asia: Spotlight on Indonesia,
Vietnam, Singapore
The Future of Fintech in Southeast Asia

E-money transactions in Indonesia skyrocketed 173% from Jan 2019 to Jan

2020. Two key players are Gojek (Gopay) and OVO.

Founded: 2010 Founded: 2017

Location: Jakarta, Indonesia Location: Jakarta, Indonesia
Valuation: $10B Valuation: $2.9B

A Super App that provides a variety of services from The leading Indonesian payments, rewards
payments, food delivery, transportation and logistics and financial services platform.

Strategic partnerships Started in 2017 by the venture builder arm of the

Indonesia-based conglomerate Lippo Group,
GoPay was the only mode of
E-wallet OVO is Indonesia's most popular
non-cash payment accepted by Gojek
payment option followed by debit cards, ATM
in Indonesia before mid 2019. GoPay
transfer and Gojek’s GoPay e-wallet. OVO
recorded $680 million in total digital
recorded $1.5 billion in total digital payment
payment transaction value in the first
transaction value in the first half of 2019.
half of 2019.

Strategic investors Fintech acquisitions & investments Strategic investors Fintech acquisitions & investments

Source: m2insights Indonesian E-wallet Race 2020

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The Future of Fintech in Southeast Asia

Gen Y and Z are fueling rapid growth of Indonesian

e-payments and peer-to-peer lending.
Alternative lending startups in Indonesia
attract the most funding and secure the
highest number of deals of any fintech
Lending Payments Lending segments. A young population is driving
adoption, being more open to alternative
lending investments compared to the
traditional institutional lending.
Provides alternative installment Agent banking startup using Data Online marketplace connecting
for online purchases without analytics to simplify financial Borrowers and Lenders
credit card product distribution Lending startups as a percentage of total
fintech investment in Indonesia
$120M funding $75M funding $60M funding

Lending Lending Payments

B2B marketplace lending Provides P2P lending for micro Smart mPOS and payment 76%
platform for SMEs entrepreneurs solution for businesses
42% 42%
$24M funding $18M funding $8M funding
16%

2017 2018 2019 2020

Jan-Jun

Source: Dealroom.co

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The Future of Fintech in Southeast Asia

The fintech future of Singapore will be powered by AI

and blockchain.
Since 2016, artificial intelligence and
blockchain enabled fintechs in Singapore
have gained significant traction. The limited
number of such fintech startups make them
Insurance Capital Markets / AI Blockchain even more attractive to investors.

In May, the Monetary Authority of Singapore

kicked off efforts to develop a framework to
ensure the "responsible" adoption of
Mobile-first account that allows A platform that prices and trades Software that enables banks and artificial intelligence (AI) and data analytics
you to save, spend, earn and be exchange-traded products in a insurance businesses to leverage in credit risk scoring.
insured all in one app multitude of currencies blockchain
Blockchain and AI fintech startups receiving
$173M funding $100M funding $23M funding funding rounds in Singapore

Capital markets / AI Wealthtech / AI Regtech / AI

44

27 28
Data-driven venture investment Artificial-intelligence digital asset AI platform helping financial 23
platform management platform institutions combat money
laundering

$14M funding $9M funding $6M funding

2016 2017 2018 2019

Source: Dealroom.co

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The Future of Fintech in Southeast Asia

Cash is king in Vietnam: a huge digital payments

opportunity is rapidly evolving.
90% of Vietnamese consumers opt to pay
cash on delivery for their online purchases, a
much higher proportion than other regional
markets. However, digital payments
Payments Payments Payments technology is evolving rapidly. Payments
through mobile banking services surged by a
whopping 144% per year over the past five
The leading company in the Offering digital payment via an A mobile payment application to years.
electronic payment in Vietnam e-wallet app. shop and make online payments
The rise of digital payments in Vietnam is
$300M funding $134M funding $1M funding supported by the Government. To date, 33
payment licences have been issued by the
State Bank of Vietnam, at a rate of around 1
Payments Lending Banking licence every two months

% of internet purchases paid

with cash on delivery (1)
A mobile payment application Financial marketplace and First digital bank in Vietnam.
with use cases for daily life and peer-to-peer (P2P) lending
business needs platform.
90%
N/A funding N/A funding N/A funding
65%
10%
Singapore Indonesia Vietnam
1. State Bank of Vietnam, Tellimer Research

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The Future of Fintech in Southeast Asia

New models of financing will emerge outside of the traditional financial service.

Financing Education Financing Agriculture Financing Supply chain

Foundation year: 2018 Foundation year: 2018 Foundation year: 2017

Location: Indonesia Location: Vietnam Location: Indonesia
Headcount: 40+ Headcount: 40+ Headcount: 70+

Financial technology company aiming to democratise Agri-finance solution will allow banks to finance the Provide affordable financing for SMEs, which in turn will
access to education in Indonesia through affordable and agricultural sector through the KILIMO App in combination advance and empower the community to grow and
flexible credit with expert loan origination software. develop.

Source: Dealroom.co

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The Future of Fintech in Southeast Asia

Incumbents gaining head start in Southeast Asia's

digital banking race.
At least seven digital-only banks owned by
large traditional financial institutions
Southeast Asia incumbent-backed digital banks operate in Indonesia, the Philippines,
Thailand and Vietnam.

Operating Lunch
Parent Bank HQ Digital Bank
country date
Central banks in Singapore and Malaysia are
preparing to open the banking industry to
digital players. Regulators in the Philippines
DBS Group Holdings Singapore DBS Digibank Indonesia Aug-17
and Thailand have expressed interest in
developing virtual banking frameworks, and
United Overseas Bank Singapore TMRW Thailand Feb-19 other countries could follow suit. Although
the onset of virtual banking regimes will
bring in more competition, large incumbents
Philippines Jan-19 are already learning the tricks of the trade
CIMB Group Holdings Malaysia
with their digital-only banks. The future is to
Vietnam Dec-18
enable these incumbents with software. The
next step is to enable these incumbents with
Vietnam Prosperity Sep-16 software.
Vietnam Vietnam
JSCB Sep-18
In late June 2019, the Monetary Authority of
Singapore (MAS) announced its intention to
PT Bank BTPN Tbk Indonesia Indonesia Aug-16
issue five digital bank licenses to eligible
applicants.

Source: S&P Global market intelligence 2020

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Fintech investment in Southeast Asia
The Future of Fintech in Southeast Asia

Fintech is Southeast Asia’s largest venture capital investment category by

number of backed startups.

Number of VC-backed startups Investment by internet sector

by internet sector Jan 2015- Jul 2020

Fintech 484 Mobility $15.4B

Marketplace Marketplace $7.3B

Health Foodtech $4.9B

Proptech Fintech $4.6B

Mobility Travel

Travel Proptech

Foodtech Health

Education Energy

Energy Education

Source: Dealroom.co

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The Future of Fintech in Southeast Asia

The rise of fintech is accelerated by venture capital investment. Last year, $1.6B
was invested in the region, compared with only $0.2B five years ago.

VC investment in fintech in the SEA region Largest funding rounds 2018-2020

$1.6B
Vietnam Indonesia Vietnam
$300M $100M $100M

$0.9B
$0.9B

Singapore
Singapore Indonesia
$80M
$90M $90M
$0.4B
$0.2B

Indonesia Singapore Singapore

$53M $52M $45M
2015 2016 2017 2018 2019 2020E

Source: Dealroom.co. Gojek and Grab are not included as fintechs.

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The Future of Fintech in Southeast Asia

Much of the increased investment in SEA fintech startups is driven by foreign

investment.

Domestic and foreign venture capital investment into fintech sector in SEA

$1.6B

$0.9B $0.9B $1.2B

Investment from outside SEA
is up 7x since 2015

$0.6B $0.6B
$0.4B
$0.2B
$0.6B Investment inside SEA
$0.4B
$0.6B $0.3B $0.3B is up 6x since 2015
$0.3B

2015 2016 2017 2018 2019

Source: Dealroom.co

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The Future of Fintech in Southeast Asia

Southeast Asia is "fintech battleground" for financial institutions and

established players.

Asian corporates investing European corporates investing US corporates investing

in SEA fintech in SEA fintech in SEA fintech

x x x

x x x

x x x

x x x

x x

Source: Dealroom.co

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The Future of Fintech in Southeast Asia

Top fintech VC investors in Southeast Asia, from seed to late stage.

Late stage
Foreign

Series A/B
Local Foreign

Seed stage
Local Foreign

Source: Dealroom.co. the selection is based on the number of investments since 2013 in each stage. Excludes double counts and follow on rounds.

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The Future of Fintech in Southeast Asia

From disruption to collaboration: accelerating

fintechs product market-fit through strategic Through collaborations, fintech companies
collaborative business models (SCB’s). and Banks can have access to broader
markets, along with a number of other
benefits such as a faster route to
product-market fit where fintech companies
Biz Dev can attain early adopters from Banking
Growth Operations
clients.

We highlight that collaborating instead of

competing with fintechs can provide
innovative tech-solutions for Banks. For
example, shared services and knowledge
will improve product offerings through data
analytics tools like predictive analytics,
SCB offering deeper engagements with
customers.

We conclude that the shift from disruption

to collaboration is largely driven by the use
of a more collaborative business model such
Scaling Product Branding as B2B2C.

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Exit landscape: $10 Billion unrealised value
in the pipeline
The Future of Fintech in Southeast Asia

Exit landscape: there is at least $10 billion unrealised value in the pipeline.

Estimated value of VC-backed fintech startups Selected VC-backed fintech startups

$10B
$8.8B Valuation
A cohort of 200+ startups have above $250M
raised an all-time record of VC
investment in 2019

Valuation
$50M - $250M

$2.3B

$1.0B Valuation
$0.4B $0.6B
below $50M
2015 2016 2017 2018 2019 2020E

Source: Dealroom.co. Gojek and Grab are not included as fintechs.

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The Future of Fintech in Southeast Asia

We foresee 100+ fintech exits between 2020-2023,

driven largely by consolidation play.

While exits in the form of initial public

Forecast: number of fintech exits in Southeast Asia offerings are likely to be few and far between
Based on the current funnel of early stage fintech startups. in this climate, secondary sales may be the
way forward for shareholders seeking an exit
at this time
32

These sales could be to unicorns and

27
regional tech giants which remain well
22 capitalised, and want to strengthen their
20
platforms and widen their product offering.
18 We foresee a majority of exits will happen in
the Payment category.

9 8 This trend seems to already have started in

8
the region with minority shareholders of
2 Grab and Gojek looking to the private
secondary market to cash out on their
shares.
2015 2016 2017 2018 2019 2020E 2021E 2022E 2023E

Source: Dealroom.co

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The Future of Fintech in Southeast Asia

Most of fintech exits happen via strategic M&A with

local tech companies.

Top fintech acquisitions in Southeast Asia since 2015

Breakdown of buyers per location
Acquirer Target Location Sector Amount Date

Domestic 57%
x Indonesia Payments/mPOS $130M Apr 2020

Asia (non domestic) 18%

x Malaysia Payments/E-wallet $100M Apr 2018

Europe 12%
x Indonesia Payments/E-wallet $100M Feb 2017
Australia 8%
x Philippines Payments/E-wallet $72M Jan 2019
United States 6%
x Singapore Payments/Infrastructure $64M May 2016

x Indonesia Payments/Infrastructure $50M Nov 2017

Breakdown of buyers per category
x Vietnam Payments/Infrastructure $34M Nov 2016

Tech scaleups 57%

x Malaysia Payments/Remittance $28M Oct 2018

Corporation 33%
x Indonesia Wealth management $20M Apr 2019
Private Equity 10%
x Singapore Payments/Infrastructure N/A May 2020

Source: Dealroom.co

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The Future of Fintech in Southeast Asia

Payments and Wealth management startups are the main acquisition targets.
New targets emerged in Insurtech and Enterprise Software in 2020.
Fintech acquisitions in Southeast Asia since 2013

Banking

Lending

Investing

Insurtech

Enterprise

Blockchain

Payments

2013 2014 2015 2016 2017 2018 2019 2020

Source: Dealroom.co

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The Future of Fintech in Southeast Asia

The age at exit of fintech startups in Southeast asia is relatively lower than in
Europe and USA.
Years to exit fintech VC-backed startups per region.

Years to exit
Transaction Number of VC As percentage of total VC-backed exits
Region
value at exit backed exits
1 to 3 years 4 to 6 years 7 to 9 years 10 years or more

United States $50B 374 18% 28% 19% 35%

Europe $20B 206 19% 34% 16% 31%

Southeast Asia $1.2B 25 28% 48% 20% 4%

Source: Dealroom.co. Based on VC-backed exits since 2016.

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Finch Capital’s investment thesis in Southeast Asia.

● Stage: Seed - Series A (Early Stage)

● Themes: Fintech in Southeast Asia are still in its early-days, with current startups concentration still around
traditional fintech applications e.g. Payment & Lending. Wealth Management, Insurance Technology, and
Property Technology are predicted to be the next wave along with the applications of fintech in
non-financial sector or Embedded Fintech.

● Market: Indonesia is already Southeast Asia’s largest economy but it is now also poised to become the
region’s largest Fintech hub by 2025 at an estimated USD 130 Bn. The large number of unbanked and
underbanked population make it ripe for digital penetration.

● Business Model: Successful shift from disruption to collaboration between fintechs & financial institutions
are largely driven by the use of complementary business model (B2B2C); enabling faster product market-fit
and scalability across multiple channels.

● Exits: We expect 100+ Fintech exits in the region between 2020-2023 to be driven largely by consolidation
play around the Payment space and later Wealth Management - where we see local tech companies as the
main acquirers.
Finch Capital is a thematic VC in financial Dealroom.co is the foremost data provider on MDI Ventures is a global multi-stage venture
technology with combined 30 years of start-up, early stage and growth company capital firm backed by Telkom Indonesia. The firm
operational experience and 25 years of investing ecosystems in Europe and around the globe. invests in seed to growth stage startups
experience in both Europe and Southeast Asia. Founded in Amsterdam in 2013, we now work throughout multiple Independent Associated
Finch Capital today manages over $200 million with many of the world's most prominent Fund across various sectors and takes a thesis
AUM across two funds, having invested in more investors, entrepreneurs and government driven investment approach.
than 30+ companies with 4 exits. organizations to provide transparency, analysis
and insights on venture capital activity. MDI Ventures manages over USD 290 million in
In Southeast Asia we focus on Indonesia, assets across three funds with portfolio’s
Vietnam, Singapore and Malaysia where we invest Our offerings include data sets via SaaS and API spanning over ten countries through three
in early stage Seed - Series A companies with as well as custom reports and bespoke ecosystem international offices in Jakarta, Singapore, and
Fintech & Embedded Fintech themes. Our unique solutions. San Francisco. Some of our prominent portfolios
investment & portfolio strategy accelerates including Payfazz, Kredivo, MPL, aCommerce,
companies product-market fit and scalability Nium and Wavecell.
through collaboration.

Our regional HQ is located in Jakarta, Indonesia,

where the SEA team leverages Finch Capital’s
global infrastructure in Amsterdam and London.