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Digital banks: lessons from South East Asia (part 2)

South East Asia’s expanding digital banking market owes its rapid growth to surging customer expectations and digital penetration – encouraging customers to experiment more. Over 20 percent of the 460 million Internet users (as of 2022) only came online in the past three years. 

Six countries – Singapore, Vietnam, Indonesia, Malaysia, Thailand and the Philippines - are driving the digital transformation in South East Asia (SEA). While Thailand and Vietnam are just beginning their digital journeys, regulators in the other countries have awarded multiple licenses to new digital entrants. 


In Singapore, Malaysia and the Philippines, regulators have already published digital banking guidelines. And digibanks are customizing their offerings based on each country’s demand and services they can provide to the underserved niche segments. For instance, in Indonesia, the Financial Service Authority (Otoritas Jasa Keuangan or OJK) provides digital bank licenses under the umbrella of commercial bank licenses. In Vietnam, digital banking applicants are either partnering with or becoming subsidiaries of existing licensed banks. 


Digital banks in the SEA region began their journey with a focus on payments and managing bank accounts. But they soon recognized the untapped opportunity on the credit side of the business – being able to service the discretionary needs of an aspirational population. Indonesia, Vietnam and the Philippines present significant tailwinds for the progress of digital banks, as approximately 30 percent of these countries’ populations are in the 15-35 age group and over 50 percent of their populations are underbanked or unbanked. 


Super apps and digital financial services thrive in SEA


SEA is home to some of the world’s largest super apps - Grab and Go-Jek in Indonesia, Zalo in Vietnam and Singtel Dash in Singapore. A recent Morgan Stanley report predicted the super app economy to reach $23 billion by 2025. Super app adoption grew exponentially during the pandemic when people had to make their purchases online. The rise of digital financial services like digital wallets spurred their growth as well.


Take the case of Grab, founded in Malaysia in 2012. Begun as a taxi-booking app, MyTeksi (later called GrabTaxi) forayed into other SEA countries with services like delivery, enterprise and financial services and more. Here’s a timeline of Grab’s growth across SEA markets.


  Key milestones Product expansion Country expansion
2012 Grab's first service launch, Grab Taxi   Malaysia


  Singapore, Philippines, Thailand
2014   GrabCar (mobility), GrabBike (mobility) Indonesia, Vietnam

GrabExpress (deliveries)


2016   GrabShare (mobility)


2017 > $ 1B (GMV) GrabPay (financial services) Cambodia, Myanmar

> $ 5B (GMV)

Acquistions: Uber's business in SEA

GrabFood ((deliveries)

GrabAds (enterprise)

2019 > $ 10B (GMV)
> $ 1B (Adj. net revenue)
GrabKitchen (deliveries), GrabMart (deliveries), GrabFinance (financial services), GrabInsure (financial services),   
2020 Licensing rights: selected for digital banking license in Singapore GrabInvest (financial services), 
GrabDefense (enterprise

Setting up digital banks in SEA: licensing 


The Monetary Authority of Singapore (MAS) in 2019 announced the opening of three digital wholesale banks and two digital full bank licenses. In 2020, four digital banking licenses were awarded to a consortium of Singapore Telecommunications (Singtel) and Grab Holding Inc., ANT Group, etc.


In Malaysia, Bank Negara Malaysia issued the licensing framework for digital banks in 2020. Subsequently, 2022 saw five digital banking licenses being  given out. In the Philippines, the Bangko Sentral ng Pilipinas (BSP) published guidelines for the establishment of digital banks and six licenses have been issued by the Certificates of Authority (COA) to date.


The Financial Services Authority (OJK) in Indonesia considers digital banking a business model that doesn't require a specific license. The country has seven licensed digital banks today.


Setting up digital banks in SEA: ownership 


Capital for digital banking licenses and the needed technological infrastructure requires formidable investment. To maintain effective operations and ensure future scalability, ecosystem participants prefer the consortium road. This allows for an uniform distribution of capital and leveraging capabilities like meaningful customer relationships, risk management, compliance and data analytics. In consortium-based ownership, the shareholders could have diverse interests ranging from telecom providers, big techs, and fintech  to incumbent banks as well.


  Incumbent banks Big tech/Fintech Other financial services Telecom Other industries Main shareholder

Line Bank


Y Y _ Y _ Line Financials,
Taipei Bank,
Far Eastone
Telecommunications Co



_ Y _ _ Y PT Metamorfosis,
Ekosistem Indonesia
Y _ _ _ Y Sumitomo Mitsui
Banking Corporation
_ _ Y Y _ Grab , Singtel
Y _ Y _ _ Thai NVDR,
Hong Leong Bank Group,
Social Security Office

Digital banking success: a case study from Indonesia 


Digital banking has been growing year over year in Indonesia, driven by the country's growing economy, increasing mobile penetration and growing demand for online services. By going digital, Indonesia plans to unleash the next level of economic growth - to the tune of $150 billion in annual economic impact by 2025.


Traditional banks in Indonesia are leading the charge in providing digital banking services. Many banks offer mobile banking apps, online banking platforms and digital wallets. Some banks in the country have even launched digital-only banks that provide their services entirely through online channels, from account openings to payments and even loans. Digital-only banks have been especially popular amongst young Indonesians, given the convenience of enjoying banking services on the go, without having to visit a physical branch.


Apart from traditional banks, Indonesia has also seen the emergence of fintech companies offering innovative digital banking solutions. Fintech firms like Gojek, OVO, and DANA provide digital wallets that are widely used in the country for various transactions including bill payments, e-commerce purchases and peer-to-peer money transfers. One should note that the outbreak of COVID-19 played a significant role in driving the growth of digital banking in Indonesia. 


Financial inclusion has been a significant focus for the Indonesian government with massive untapped potential for digital banking in the country. The proportion of the banked population has been increasing in recent years; however, there is still a significant unbanked population, most of which reside in rural locations. Fintech companies are tapping into this section of society and are extending innovative and affordable financial services to this segment. 


Indonesia is home to more than 60 million ultra-micro and micro businesses, according to a World Economic Forum report. The country  has set a target of 90 per cent financial inclusion by 2024 with a special focus on ultra-micro and microbusinesses to overcome the sector’s lack of access to capital.


A noteworthy collaboration is between Bank Rakyat Indonesia (BRI), Pegadaian, Indonesia’s largest pawn lender and Permodalan Nasional Madani (PNM), Indonesia’s largest group lender focused on empowering women – who want to create an ultra-micro ecosystem. In a bid to become one of the world’s largest microfinance institutions, they plan to raise more than 30 million customers out of poverty over the next 4 years in Indonesia. They offer an exhaustive product portfolio that includes group lending products, savings and investment. Their approach will ensure that micro and ultra-micro segments have equal access to sustainable financial services.


To encourage the adoption of digital banking in Indonesia, banks and fintech firms have been making efforts to educate customers about the benefits of digital banking, including convenience, reduced costs, and enhanced security. The government has also been promoting initiatives to improve digital infrastructure, build banking technology, and support financial inclusion – attracting investors to the country and increasing competition amongst firms.

In conclusion, the digital banking sector in Indonesia will continue to grow as banks and fintech companies make the most of the Indonesian government's pro-digital initiatives to compete, win customers and tap into the unbanked population. Our work in the region has  given Thoughtworks a keen understanding of the Indonesian digital bank landscape. We were technology partners in building an Indonesian digital bank from the ground up in less than 4 months. Our experience tells us that the SEA market and specifically Indonesia will see a surge in digital banking players soon.


Disclaimer: The statements and opinions expressed in this article are those of the author(s) and do not necessarily reflect the positions of Thoughtworks.

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