The Rise of Financial Wellness in Southeast Asia

February 2, 2021

Photo Credit: AIHR Digital

Special thanks to Alaguvignesh Thirunavirkarasu and Rohan Jain for their assistance on this piece.

Financial Wellness for Emerging Asia

Financial Wellness is a key determinant in living a healthy life. At its core, it is about effectively managing your economic life. Financial wellness is only possible through access to affordable and responsible financial services. However, for a large population in Southeast Asia, access to financial services has been the first hurdle to a better life. Fintech has exploded to meet this demand, providing cashless payments and digital loans. Yet attaining strong financial health remains elusive and regulators are beginning to prioritize wellness at the cost of access to those who need it most. This is where fintech aims to reimagine the financial services market and disrupt the industry.

“Estimated USD 300B loss due to poor financial wellness”

Financial Literacy in Southeast Asia

In a recent study by the OECD, in Southeast Asia, over fifty percent of employees report they are stressed about their finances and over a third report that issues with personal finance are a distraction at work. Poor financial wellness creates unproductive and disenfranchised workers. This has costed employers an estimated USD 300 billion in productivity losses, much of which is connected to poor financial wellness of their employees.

Traditional Financial Wellness Products

As Financial Wellness becomes an increasing necessity around the world, Financial Wellness Programmes are being introduced as a more holistic solution. Historically, service providers were narrowly focused on single verticals (i.e. lending, savings) to enhance financial inclusion, while financial wellness companies take a more holistic approach towards building long-term financial resilience for individuals.

Fintech and Financial Wellness

The next generation of fintech’s are reinventing financial wellness. We are seeing fintech firms bring credit facilities to groups that were underserved and underrepresented by banks and other major financial institutions. There is a major opportunity in the region for fintech firms to capture. Fintech companies are in a unique position to revolutionise the industry. The agility and data-centric nature of fintech firms allow them to target the rising working class in Southeast Asia. One example of the fintech revolution is Earned Wage Access (EWA).

“The next generation of Fintech’s are reinventing financial wellness”

Earned Wage Access

Earned Wage Access enables consumers to access and withdraw their already earned wages. It’s not a loan from the employer to the employee. For employees this means that they can be flexible on how they withdraw their salary depending on their financial obligations. Earned Wage Access provides a much more affordable and responsible to payday loans.

This is not new to Southeast Asia. Historically, employers have been actively supporting their workforce when in need through employee loans. However, this has created a lot of unnecessary administrative work and is causing cashflow constrains, especially in times of Covid-19. In addition, this benefit was often only available for higher rank of workers and has locked out access to the rest of the population. Until now.

The EWA industry is creating a lot of excitement worldwide, especially amongst investors. Companies such as PayActiv and DailyPay in the US have recently concluded their Series C rounds.  Beyond investor interest, companies see the benefits of partnering with EWA providers.  EWA not only provides a strong financial wellness benefit for a company's workforce, but also helps reduce turnover costs, increase retention and increased productivity.

There is a large opportunity in Southeast Asia for this kind of product to drive financial wellness and ultimately impact the overall wellbeing of the society. There are several fintechs in the region, such as Wagely the leading earned wage access platform in Indonesia, that focuses on financial wellness. International investors are taking notice as this model has been proven in other markets and a favorite for global fintech investors

Source: Crunchbase

The Future is Fintech

We understand that fintech provides major opportunities for the next generation of bold, innovative investors. Technology will be at the heart of financial wellness for many years to come. Customer-centric data-driven value-added services are set to topple the sector, it is time to get in at the forefront of disruptive innovation. Fintech is the next big thing in financial wellness.