Frost Radar™: ASEAN Peer-to-Peer (P2P) Lending Market, 2020
The Association of Southeast Asian Nations (ASEAN) peer-to-peer (P2P) lending industry is disrupting the small and medium enterprise (SME) loan market that is primarily served by banks. P2P lenders are launching products that use technologies such as machine learning and artificial intelligence (AI) to shorten the entire lending process from more than 4 weeks to 1 week or less. P2P lending platforms complement the existing financial system and empower individuals with an alternative investment opportunity that did not previously exist.
The role of SMEs among ASEAN member states is significant, contributing between 36% (Thailand) and 57.0% (Indonesia) to their country’s GDP. Despite underpinning the region’s economic growth, many SMEs in ASEAN countries cannot obtain loans from mainstream commercial banks (including government-assisted loans), which forces them to struggle with day-to-day business. P2P lending platform providers look to fill this gap by extending services to the un- or under-banked SME segment of the market. The gap is particularly large in Indonesia, the Philippines, and Vietnam.
For a P2P lender to grow at breakneck pace, it should continually invest in automating business processes. Although lenders have to a large extent automated on-boarding, loan disbursement, and loan servicing, work remains to fully automate the loan underwriting process. Automating their processes positions P2P lenders to focus next on acquiring new borrowers and new investors, which will bring down the overall cost of underwriting a loan to a fraction of previous rates.
P2P lenders must target more customer segments, offering them customized products that appeal to their specific needs. For example, Funding Societies’ introduction of a loan geared toward used car dealers is a first-of-its-kind offering in the region. P2P lenders should also look to expand beyond their local reach, taking their offerings and experience in servicing loans for SMEs from one geographic location to another.
In a field of more than 250 ASEAN industry participants, Frost & Sullivan independently plotted 16 notable companies in this Frost Radar™ analysis based on their excellent growth or innovation capabilities. The Frost Radar™ reveals the market positioning of companies in an industry using their Growth and Innovation scores as highlighted in the Frost Radar™ methodology. The document presents competitive profiles on each of the companies in the Frost Radar™ based on their strengths, opportunities, and a small discussion on their positioning. Frost & Sullivan analyzes hundreds of companies in the industry and benchmarks them across 10 criteria on the Frost Radar™, where the leading companies in the industry are then positioned. Industry leaders on both the Growth and Innovation indices are recognized as best practice recipients.
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