An Economy of Emerging Entrepreneurs

Everyone’s talking SMEs right now, and no wonder. It is estimated that around 99% of all Asian and Pacific companies are small-to-medium sized enterprises. It cracks open some misconceptions, and dramatically so.

That number translates into around 17 million formal SMEs in the Southeast Asian region, adding an average 42% to national GDP, and contributing 62% to nationwide employment.

The scale of informal micro-enterprises is also astonishing. Around 65-75% of all businesses are one-person services or vendors, with a single family typically owning more than one stall exclusively servicing a localised niche. Forget ‘side’ hustles – this is a region with an inherent tendency to self-sustained entrepreneurship.

Isolation Implies Interconnection

It’s unsurprising that this region has such a voracious appetite for new product and service solutions. Geographically disperse, sprawling across confusing time zone demarkations, Singapore’s Silicon Hub is separated from its equally tiny, just-as-explosive partner, Hong Kong by the South China Sea.

However, the region is tethered together tighter than any country’s internal communication could hope. The virtual hum of business across the airwaves makes international exchange a no-brainer. Near total penetration of stable internet makes integrating complex teams feasible. Within minutes, teams accustomed to spending 12+ hours per day on mobile services operating hitch-free across Indonesia, the Philippines and Vietnam can coordinate. Much of the developed West with its traditional systems can’t keep up.

Applications, Adoption, Affinity

This innate need for interconnection underpins the seamless adoption of new technologies across the Asian Pacific, and becomes a self-fulfilling cycle. Southeast Asia is service-agnostic, which is to say that there is little loyalty to brands, and users are quick to switch to faster, cheaper, better options. Competition is tough. While there is ubiquity, there is also innovation.

FinTech: Emerging Heavyweight

We could consider FinTech as an obvious case study. The Asian Pacific is currently the world’s largest FinTech user as per the EY Global FinTech Adoption Index, with some of the most niche innovations shaping the market. Since 2017, Fintech market has nearly tripled in Singapore alone. With deregulation, digital services have been able to move into the vacuum where traditional banking services haven’t penetrated the market, and currently shape the environment. China and India blaze ahead with adoption statistics nearing the ninetieth percentile, but the Southeast Asian region is warming fast.

With the average mobile subscriptions ranging between 1.4 – 2.5 per person, the adoption of financial technologies stands at two-thirds of the population in Hong Kong, Singapore, and South Korea.

Wealth management, Personal Finance Management platforms and services for the unbanked have seen enormous growth in the last 5 years. To put a number on that, we’re talking 5000 or so companies regionally and counting. The Asian Pacific has seen around $850 million invested into alternative lending and more than $570 million into payment solutions. Another area of rapid growth is InsurTech and digital insurers, reported by PWC to comprise around $932 million total investment to date.

Ubiquity does not mean Utility

Much like the bursting “dot.com” bubble in 2001, those providers that can’t solve a problem come and go in cycles lasting around 3-5 years. Those that continue to innovate and simplify, however, enjoy ever-increasing traction and growth.

And more to come

In the coming year, it is likely we will see even greater advancement of multi-service apps for streamlined funnelling of e-payments, utilities, personal finances, and insurance. My personal interest is in seeing how the investment market changes in the coming year. The upwards trajectory shows no signs of slowing, but rather, like the complex ecosystem it is, naturally selecting for the best performers.