SME lending and incubation is a big opportunity for Digital Only Banks in ASEAN

Macroeconomy-trends and customer pain-points are the real tailwinds that create the most disruptive business models. Yes, the founder’s execution matters, but a lot has to fall in place before a business becomes successful.

Digital Only banks can learn from the Shark-Tank or the VC community. Every time a SME pitches an idea the VC’s offer the full ecosystem- Accounting, Business Development, Procurement, Manufacturing, offline and online growth solutions

Image-Shark Tank

SME Pain-points and their financial inclusion is the biggest opportunity in South East Asia

  1. How and Why to startup?
  2. Help with the regulatory affairs?
  3. How to have an online presence?
  4. How to run marketing campaigns across digital platforms and lower CAC (customer acquisition cost)?
  5. How to procure at the lowest possible cost?
  6. How to manage real-time inventory systems?
  7. How to participate and integrate with online marketplaces and offline communities? How to protect rights and prevent cannibalization?
  8. How to receive manage invoices and receive payments with one integrated PoS systems?
  9. How to maintain books?
  10. How to manage business expenses and bills?
  11. How to pack and ship the products or serve the customer with minimum friction?
  12. How to establish the people and HR/payroll systems?
  13. How to own and use the customer and process data?
  14. How to launch customer loyalty and reward programs?
  15. How to ensure that minimum paperwork is there and real-time dashboards available around business performance?
  16. How to file the regular tax filings and GST’s?
  17. How to access the best-in-class technology solutions, software to automate business and to minimize costs?

Every question highlighted above is a real-pain point not just in one market but across hundreds of countries. The opportunity is huge in a post-COVID-2019‘ contactless’ world.

No amount of governments and Fortune 500 companies can create the number of jobs needed to absorb the ‘employable workforce’

SME’s are the backbone of every economy.

Look at SME’s as a % of all firms and the Persons employed by SME’s in the below table.

Image- ISEAS

MSME’s matter a lot for India too- About 110 million people are employed by the MSME sector alone.

Image -MSME annual report

SME ecosystems are emerging in both Fintech and Non-Fintech World

  1. The SME ecosystem-based business models need to ask themselves are they providing revenues and growth first or are they charging the SME first. Online marketplaces first generate revenues, and some payment players like Stripe and Square are also helping with working capital solutions.
  2. Solutions that only cost money to the SME even though they may be resulting in saving money for the SME, ultimately get disrupted by platforms that provide revenue first and then take a certain % as the operational cost or solution fee.

Shopify- Helps merchants go online in the fastest manner possible by helping them with customized stores and integrated payments solutions.

Recently partnered with Walmart in June 2020, to expand the reach of the participating brands (its 1200 PLUS SELLERS) by giving them placement in Walmart Marketplace’s that has 120 million monthly visitors. They are direct competitors to Amazon, which singlehandedly holds the majority share in the US eCommerce market.

Xero — Full fledged accounting and invoicing solutions for the start-ups and even established business.

Image credit- Xero

Square -PoS, Lending, Seller, and Buyer ecosystem


GRAB- The leading mobility player in the region and now also the Digital Banking license recipient


Amazon Lending Business- Why amazon wins is that it always goes after the entire value chain of SME ecosystem- Selling, Packaging, Shipping (Prime), AWS cloud support, Lending models.

It even sells Amazon-branded packets in which the sellers can pack and ship the shipments.

Uber- It just did not sign up the existing car owners as drivers, but also helped a lot of drivers with just driving license to own, finance, or lease a car.

Stripe Atlas- It is going after the goal of increasing the GDP of the internet.

Stripe ecosystem helps merchants and developers with API/tools to launch market places in a matter of minutes and simplifies payments and end to end business hassles for them like ID/Verification, and global payout settlements on a real-time basis. One of the companies that are my personal favorite along with Square and it is poised to get bigger and better in the future.


Shopee -Sellers Program- Shopee has emerged as the ‘new’ and clear winner of eCommerce opportunity in South east asia. Backed by SEA Group , Shopee is a power player is one of the most famous groups of SEA. It is amazing story , how it outsmarted Lazada to capture e-commerce market share across a lot fo SEA markets and even Latin America. The group also has a Gaming business (Garena), payments business called SEA money, and also won the Digital Banking License in SEA.

Lazada -merchants ecosystem- Powered by Alibaba Technology infrastructure. Lazada is trying to replicate Alibaba’s success story beyond the China mainland in SEA. Acquired Redmart for grocery delivery opportunity.

Urban Company in India — This model helped in organizing the service sector- beauty saloon, cleaners, plumbers, repairmen can list there services on the platform. It is the UBER equivalent of service business.

Zomato Food delivery- A lot of small restaurants that could not invest in a fancy restaurant facility, could sell on India’s biggest food delivery platform. It also employs a lot of delivery workers via its partner agencies.

7 IMPERATIVES: So what can the SME-focused ecosystems or digital wholesale banks do?

  1. Access to Online Marketplaces-The digital-only banks (with e-commerce and mobility)background can help to bring SME’s into the new digital economy. Businesses that bring new sellers and service providers into the economy are the ones that create the highest value.
  2. Growth before chargebacks-Create revenue before taking your cut. Bake the pie and then take your share. Give them access to new markets, new consumers
  3. New Operating models that regulations permit- Think like a 360' incubator, accelerator, or a Y-combinator. Alibaba and Amazon usually make strategic investments too. Break the rules, not the laws.
  4. One-stop solution- If you could provide a one-stop solution to the SME then they will transact within your ecosystem.
  5. Never cannibalize and keep things transparent-Design trust-based systems, and craft win-win value sharing agreements. Do not over-charge or over-complicate things for the business owner. Online marketplaces and fintech platforms that fail are usually culprits of greed. They failed to pass on value to the partner.
  6. Transaction data and AI-based lending systems- Digital wholesale banks and vertical banking entities have access to the merchant’s transaction data. Thus they can customize the lending product to the needs of the merchant. The rates can be much lower than the traditional banking loan products.
  7. Frictionless experience- Create a frictionless customer journey- ranging from digital KYC, onboarding, personalized recommendations and fintech products, optimal click application processing, loan disbursement, and repayment systems.

Just a matter of time before these disruptors get the model right outside China as well. SEA, LATAM, Africa and India are ripe for SME disruption.

Best regards,

Sidhartha Sharma

Digital Strategy, Fintech, and Platform expert



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Sidhartha Sharma- Future of Tech, Digital & Data

~17+yrs Consulting- McKinsey & BCG-Digital Strategy, Ecosystems & Ventures | Start-Up Mentor | Platforms | Digital-First | Author & TEDx Speaker. Views Personal