Report

The Southeast Asia Credit and Risk Management Market is expected to register a CAGR of 10.93% during the forecast period.

Key Highlights
- Credit risk management solution provides a centralized platform for storing consumer credit profiles, allowing financial organizations to instantly access essential data that would otherwise take time to locate. Many market vendors in the SEA region are developing AI-powered credit management systems enabling BFSIs to predict delayed transactions based on previous transaction volumes and payment habits, which can improve the credit decisions of the organization.
- The Southeast Asia region consists of many emerging countries, including Malaysia, Vietnam, Thailand, and the Philippines, which have been registering a significant growth rate in their economies for the past few years and have created a demand for capital inflows in the region through increasing purchasing power and MSME sector growth. According to the Asian Development Bank, there are over 71 million MSMEs in the SEA region. MSMEs dominate private sector businesses in Southeast Asia by contributing 97.7% of the market share, which is creating a demand for lending organizations in the region because qualified MSMEs can raise working capital from banks. Thus, the increasing trend of lending to individuals and enterprises in the SEA region is driving the market as BFSIs require credit and risk management solutions to minimize their credit risks. For instance, the S&P Global Ratings published a report stating that the Malaysian banking sector loan growth would be around 5 to 6% this year due to the country's economic stability, which would maintain Malaysian enterprises' and consumers' creditworthiness.
- In addition, Thailand has planned to establish banks to increase competition and improve financial inclusion in the country. According to a report by the Central Bank of Thailand, these digital banks should make it easier for underserved and unserved categories of retail and SME clients to obtain financial facilities, including credit services, which would increase the market opportunity for the credit and risk management solution providers in Thailand because these solutions can be used in automating the lending processes of the digital banks in the country.
- However, financial institutions are among the most strictly regulated industries in which regulatory agencies of the SEA region have specific risk management and compliance objectives that require specially designed credit and risk management solutions based on the needs of the business. These can be difficult to implement in the process and creates an additional burden on market vendors to design highly customized solutions. Thus, the complexity of the lending process and the need for highly reliable and customized credit and risk management solutions to predict an accurate major for lending is challenging the market adoption in the SEA region.
- Credit and risk management across the BFSI sectors in the SEA region transformed due to the COVID-19 pandemic as BFSIs had to adapt to the latest risk procedures, including new risk technology and risk-evaluation indicators. The need for the unification of various risk solutions, the use of AI technologies, and the enhancement of overall implementation processes have enhanced market growth in the post-pandemic time.


Southeast Asia Credit and Risk Management Market Trends

High Inflow of Credit Needs, Owing to the Increase in Purchasing Power, Drives the Market


- The high inflow of credit needs owing to the increase in purchasing power of consumers is one of the significant drivers for the adoption of credit and risk management solutions in the region. Many major countries in the region, such as Singapore, Thailand, and Malaysia, attract the attention of global companies and investors willing to do business in the region. Singapore and Malaysia are among the world's fastest-growing economies. This allows them to reap the benefits of the region's growth. SMEs, coupled with the presence of multinational companies, are emerging as the driving force of Southeast Asian economies.
- Southeast Asian countries like Singapore offer a favorable business environment due to the country's sophisticated digital infrastructure, strong legal system, and vast talent pool. For instance, the country built a vibrant ecosystem featuring global R&D labs for leading Fortune 500 companies and over 150 venture capital funds, incubators, and accelerators. Further, according to Singapore's Budget 2023, the country will introduce a 15% minimum effective tax rate for large multinational enterprises (MNEs) based in Singapore from January 1, 2025.
- Moreover, after the COVID-19 pandemic, the economy has rebounded in Southeast Asia. The need for finance has been growing in micro, small, and medium enterprises (MSMEs) and large enterprises, thus propelling the demand for effective credit and risk management solutions in the lending sector companies to identify, measure, and mitigate the risks involved in financial decisions. For instance, according to Bank Negara Malaysia, SMEs are a key component of the Malaysian economy, contributing more than a third of the GDP. Banking institutions are the main source of financing for SMEs, providing more than 90% of total financing.
- Emerging businesses such as start-ups from the various sectors, such as telecom, retail, and automobile sector in the Southeast Asian economies, are expanding their operations, indulging in new product launches owing to increased purchasing power, thus significantly driving the need for credit. For instance, Yamaha Motor announced the expansion of its robotics business by establishing a new company in Singapore. The new company aims at growing its business in Southeast Asia and India, where demand for robots is rising.
- Similarly, other companies are launching new products to expand their businesses. Such factors are further driving credit needs, thus proliferating the demand for credit and risk solutions in the BFSI sector to enable the automation of lending, credit risk analysis, and the ongoing monitoring of financial risks involved in decision-making processes.
- Such instances are analyzed to boost the adoption of credit and risk management solutions in commercial lending sector businesses such as financial institutions to ensure that the market, operation, and credit risks are understood and effectively managed. The credit and risk management market is expected to witness significant growth owing to the high credit needs of enterprises and the favorable business environment offered for business growth by many countries in the region.


Cloud to be the Fastest Deployment Mode


- Risk management in the banking industry presents one of the most considerable opportunities for cloud computing, including financial (such as credit, market, and liquidity) and nonfinancial hazards. Cloud computing might offer significant advantages when risk management players are required to analyze larger volumes of data in a shorter time, frequently due to staffing and financial restrictions.
- Cloud-based solutions can be used to combine various data sources and systems swiftly and effectively by risk management teams. Some solutions do not require complex setups between a bank's systems and those of a third party since they feature conventional, user-friendly web-based interfaces. Moreover, due to economies of scale, cloud providers can provide modern, secure cloud ecosystems that are significantly more robust than customers operating their own systems. Several organizations stand to gain considerably from this. A well-implemented cloud strategy with efficient cloud risk management might increase cooperation, drive corporate development, and result in operational efficiency and higher customer satisfaction.
- Further, cybercrime and the attack surface of cybercriminals have expanded due to the rise in internet usage, online banking, and the digitization of financial services in Southeast Asia. The vast amount of data and money that financial institutions store, make them a potential target for cyber-attacks. The breach of the Singaporean bank is one of the most notable examples of the surge in cybercrime in financial institutions over the last few years. In response, last year, the Monetary Authority of Singapore emphasized risk management guidelines for financial institutions considering the use of public cloud services. The advisory suggested corporations develop a cloud risk management plan, considering elements like vendor lock-in and industry best practices, like the least privileged access principle and multi-factor authentication.
- Nevertheless, there are also difficulties with the cloud that must be considered, such as getting value for the money, managing cloud services, cloud governance, compliance, regulatory needs, and the potential for a skills gap in cloud management abilities. Thus, various agencies are finding ways to resolve issues that might drive market growth during the forecast period.
- The market is anticipated to register significant growth rates in the region due to the rising awareness of cloud benefits among end-users, thereby significantly driving adoption rates.


Southeast Asia Credit and Risk Management Industry Overview

The Southeast Asia credit and risk management market is moderately fragmented as vendors in the market have partnered with many AI-based startups in the SEA region to increase their capabilities in providing credit and risk management solutions to BFSIs, making the market competitive.


- February 2023: Baiduri Bank, a prominent supplier of financial services in Brunei, teamed with AI FinTech finbots.ai, a Singapore-based company, to modernize its credit risk management capabilities as part of an initiative to transition core banking to a cloud-based SaaS model.
- September 2022: The consumer intelligence and risk assessment firm Bizbaz in Singapore received USD 4 million in a seed round headed by HSBC Asset Management, the investment division of the British HSBC Group. Banks, insurance firms, and find startups-ups may benefit from Bizbaz's consumer intelligence and risk management solutions. The companies are attempting to attract or onboard new consumers through such investments, which are anticipated to drive market growth through adopting these solutions.


Additional Benefits:

- The market estimate (ME) sheet in Excel format
- 3 months of analyst support