Southeast Asia solved distribution: Now fintech has to scale on the balance sheet

Southeast Asia's fintech industry has transitioned from a distribution-focused business to a balance sheet-driven industry, driven by the region's public infrastructure. The development of QRIS in Indonesia, PromptPay in Thailand, DuitNow in Malaysia, PayNow in Singapore, QR Ph in the Philippines, VietQR in Vietnam, and KHQR in Cambodia have created 29 cross-border payment linkages by December 2025. This shift from private rails to a public good has changed the dynamics of the industry.

The shift means that distribution is no longer defensible, and margins are now driven by deposits, underwriting, and the spread between them. For micro-merchants, acceptance is now free, and credit is the scarce good. For SME platforms, the question is whether to originate a loan or route it to someone else's book. For regional operators, it determines whether to obtain a licence in every market or partner with one in each market.

The proof of this shift is evident in the financial performance of digital banks in Singapore, with GXS, MariBank, and Trust experiencing losses, while the incumbent banks earned billions. In Indonesia, the nine listed digital banks posted profits, but when looking at return on assets and return on equity, the numbers are thin or inflated.

The 29 cross-border linkages processed $716.4 million in transactions, averaging around $20 per transaction. These are largely tourists buying lunch, not businesses settling invoices. Wholesale connectivity faces deeper constraints, such as capital flow management measures, regulatory divergence, and shallow local currency foreign exchange markets.

For fintech companies already focused on payments, the focus should be on funding costs. Deposits that are cheap and sticky can outperform more downloads. For those outside financial services, building a bank should be considered. Route, partner with someone else's balance sheet, and keep the customer relationship. Buying capability beats buying a licence right now, as regional fintech funding fell to $839 million in the first nine months of 2025, down 39% year on year, with Singapore absorbing 84% of it.