Fed rate cuts may boost ASEAN fintech funding

Interest rate cuts and emerging tech are driving fintech growth.

ASEAN’s fintech sector, experiencing a funding downturn over the past two years, may see renewed growth as federal rate cuts loom, according to Janet Young, Managing Director and Group Head, Channels & Digitalisation and Strategic Communications & Brand at UOB.

"There is a correlation with the fed fund rate and the cost of funding to the amount of fintech funding that is raised," said Young. She noted that fintech funding peaked at $6 billion in 2021, aided by record low interest rates, but declined as rates rose.

Recent cuts in September 2024 indicate a potential shift. "Moving forward into next year, there is an expectation that there will be a fed fund rate cut that could provide a boost to the overall fintech funding," she added.

Young highlighted how fintech funding has grown tenfold since 2015, with payments and lending leading early developments aimed at financial inclusion. “Payments and lending were the two largest sectors that benefited a lot from fintech in the last 10 years,” she said, adding that recent years have also seen growth in business-to-business (B2B) applications, especially post-COVID, with innovations in blockchain, AI, and digital wealth.

Looking ahead, Young sees generative AI (Gen AI) and quantum computing as transformative forces in fintech. Gen AI has generated renewed interest in AI, with UOB using tools like Microsoft Copilot to improve customer service and productivity. Quantum computing, while less accessible, promises breakthroughs in cryptography and big data analysis, enhancing capabilities in areas like portfolio and risk assessment.