Southeast Asia and DeFi’s Big Bet on the Unbanked

In one of the more striking early scenes from P.T. Anderson’s 2007 film, There Will Be Blood, there is a gas explosion that destroys the drilling rig set up by oil tycoon Daniel Plainview. Noticing one of his employees observing the situation dejectedly, Plainview rebukes the man, saying: “What are you looking so miserable about? There’s a whole ocean of oil under our feet. No one can get at it except for me!” 

Access to and possession of that oil would catapult Plainview, like it did many of his real-world counterparts, to the highest stratosphere of wealth. These days, rather than turning paupers into princes, oil more often serves as a means of transforming princes into the owners of the world’s biggest sports teams. But one can be forgiven for seeing parallels in the mania of that time and today’s focus on what is currently one of the most dynamic aspects of global finance, namely the race to reach the unbanked. 

An economic force unrealized

While western countries are rife with banking services that cater to all demographics, in emerging markets the situation is quite the opposite. Southeast Asian economies number among the world’s strongest and yet banking penetration levels in these countries are shockingly low. 

A recent report from Bain and Company estimated that around 70 percent of the adult population of Southeast Asia is either unbanked or underbanked. This is a whopping figure, especially considering that the six leading countries of Southeast Asia combine to have a population of around 570 million people and a collective GDP projected to reach $4.7 trillion in the coming years. Reaching these people with adequate services represents an ocean of opportunity, which has triggered a race of sorts to do so.  

Ending the reign of cash

Cash is still king in these countries, but how long can the dam hold? In the Southeast Asia region, 50% of people are unbanked, meaning they do not have access to even the most basic banking services, like a savings account. Without a bank account, individuals are unable to receive any banking services including lines of credit. 

This is particularly problematic for medium and small-sized businesses, which constitute the majority of businesses in Southeast Asia. The above-mentioned report notes that millions of these kinds of businesses struggle to overcome substantial funding gaps due to the limited options available to them. 

Integrating the Southeast Asian demographic into the fabric of global…