The Future of B2B FinTech: Enabling the SMBs

Sruthi Srinivasan
8 min readSep 5, 2020


By Sruthi Srinivasan (COO of Atlantis — SEA) & Gaurav Sharma (CEO and Founder of Atlantis)

The engines of the world economy have a tendency to shift between regions, and an early marker of such shifts is quantified by a simple saying: follow the money. One region that has seen an immense amount of interest from businesses and investors in recent years is Southeast Asia (SEA). Upon closer analysis, it is clear why this region presents an exciting story of growth, and more importantly, opportunity.

Since the late 1970s, SEA has dramatically outpaced the rest of the world in terms of GDP per capita growth — income growth has remained strong since 2000 owing to political and macroeconomic stability. With a combined GDP of US$9.34 trillion in 2019, and the 3rd largest labour force on the planet, SEA is an economic powerhouse. To put these numbers in context, if ASEAN were a single country, it would rank as the world’s 5th largest economy and the 3rd most populous, and it is on track to being the 4th largest economy by 2025.

However, these numbers are only one part of the story. The other part is the young, enterprising, and increasingly connected population that calls this region home. SEA boasts one of the fastest growing Internet economies in the world. Since 2015, every month has seen more than 3m Southeast Asians go online for the first time. With the seamless adoption of the Internet, there has been a steep increase in the number of digital consumers, creating a thriving US$100 billion Internet economy (Fig 1).

The current Covid-19 pandemic has accelerated the pace of this transformation significantly. 2020 alone has seen five years’ worth of digital transformation compressed into one. The total number of digital customers in SEA was expected to hit 310 million in the year 2025. Research by Facebook and Bain & Company indicates this number will be reached by the end of 2020. Further, online spending is expected to increase at an even more astounding pace — 3.2 times between 2018 and 2025 (Fig 2).

This internet economy is estimated to grow at over 20% CAGR, and is projected to account for ~8.5% of the region’s GDP by 2025. For context, it is currently at 3.7% of GDP.

Fig 1: Southeast Asia Internet Economy Market Size; Fig 2: Average spend per digital customer; Source: e-Commerce SEA 2019; Google, Bain, & Temasek

SEA is also home to one of the world’s youngest populations — with a median age of just 28. A major contrast to aging populations in Japan, USA, China, and the EU.

This young, ambitious, digitally-savvy consumer group is poised to drive growth in the region, and businesses have not failed to recognize the opportunity of serving their growing needs. Entrepreneurs across the region will try to capitalize on these trends by utilizing technology to create efficient business models with a focus on the ‘digital-first’ customer (Fig 3).

Whilst rife with opportunity, the region is also fairly complex, with significant cultural, religious, and economic barriers to overcome. SEA is not a monolithic market, and businesses and investors need to be conscious of these differences when charting out a strategy for the region.

Fig 3: Digital Payments and Remittances are at an inflection point

Understanding the Opportunity

What does innovation and opportunity look like in an economic powerhouse of a region driven by a young, ambitious population? The answer lies in an important, but underserved group: Small and Medium-sized Businesses(SMBs).

To better understand if the sentiment on the streets matched the hype in the tweets, I (Gaurav) spent the latter half of 2019 traveling around SEA. My objective was to observe, listen, empathize, and document my findings. What frustrates businesses and consumers across the region? Can these problems be solved? Will digitization be accessible to all? Can traditional businesses adapt with tech? Do they plan to?

Across countries, one group left a strong impact: SMBs. Powering incredible economic growth in the region yet entirely underserved by the large, enterprise-focused tech players, SMBs stand to gain — and give — far more with support.

SMBs are the Growth Engine of the Region

SEA’s 75m+ SMBs are the powerhouse of the region’s economy, contributing to 70% of the region’s GDP (US$ 2.7B), and accounting for 52% and 97% of total employment. Understanding the pivotal role that these enterprises play in driving economic growth, regional governments across SEA have launched Covid-19 support packages to help them tide over this difficult financial period. FinTechs have played an important role in enabling these businesses to gain access to government aid. As we battle the Covid-19 pandemic, partnerships between SMBs, FinTechs, and governments are expected to pave the way for nation building and economic progress.

Who is building for SMBs?

Covid-19 has made digitization a necessity for SMBs. In a socially distanced world where larger numbers of consumers are taking more parts of their life online, businesses that do not follow suit with their offerings run the risk of losing out on the growth opportunity.

Despite this, SMBs in the region are still not fully on the digital bandwagon. This is not to say that they are averse to digitization — in fact, a recent study conducted by Bain & Company, found that 80% of SMBs view technological change as an opportunity.

The reason for this is that SMBs in the area are left significantly underserved, as tools and services in the market do not solve their most urgent needs. Adopting a large enterprise-like solution is often too costly, and smaller B2B-focused players often do not provide adequate functionality to solve the basic needs of their clients. The majority of these SMBs, therefore, must resort to manual tools or a hotchpotch of products and services ‘to get the job done’ rather than benefiting from solutions that are created for their specific size and scope. This is both expensive and inefficient.

If the first wave of digitization in SEA focused on the consumer, digitization 2.0 will be driven by solutions and services that help businesses. We have seen this evolution take place in developed markets, where companies like Square have built successful businesses ecosystems that focus on SMB-centric solutions.

In SEA, SMBs are looking for digital solutions that will assist them with their daily operating needs and help them better focus their energies on core activities such as sales growth and business expansion (Fig 4).

Fig 4: SMB Needs

Digital Credit — The Big Opportunity

A further impediment faced by SMBs is the lack of adequate credit available to them. Securing loans or credit has never been easy for SMBs — the absence of a stable and predictable portfolio is seen as a drawback by banks and financial institutions. Even before the pandemic, 61% of Singaporean SMBs held low credit standings and not more than 15% in fast-growing economies had access to the credit they required. The additional delays in payments induced by the pandemic has made this situation worse.

In Southeast Asia, SMBs face significant obstacles to raising finance from regulated sources. As a result, they often succumb to unauthorized money lenders who charge extortionate interest rates or end up having to borrow from friends and family. According to our internal analysis, there is a credit gap of ~$480B for SMBs across the region, with over 48m businesses actively seeking funding. Both these areas provide significant opportunities for digital disruption, either in providing tools to ease business operations or in offering access to faster, more efficient pools of capital (Fig 5).

Fig 5: Southeast Asia SMB Credit Gap (Source: Atlantis Analysis 2020)

With the small business credit gap continuing to plague SMBs across Southeast Asian markets, the opportunity to fill that gap through data technology is significant. Combining traditional and alternative sources of data to generate detailed insights on SMB business performance is key to connecting businesses to capital.

The growth in internet access and smartphone penetration in developing economies will create an increasing demand for digital financial services ranging from credit, cash management, invoicing, accounting, and even insurance. Incumbent banks often lack the technology infrastructure and investments needed to capture, process, and understand SMB cash flows. This opens the door for FinTech companies to build robust solutions.

The evolution of the digital world has finally evened out the playing field for alternative lenders to build efficient distribution rails to reach geographically dispersed businesses. The reach, speed, and efficiency of the Internet will allow alternative lenders to build new credit modules that effectively factor in the risk of SMBs without having to invest in the traditional ‘feet on the street’ model.

Further, with the onset of the ‘intelligence’ phase of the Internet, the decision-making ability of these alternative lenders will be faster with more efficient disbursals, allowing SMBs to focus on growing their businesses as opposed to engaging in tedious processes to open accounts, access credit, and get support.

A word of caution: To truly revolutionize the industry, businesses looking to enter the alternative lending space need to be cognizant of the complexities involved in each country and the skills required to build out credible risk and collection systems.

Enabling Regulations + Regional Collaboration = Force Multiplier

One of the most impressive aspects of SEA is the significant collaboration that exists between the countries. A good example of this can be seen in the ASEAN Strategic Action Plan for SME Development, whose mission is “seamlessly integrated SMBs to the ASEAN community and inclusive development in the region.” (Fig 6)

Fig 6. ASEAN SMB’s Strategic Goals & Desired Outcomes; Source: ASEAN Strategic Action Plan For SME Development 2016–2025

By encouraging cross-border collaboration and integration, regulators are taking proactive steps to remove roadblocks for SMBs’ inter-regional aspirations. Businesses in the region should take a page out of these governments’ playbooks and realize the immense benefits of collaboration — these markets cannot be won with a ‘winner-takes-all’ mentality.

In addition to ASEAN inter-country collaboration, regulators from each major country are also creating favourable conditions to encourage technological advancements across sectors. In Singapore, MAS has set up the FinTech Regulatory Sandbox, enabling financial institutions and FinTech players to experiment with innovative financial products or services. In Malaysia, regulators have established a Digital Free Trade Zone that facilitates cross-border trade through e-commerce and market access, allowing SMBs to reach global customers with greater ease.

The Challenge is Clear, so is the Opportunity.

At Atlantis, we want to partner with the dynamic SMBs of SEA by building solutions that will help them overcome the operational challenges associated with Covid-19 to achieve growth.

By creating contextual, responsible, and transparent products and services, we want to empower Southeast Asian SMBs to maximize their growth potential, and help them set a new standard for opportunity, empowerment, and economic freedom.

All the pieces to drive a digital transformation that turbocharges the engines of SEA are now in place. The opportunity is upon us.

It is time to build for the SMBs.

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