Why tech companies are flocking to fintech

The market and investors seem to have resoundingly approved this approach. Ant Financial has posted more than 65 percent growth in pretax profit in the recent fiscal years. It has also obtained an extraordinary US$14 billion in a series C round to drive its global expansion and further its data collection.

However, the real growth in this sector may come from the possibility of combining financial information with other types of data. Let’s look at Southeast Asia as an example. Startups have already amassed more data on Southeast Asian citizens and their habits than any census could provide because they offer convenient services for free or at a nominal fee.

As competition for markets and customers reaches a stalemate, Southeast Asian unicorns – including Grab, Go-Jek, Razor, and Sea – have expanded their payment options and absorbed fintech companies, specifically payments companies. The top-level competitors have stretched into new other areas like on-demand beauty services and grocery deliveries. But payment technology has been an emphasis for these major players.

This opens doors for new products and services. Grab CEO Anthony Tan has spoken openly of Grab’s plans to use information collected through their fintech products to create alternative credit ratings, which could then be tied to banking products. Go-Jek has also made the leap into credit: its partner Findaya started testing a credit option that allows users to repay at a later date.

Venturing into fintech also positions companies to expand their understanding of customers and improve their non-financial products and services. For example, Sea cleverly leveraged its successful gaming brand Garena to target the fast-growing market of gamers for their ecommerce services. You can bet that it is also feeding back the data mined from its ecommerce platforms to serve users relevant in-game advertising.

Finally, tech companies that go into fintech can open up new revenue streams by selling information to third parties. Even if startups have a niche or small group of customers, the data will be valuable to other players in the market.