Wealthtech Industry in Asia Pacific Predicted to Quadruple by 2027

Published 7 months ago

The wealthtech industry in Asia Pacific (APAC) is set for significant expansion, propelled by the region’s growing economy and increasing wealth. According to the ‘WealthTech in Asia Pacific’ report by McKinsey & Company, the APAC wealth technology market is expected to grow at a rate of 25 to 30 percent each year. As a result, its Assets Under Management (AUM) could triple or even quadruple, reaching up to $2.25 trillion by 2027 from around $700 billion at the end of 2022.

D2C and B2B Wealthtech Firms to Experience Rapid Growth

Direct-to-consumer (D2C) wealthtech firms are anticipated to increase their AUM to around $750 billion by 2027, up from $200 billion in 2021. Meanwhile, the AUM for business-to-business (B2B) firms is projected to grow approximately 25 percent per year, potentially reaching $1.5 trillion by 2027.

The Rising Affluent Segment

The McKinsey report also highlights a significant shift in the wealth management industry. While the sector has traditionally been dominated by high-net-worth individuals (HNWI), the affluent segment is experiencing rapid growth due to increasing wealth in the APAC region. By 2027, this segment is predicted to represent 34 percent of onshore personal financial assets (PFA).

Currently, the affluent segment’s compound annual growth rate (CAGR) is eight percent, with a relatively low wealth management penetration of 15 to 20 percent. The report notes that this segment is largely untapped and underserved, presenting a substantial opportunity for wealthtech companies.

The Increasing Need for Retirement Corpus

The report also emphasizes that customers are showing an increasing need for a retirement corpus. This is particularly evident in emerging APAC countries, where the pension to GDP ratio is lagging behind that of developed APAC nations and other global regions.

Indonesia and Malaysia, for instance, both have a pension to GDP ratio of less than two percent, mainly due to their younger populations. According to McKinsey, this presents an enormous untapped market potential for wealthtech companies to explore.