The Southeast Asia digital economy is growing and bringing many top innovations and solutions to the world after two challenging years of dealing with the COVID-19 pandemic and its economic fallout. The outbreak accelerated digital technology adoption, and these disruptive creations offer opportunities for boosting the economy and improving society.
According to a new report commissioned by leading payments platform, 2C2P, and Merchant Risk Council (MRC), a non-profit global membership organisation providing eCommerce fraud prevention programs, risk management, and payments optimisation, the Southeast Asia tech trends show that the region’s digital economy will exceed USD 300 billion by 2026.
Top 3 M&As in Southeast Asia in 2022
The report “How Southeast Asia Buys and Pays: New Opportunities, Connectivity, and Risks” surveyed six member countries of the Association of Southeast Nations (ASEAN), namely Indonesia, Malaysia, the Philippines, Singapore, Thailand, and Vietnam. The researchers wanted to uncover the region’s emerging opportunities, risks, and vulnerabilities.
Key report findings
Several factors are fueling Southeast Asia’s rapidly expanding digital economy: growth of the sharing economy and eCommerce, reopening of the region, an online travel resurgence, the adoption of digital services, and more.
Standing at 17.1%, ASEAN’s digital economy growth rate from 2021 to 2026 onwards is outpacing China at 12.7%, Europe at 10.2%, and the USA at 7.2%. Digital services spending per capita will rise to USD 455 in 2026 from USD 128 in 2021, an increase of 109%. Digital economy spending will rise by 121% by 2026, with digital payments growing from 80% in 2020 to 92% in 2026.
The digital economy’s gross merchandise value (GMV) seems set to make up 14% of Southeast Asia’s consumer payments by 2026, representing a rise of 133% from 2021. The growth in domestic payments will reach 296%. Card payments will lead the way in 2026 at 93.9%, domestic payments at 89.5%, and mobile eWallets at 88.3%. The Buy Now Pay Later (BNPL) payment model will stand at 17%, with alternative payments reaching 25%.
These statistics show that ASEAN is now open for business, and startups should start looking for ways to maximise their potential, expand to other regional countries, and adopt comprehensive payment solutions to bolster their companies. Southeast Asia has a young, tech-savvy population, an expanding 5G technology infrastructure, and digital payment options that can help the region thrive.
Payment methods shaping the region
Cash usage is declining in ASEAN, with countries like Malaysia and Singapore limiting cash payments for some government services. Governments are trying to connect their domestic real-time payment (RTP) rails to enhance cross-border digital transactions. Furthermore, major regional markets are working together to create future-proof infrastructure for the interoperability of payment methods.
The payment methods are also evolving, and several have grown in popularity since the pandemic began. Mobile wallet users will reach 426 million in 2026, representing 62% of the population in the region. RTPs’ popularity continues to explode, with mobile banking apps being the leading platforms for those transactions. Mobile wallets and RTPs may become even more valuable once financial transactions become interconnected through an intra-SEA (Southeast Asia) network.
The BNPL payment method offers an alternative to cards and is expected to increase more than three times—from USD 2.8 billion in 2021 to USD 12.6 billion in 2026. Moreover, it is likely to make up 6% of online spending in key markets in 2026.
The implementation of new regulations is helping to protect customers and make them aware of the risks associated with the novel payment methods. They will help create a sustainable and healthier ecosystem for everyone.
Emerging threats for Southeast Asia
Despite the positive Southeast Asia tech trends, emerging threats and vulnerabilities prevent a complete economic revival in the region. ASEAN faces challenges from COVID-19 variants reemerging, geopolitical issues, high-interest rates, and possible inflation, and the diverse payment systems and their complexities also pose a substantial problem for the population.
However, one of the biggest emerging threats is online fraud. According to the report, 23% of respondents were victims of online fraud in 2021. Each surveyed country is vulnerable to phishing scams, card testing, and identity theft. Singapore is susceptible to coupon discounts and refund abuse. Passwords and 2-factor authentication evasion through phishing and cross-border transactions are at risk due to anonymity, regulatory differences, and discrepancies in other countries.
BNPL, RTP, and bank payments have proven to be more secure because they use verification methods such as biometrics. ASEAN could be better off if it embraces artificial intelligence (AI) and machine learning (ML) to process data faster and detect suspicious activity.
The Southeast Asia digital economy growth is promising despite the global issues weighing down the region. Businesses should use the right technologies to guard against online threats and enter into data-sharing agreements to fight fraud. In addition, they should adopt secure and more affordable solutions for digital payments and cross-border transactions.