Southeast Asia’s digital economy rose by 67% between 2020 and 2022, a report conducted by Google, Temasek, and Bain & Company states. According to the study, the archipelago nation’s digital economy is on track to top USD 124 billion by the end of 2025

As Southeast Asia’s largest market, Indonesia is well on its way to becoming a key contributor to the global digital economy. Current expectations are that the state of the digital economy in Indonesia will continue to be a talking point as it maintains its upward trajectory after the pandemic ends, bringing even more opportunities for the country to digitalise.

Increasing demands of eCommerce

During the pandemic alone, there has been a 13% growth in digital customers in Indonesia, especially in the eCommerce sector, where online shoppers increased by more than 60%. According to the Google, Temasek, and Bain & Company (2021) report, the pandemic encouraged approximately 88% of internet users, particularly MSME owners, to adopt eCommerce. The move to online sales was crucial for the economy, with over 28% of Indonesian merchants claiming they would not have survived Covid-19 if they had not shifted to digital platforms.

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Even major established players are responding to this digital shift, with bricks and mortar stores like Matahari and supermarkets like Hero introducing online sales and services. In some instances, prominent online players made moves to acquire traditional enterprises, such as GoTo’s purchase of Hypermart stock. This transition has resulted in a hybrid entity with both an online and physical presence. 

As eCommerce grows at a rapid pace, more merchants are turning online. Furthermore, compared to pre-COVID levels, there are significantly more consumers availing of food delivery services. Approximately 64% of Indonesian internet users increased the frequency of making food delivery orders, and 72% stated that access to food deliveries made their lives easier. Food delivery services will continue to be a promising market sector but remain extremely competitive; incumbents are fast expanding even as new players enter the fray.

A widespread uptick in remote working and learning

The use of online platforms for working and learning has risen exponentially due to lockdowns and social distancing rules introduced during the global health crisis. These behavioural shifts are not a one-time occurrence, as many people are likely to continue using digital platforms. With workers being encouraged to stay at home, work and education shifted online.

Consumer interest in video meeting services and educational training programmes such as Coursera, Udemy, Google Meet, and Zoom continue to be very popular.

Working from home (WFH) has become the new normal for some businesses, particularly in the technology and knowledge industries and some parts of the education sector. WFH may not be an option for some companies, such as those working in healthcare, manufacturing, or retail. Many major firms, such as Starbucks or McDonald’s, cannot offer work-from-home options to their employees. Management, business, and finance employees are more likely to work from home than those in sales, construction, office administration, services, repairs, transportation, and factory-floor production.

The increased adoption of fintech

Another notable shift following the COVID-19 outbreak is an increase in fintech adoption. In Indonesia, this shift has been fueled by a large proportion of the population being unbanked and by many lower-income urban areas. Furthermore, the growth and convenience of the digital payment system and the acceleration of digital banking drove the increase in eMoney transactions. According to a recent ISEAS survey, the most popular eWallet platforms in Indonesia (GoPay, OVO, DANA, and ShopeePay) are increasingly utilised by lower-income groups or those with monthly spending of less than USD 265.

While lower-income people favour eWallet applications, higher-income people prefer mobile banking apps. The survey also shows that reliance on eWallet, buy-now-pay-later (BNPL), and multi-finance apps is increasing, with men more likely to use investment apps while women are more likely to prefer lending apps. During the pandemic, BNPL apps became popular for acquiring big-ticket items such as furniture, technological gadgets, and motorcycles and for making household utility payments. The report also found that those with higher education levels are more likely to use fintech services, especially the investment and donation apps, than those with lower education levels. 

What’s next?

The rapidly changing state of the digital economy in Indonesia resulted from the pandemic, with more digital awareness being brought forth by the government to turn Indonesia into a digital hub. For the burgeoning Indonesia digital economy to be sustainable, upgrading the country’s digital infrastructure, including its software and hardware, is necessary. As the digital economy spreads throughout the country, it will be interesting to see how businesses change, adapt, and use accessible digital technologies in their everyday operations and, ultimately, how the entire economy becomes more digitally interconnected in the future.