The digital economy in Southeast Asia has experienced rapid growth in recent years, transforming the region into a digital-first area with escalating internet penetration and adoption levels. Since 2016, the region’s internet users have doubled in the six largest countries: Singapore, Vietnam, Indonesia, Malaysia, The Philippines, and Thailand. 

Thanks to growing internet penetration, the region is also experiencing overall growth in its digital economy, which includes cashless payments, e-commerce, social media usage, and more. These countries represent strong growth prospects, with an estimated USD 600 billion in Gross Merchandise Value (GMV) by 2030.  

We looked into the future of Southeast Asia’s digital economy in 2023

This evolution of the digital economy is not just a trend but a potential game-changer that could unlock overall prosperity for these countries, thanks to a young, digital-savvy population. 

Let’s dive into the salient features of the region’s rapidly changing economic landscape.

Path to digital adoption

Southeast Asian countries are taking well-planned and coordinated steps towards wider digital adoption. They recognise that digitalising can be the key to unlocking overall economic growth and that coordinating with other ASEAN countries will help each country boost its economy.

The ASEAN Digital Masterplan 2025 has emerged as a guiding light in shaping national policies, laying down a comprehensive roadmap for countries to become digital-first. It focuses on critical areas such as improving broadband and internet coverage, providing public infrastructure, and expanding digital financial services. 

Efforts by international agencies are also helping the region. For example, the World Economic Forum’s “Digital ASEAN” initiative involves:

  • Shaping regional data policy.
  • Assisting with digital skills training.
  • Building a standardised digital payments infrastructure.
  • Helping develop cybersecurity measures. 

Rise of eCommerce and the digital economy 

A study by Google, Bain & Company, and Temasek found that the region’s digital economy has grown 8 times over the past 8 years, and its current value stands at more than USD 100 billion. 

Increased internet penetration, from 34% in 2013 to more than 73% in 2024, has led to the growing adoption of digital products and services. Numerous businesses that leverage the internet have sprung up to reach consumers and provide goods and services. The recent global pandemic helped spur this growth further due to lockdowns and consumers wishing to have everything delivered to their homes.

Further, observations show that several new Southeast Asian startups are nearing profitability. Achieving this milestone could be critical in indicating that the area has a sophisticated digital economy. Several stakeholders are playing a part in this growth, including the governments, which are doing their part by creating a supportive ecosystem by building the necessary public infrastructure and having a favourable regulatory framework.  

Expanding financial inclusion 

Several traditional areas of business are becoming digitised. Work previously done on paper is now widely completed using devices and the internet. Some of the most significant sectors in the midst of digital transformation include finance, HR, operations, customer experience, and more. 

Financial inclusion is a key concern in the digital economy, particularly in Southeast Asia, where around 70% of the population lacks access to basic financial services. However, growing internet access enables financial service providers to reach previously underserved consumers.

For instance, Akulaku in Indonesia aims to provide banking services to rural consumers previously outside the financial system. With so many people not having a bank account or only having access to the most basic financial services, they cannot protect their money against inflation, and they do not have access to any form of formal credit. 

One solution to changing this is peer-to-peer lending. While banks may be reluctant to provide risky microcredit, rural economies can lend within themselves, opening a new avenue for credit. 

What’s next: Challenges and opportunities

While rural areas are seeing a rise in internet connectivity, there is a widening gap between the demand and supply of services, and some online services are still unavailable. In some cases, eCommerce platforms do not have delivery networks that can access the more rural parts, leading to unfulfilled demand. 

Several other challenges still need to be overcome. Researchers report insufficient infrastructure, such as road networks, which prevents businesses from building cost-efficient business models. 

Further, cross-border services still need to be improved for many businesses. Standardised and coordinated international regulations and treaties can help countries benefit and leverage each other’s capabilities. It can be significantly more challenging for smaller firms to navigate diverse sets of regulations, which can hinder the evolution of the digital economy in the region. 

Overall, the digital economy in Southeast Asia has come a long way over the past decade. Countries within the region have surpassed several milestones, such as high levels of internet penetration and building public digital infrastructure. While there are a few challenges, ASEAN will likely continue to improve its digital landscape and watch its economy grow.