Southeast Asia has taken many years to develop the bedrock of its digital economy. Internet usage has increased while mobile phones play a major role in transactions, with online payments becoming a daily occurrence. The next challenge is increasingly not just whether nations have digital connectivity, but whether their systems can actually work together.
When a business operates across ASEAN, having access to the internet in several markets is only the starting point. Payment systems, invoices, digital identities, signatures, transactional and regulatory requirements all operate through separate national systems. As digital trade expands across borders, this fragmentation is becoming a bigger challenge than connectivity itself.
The ASEAN Digital Economy Outlook 2026, developed by the World Economic Forum in collaboration with ASEAN, draws on input from more than 4,500 businesses and identifies persistent challenges around cross-border payments, invoicing, identity verification, electronic signatures and data transfers.
We take a look at where Southeast Asia can still compete as AI funding concentrates globally.
From national digital systems to a regional digital economy
The distinction matters because ASEAN’s digital economy is increasingly regional by nature. A Malaysian software company can sell to a customer in Indonesia, a Singaporean logistics platform can work with suppliers across Thailand and Vietnam and an SME in the Philippines can provide digital services to clients elsewhere in the region. Yet the underlying systems supporting those transactions may not communicate seamlessly.
While a company may be capable of accepting an online order from another country within ASEAN, it may still encounter separate procedures for customer verification, invoice issuance, contract signing, data processing and receiving payments. Behind the scenes, what appears to be one digital transaction can actually consist of several independent processes. Here is where interoperability comes into play. The objective is not to develop a single digital system that operates throughout ASEAN, but rather to ensure that national systems are able to recognise and interact with each other.
The ASEAN Digital Economy Framework Agreement (DEFA) is intended to move the region in this direction. ASEAN substantially concluded negotiations in October 2025, with the remaining outstanding issues resolved in May 2026. The agreement is intended to support a more integrated, interoperable and seamless digital economy across the region.
Digital trade needs to work end to end
The first challenge is making digital trade genuinely digital from beginning to end. Today, a company may find clients through online channels, negotiate electronically and accept digital payments, only to encounter manual procedures elsewhere in the transaction process. Businesses may need to reformat trade documents, repeat data entry across markets and navigate different compliance requirements in each jurisdiction.
DEFA places emphasis on facilitating end-to-end digital trade, including digital trade documents and processes. This matters particularly for SMEs, which generally have fewer resources to maintain separate compliance and administrative systems for every market they enter. The ASEAN Digital Economy Outlook 2026 identifies the fragmentation of digital trade processes as an ongoing issue, reinforcing the need to make cross-border transactions more seamless.
Payments and e-invoicing need to speak the same language
Cross-border payment linkages are already making it easier to transfer funds between participating ASEAN markets. But for businesses, compatible invoicing, reconciliation and accounting systems are also needed. From the perspective of an SME, the problem is more practical. While customers may pay electronically, sellers still need to issue invoices that comply with local requirements, reconcile payments and maintain records for tax and accounting purposes. This creates opportunities for infrastructure providers that can connect payment systems, accounting platforms and e-invoicing networks rather than requiring businesses to operate each process separately.
Digital identity and signatures need cross-border recognition
Identity verification is another potential bottleneck. A customer or business may already have a verified digital identity in its home country, but that does not automatically mean a company operating elsewhere in ASEAN can recognise the same credentials. The same issue applies to electronic signatures. Digital contracts can be created and signed very easily, but their practical value for international business operations depends on whether they are legally recognised and technically interoperable across jurisdictions.
DEFA addresses digital identification and electronic authentication as part of the broader effort to build trust in cross-border digital transactions. In the context of startups, this creates a range of possible solutions relating to business identity, KYC systems and API-based authentication that can translate between different national requirements.
Data governance has to become more practical
It is becoming common practice for companies to transfer information related to customers, operations and finances across borders. However, ASEAN nations have varied laws and regulations on issues such as privacy, cybersecurity and data transfers. The aim is not necessarily to achieve regulatory uniformity across all ASEAN nations. Instead, businesses need clearer mechanisms to understand where data can move, what safeguards are required and how compliance can be demonstrated.
This could create demand for tools that automate data compliance, map regulatory requirements and help businesses manage cross-border transfers without having to interpret every jurisdiction manually. For technology startups, the gap between national data regimes could become a market in itself.
SMEs need interoperability to be affordable
Large multinational companies can afford teams of lawyers, compliance specialists and technology engineers to navigate fragmented systems. SMEs generally cannot. That makes interoperability particularly important for ASEAN’s smaller businesses. A regional digital economy only becomes meaningful if smaller companies can participate without having to rebuild their technology stack for every country.
MSME participation has therefore become a key part of ASEAN’s digital integration agenda. This shifts the focus from simply developing infrastructure towards making this infrastructure usable and accessible for companies of various sizes. This is also where startups can play a role. Instead of competing with national infrastructure, companies can help build the connective layer between different national systems.
The startup opportunity sits between the systems
Some of Southeast Asia’s next technology opportunities may therefore emerge in less visible areas of the digital economy. E-invoicing infrastructure, trade documentation, compliance APIs, business identity, payment orchestration and cross-border data tools may not attract the same attention as consumer apps or AI platforms. But these systems solve a fundamental problem: helping different digital ecosystems communicate. The same principle applies to digital trade. Infrastructure is not simply the physical layer of the technology economy. It also includes the standards and systems that allow businesses to operate across markets.
ASEAN’s next test is whether digital systems can work together
DEFA provides a framework for addressing some of these gaps, but its impact will ultimately be measured by what businesses and consumers experience in practice. For an SME, the test is simple: can it sell to another ASEAN market, verify its customer, issue an invoice, sign a contract, move the necessary data and receive payment without encountering a maze of disconnected systems? The next phase of Southeast Asia’s digital economy will increasingly be judged not by how many digital systems individual countries build, but by how seamlessly a company can move between them.