The baton has been passed from West to East. As the world’s economies go digital, Southeast Asia is taking the lead in digital economy growth.
According to the IDC InfoBrief commissioned by 2C2P and MRC, Southeast Asia’s digital economy has experienced tremendous growth, reaching USD 143 billion in 2021. This figure is projected to increase by another 17.1%, outpacing other regions like the US, China, and Europe to reach USD 314 billion by 2026.
Much of this is attributed to sustained growth in ecommerce and sharing economy services in Southeast Asia, along with the rebirth of online travel and other digital services.
Digital payments are widely embraced across Southeast Asia, accounting for 80% of the region’s gross merchandise value (GMV) in 2020 and are expected to reach 92% by 2026.
It is clear that the digital economy is deeply rooted in Southeast Asia. Why are opportunities for digital economic growth so plentiful in this region?
The answer lies in the combined efforts of governments and the private sector to support the growth of the digital economy.
On the private sector’s end, mobile wallets are crucial for providing digital financial services in Southeast Asia, where over 70% of the population are either unbanked or underbanked.
Due to the mobile wallet’s versatility, Southeast Asia has seen an uptick in users. According to 2C2P and MRC’s commissioned report with IDC, 2021 recorded a total of 199 million mobile wallet users in Southeast Asia, projected to reach 426 million by 2026.
Cross-border payment solutions like Alipay+ facilitate seamless flows of money across borders. They enable merchants and businesses to accept payments via local wallets endemic to each Southeast Asian country.
Buy Now, Pay Later (BNPL) has also surged in popularity in Southeast Asia due to its low barriers to entry, such as not requiring a credit card and being interest-free.
BNPL has reached a modest transaction value of USD 2.8 billion in 2021, expected to reach USD 12.6 billion by 2026.
Southeast Asia’s governments are also instrumental in developing the region’s digital economy.
In Singapore, for example, the government introduced the Singapore Quick Response Code (SGQR) to unite the services of all digital payment providers under one central QR code.
Looking ahead, five Southeast Asian countries will further develop their digital economies by linking their respective RTP systems: Singapore, Thailand, Malaysia, the Philippines, and Indonesia. Singapore, Thailand, and Indonesia have started their integrations, with the rest slated for completion further down the line.
Governments are also exploring central bank digital currencies (CBDCs) as they allow for a freer flow of currencies, improve accessibility to funds, and lower costs. Presently, over half of Southeast Asia’s governments have embarked on or completed studies of CBDCs.
While Southeast Asia takes the lead in digital economy growth, there are challenges that businesses continue to encounter in this region.
1. Southeast Asia is highly diverse and fragmented
Southeast Asia comprises countries that have developed in unique ways, each defined by a different payment landscape. Singapore’s card-dominant landscape starkly differs from Indonesia's mobile-friendly landscape.
2. Fraud is on the rise
The rise of the digital economy in Southeast Asia has made the region a target for fraudulent activities. 2C2P and MRC’s commissioned report with IDC found that in 2021, 23% of Southeast Asia’s internet users were victims of fraud, with Indonesia, Malaysia, and Vietnam recording the highest incidents.
Southeast Asia is especially vulnerable to phishing/pharming/whaling attacks. ‘Fraud migration’ is also a major problem, where fraudsters shift their operations to a different country depending on the regulatory and security environment.
A wealth of opportunities awaits you in Southeast Asia. However, challenges are plenty – while the region is undoubtedly experiencing rapid growth, predators are also looking for their moment to shine.
To help you on your business journey through Southeast Asia, 2C2P has partnered with the Merchant Risk Council (MRC) and IDC to put together a report on ‘How Southeast Asia Buys and Pays 2022: New Opportunities, Connectivity and Risks’.
In this report, 2C2P and MRC explore Southeast Asia’s latest digital payment trends and associated challenges. With fraud emerging as the most salient of these challenges, MRC steps in to outline key considerations and recommendations to tackle them.
Download your free copy of our report here.
As a dedicated payments expert in Southeast Asia, 2C2P is equipped with a wealth of insights to help businesses navigate the region’s complexities. Learn more about our full suite of payment solutions here.
About Stefan Kuhn
Stefan Kuhn is the Director of Risk and Compliance at 2C2P. For more than 20 years, he has built an illustrious career in finance, with a strong focus on governance and compliance. Before 2C2P, Stefan held leadership positions at Citibank, Standard Chartered Bank, Credit Suisse, and Cake DeFi. In 2022, Stefan became a member of the Merchant Risk Council APAC Advisory Board.
About 2C2P
2C2P is a full-suite payments platform, helping global enterprises operating in emerging markets to securely accept payments across online, mobile, and offline channels, as well as providing issuing, payout, remittance, and digital goods services. It is the preferred payments platform of tech giants, online marketplaces, retailers, and other global enterprises.
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