DESPITE Southeast Asia’s relatively lower e-commerce use against countries like China, Japan, and Korea, the region is positioned to become the next frontier of the digital economy, thanks to its young and expanding population, said UK-based lender HSBC.
With roughly 630 million population in total, the Association of Southeast Asian Nations (Asean) is expected to have another 120 million more inhabitants over the next 15 years. The world’s seventh largest economy also has one of the youngest populations.
Disposable income among Asean citizens is also rising. Kevin Martin, HSBC regional head of retail banking and wealth management for Asia Pacific, noted that disposable income in Asean is gradually rising, with 125 million middle class households by 2025 or roughly double the number in 2010.
“All this means is that for businesses, bankers and investors, Asean offers a large, dynamic and eager consumer base, and one they can tap and service increasingly easily via digital tools and mobile handsets,” Martin said in the HSBC report, “Asean: Primed for a Digital Future”.
In 2016, internet penetration in the region was at 260 million, but the number is expected to reach 480 million by 2020.
Meanwhile, in terms of online marketplaces, the UK-based lender found out that cash-on-delivery remains to be the largely practiced mode of payment, or roughly three quarters of online transactions.
“While Asia-Pacific, as a whole, accounted for 40 percent of global e-commerce sales in the first quarter of 2017, the vast majority of those sales went to China, Japan, Korea, Australia, and India rather than Southeast Asia. But that leaves plenty of room for growth, and positions the region as the next frontier for e-commerce and digital payments,” noted the HSBC official.
Financial technology (fintech) companies are also gaining ground in the region like that of Indonesia’s Go-Jek and Thailands’s Omise. HSBC also noticed traditional banks investing significantly in digital capabilities for better and faster banking and payment experience.
Further, some Asean governments are starting to embrace digital innovation in the financial system. For one, HSBC noted Bangko Sentral ng Pilipinas’ (BSP) efforts to put in place an e-money and IT risk framework to enable an environment of fintech innovation.
“Asean is on the cusp of an all-encompassing digital transformation, with technology promising to offer a new way of life and better experiences for consumers in this dynamic region. The opportunities are numerous and ripe for the taking; the challenge is to be quick, bold and flexible to change,” HSBC concluded.