Southeast Asia’s digital future is already here

Southeast Asia’s digital transformation is already having far-reaching implications for businesses in a region that is home to almost 700 million people.¹

Trade in telecoms, computer and information services in the 10-member Association of Southeast Asian Nations (ASEAN) more than doubled from USD31 billion in 2013 to USD79 billion in 2022.² Internet penetration has increased fast: between 2013 and 2021, average rates for ASEAN rose from 34% to 73%.³ This trend is creating new growth opportunities for businesses in the region that are able to keep up with the pace of technological change.

A study in 2023 by Google, Temasek and Bain & Company – the eighth annual analysis of its kind – found that revenue in the digital economy across the six biggest Southeast Asian economies passed the key milestone of USD100 billion in 2023, a multiple of eight times what it had been just eight years earlier.⁴

For innovative businesses in ASEAN, the opportunity presented by this transformation rests on progress in three key areas:

• Harmonisation of standards: ASEAN countries have worked hard to improve economic integration and eliminate trade tariffs⁵ – and have increasingly broadened this effort out to non-tariff barriers too.⁶
• Improvement in digital services: The region has a coordinated approach to digital transactions and electronic payments, including through the Digital Economy Framework Agreement.⁷
• Expansion of digital infrastructure: The rapid growth of data centres across ASEAN, most notably in Malaysia,⁸ has led to a material improvement in hardware and infrastructure throughout the region.

Further progress in these areas promises to bring substantial benefits for businesses operating in the region. By digitising operations, businesses can gain from improved efficiency and reduced costs, as well as unlocking new opportunities in the region’s growing digital economy.

The harmonisation of digital and technical standards is an essential foundation for development in a host of other areas. In recent years ASEAN countries have been working intensively to make progress on the harmonisation of trade tariffs standards to bring them in line with international standards.⁹

Meanwhile, the region is adopting increasingly coordinated digital development goals, guided by the ASEAN Digital Masterplan 2025 and other objectives.¹⁰ Areas of focus include improving broadband coverage, extending e-government offerings and expanding digital financial services.

Efforts to boost the digital development of ASEAN are also being supported by the World Economic Forum (WEF) through its “Digital ASEAN” initiative, which includes shaping regional data policy, training in digital skills, building a common electronic payments framework, and assisting in the development of cybersecurity capacity.¹¹

An important element in the region’s own programme is the new ASEAN Digital Economy Framework Agreement (DEFA), officially launched by the region’s finance ministers in September 2023.¹² The unprecedented region-wide framework aims to enhance digital cooperation and promote the interoperability of data and regulations, adding to expectations for rapid development in Southeast Asia’s digital economy. DEFA’s provisions are expected to add up to USD2 trillion to the region’s digital economy by 2030, double a previous assessment by Boston Consulting Group (BCG).¹³

The adoption of new digital services and digital transactions can only happen if the underlying hardware and network capacity powering the modern internet are up to standard. Southeast Asia again has the foundations for rapid growth, thanks to a surge in the development of new data centres to meet demand for cloud computing and artificial intelligence (AI) solutions.¹⁴

Malaysia has emerged as a key data centre hub for the region , with Johor Bahru, just across the border from Singapore, recently named as the fastest growing data centre market in Southeast Asia.¹⁶

The rapid growth of the ASEAN digital economy challenges businesses operating in the region to digitise their own operations to ensure they capitalise on the opportunity. To remain competitive and unlock growth, businesses are increasingly looking to digitise their core functions, including finance, human resources, supply chains and their customer experiences.

Digital financial services is one of the clearest examples of how technology is accelerating the growth of underdeveloped sectors: more than seven out of 10 people in the region have no bank account or have access to only the most basic of banking services.¹⁷

That startling statistic has encouraged the development of a new breed of digital banking provider – like Akulaku in Indonesia, where HSBC has helped finance its growth as it pushes beyond its domestic buy now, pay later origins and into new services and geographies.¹⁸

One of those new digital solutions has been peer-to-peer lending. The Google, Temasek and Bain 2023 analysis found that across the six biggest Southeast Asia economies, lending was the biggest driver of growth in digital financial services revenue.¹⁹ Digital loan book balances rose from USD40 billion in 2021 to USD60 billion in 2023, and are projected to soar to USD300 billion by 2030 – with some USD75 billion coming from small- and medium-sized enterprises.²⁰

With a 135-year history on the ground in ASEAN, and with the benefit of its extensive portfolio of innovative financing, treasury and trade solutions, HSBC is well placed to support clients through this rapidly-changing digital environment.²¹

HSBC has a number of tools to help ASEAN businesses on their digital journey: its USD1 billion ASEAN Growth Fund is intended to help businesses scale up in the region by offering accessible and strategic debt financing.²² And for businesses taking advantage of e-commerce and new digital solutions, HSBC can deploy Omni Collect, a one-stop solution that enables multiple payment methods and a comprehensive overview of all sales collections across markets.

A Malaysian agro-based business, QL Resources, leveraged HSBC Evolve, a tool to execute FX booking and cross-border transactions more effectively and which helps it monitor and better manage its exposure to currency fluctuations at the live-market rate.²³ And global seafood business Thai Union Group has leveraged HSBC’s digital solutions to build resilience into its supply chains, as well as improving efficiency by reducing the need for physical signatures.²⁴

Businesses can capture the full benefits of a rapidly digitising region by developing clear roadmaps, ensuring that they have the right skills in house, and overcoming the barriers of legacy infrastructure. Through its regional presence and sector expertise, HSBC is committed to helping businesses embrace every step of this digital transformation.²⁵