Consumers in South and Southeast Asia are living the digital life

01 December 2020 Consultancy.asia

A new Deloitte report has found that South and Southeast Asian economies are on a fast track to the ‘digital life,’ owing to a number of ongoing and immediate factors. Singapore and Malaysia are leading the way. 

In a report produced in collaboration with Inclusion Fintech Conference, Deloitte hints at a digital life being one where consumption, entertainment, business and finance – essentially all walks of life – are or can be managed online. The firm lists seven metrics of digital life in a market: mobile phone penetration, mobile internet speed, digital payment maturity, online shopping maturity, social media activity and policy support.

For a number of reasons, South and Southeast Asia are markets ripe for the adoption of digital life. Front and centre is the sheer size of the region’s population, the majority of which falls in the young working age. Growing up in the era of gadgets and social media, consumers in the region are comfortable with the online paradigm.

Portrait of digital payments in South and Southeast Asia

It also helps that the maturing of these economies has coincided with a boom in the global financial technology (FinTech) landscape. Many in the region remain “unbanked or underbanked,” according to Deloitte, although most have access to the internet via mobile devices. These factors combine to throw mobile-friendly FinTechs into the spotlight, as a popular alternative for payments and other transactions.

Even mobile-based ecommerce has reached new highs in the region, owing to the high mobile penetration rates. What results is a vast pool of young consumers willing and able to adopt digital applications for any function. Governments are privy to the opportunity here, with many backing digital adoption through targeted policies. All this was before the pandemic.

In light of an unprecedented health crisis and monumental shifts in consumer behaviour, Deloitte examined how the digital life is panning out in the region. Consumers of all ages from Singapore, Malaysia, Thailand, Indonesia, the Philippines, India, Bangladesh and Pakistan were surveyed for the study.

Global e-commerce sales (USD billion) in 2020; mobile phone e-commerce as proportion of total e-commerce

The central finding: digital life adoption has been given a boost this year. In fact, nearly 80% of consumers have increased their use of digital services in light of the pandemic. A key driving force here, according to the research, is digital payments.

“Digital payment is a key enabler is creating and connecting digital life for consumers, making a fundamental shift in social interactions, financial services, digital entertainment, daily life services and shopping habits,” explained Taylor Lam, Deloitte China Technology, Media & Telecommunications industry leader. As FinTech continues its surge in Asia, there are some interesting payment trends to note.

For instance, most digital payments come during an ecommerce transaction, although peer-to-peer money transfers are also picking up. Consumers are increasingly enticed by the sheer convenience of digital payments, while the ability to pay contactless during the pandemic is a clear advantage. Also in the plus column is that digital payments come with schemes and promotions. 

Reasons for shopping online in South & Southeast Asia

All things considered, there is still some way to go for the segment. While popular, digital payments have not penetrated the big-ticket transaction space as of now, with nearly 70% of consumers reporting online transactions of $30 or less.

For now, frequency alone is driving the payments boom. Outside of ecommerce and mobile banking, consumers in South and Southeast Asia are paying online for services such as ride-hailing, news and other reading, workplace collaboration, as well as a whole host of entertainment options such as music and video streaming. Evident from these findings is that digital life adoption is thriving in the region.

Leaders in digital life adoption

That being said, not all countries are at par when it comes to digital life. Across the seven dimensions listed, Singapore emerged as a ‘digital life leader,” with strong government support, widespread participation and adequate digital infrastructure. Malaysia followed closely owing to similar strengths, while Indonesia also placed in leaders bracket.

Regional variations in digital life adoption

Thailand and Philippines are positioned as digital life ‘followers’ by the report. “Although digital applications are not as rich as in leading countries, the digital economies in follower countries are on the verge of expansion. With good digital foundations and effective policy promotion, they are rapidly approaching the leading countries,” explained Lam.

India stands alone as a digital life ‘prospect.’ The positives are high mobile penetration and strong network security, while the barriers are slow internet speed and a preference for cash. That being said, government initiatives are underway to boost digital payments in the region, which could make it “the next digital power” according to Deloitte.

Lam rounded up the list: “Bangladesh and Pakistan in South Asia's are the countries with the farthest to catch up in digital life. Due to slower social and economic development, their digital infrastructure and mobile phone penetration rates are some way behind those of other countries. But this does not mean they are digital life "deserts". On the contrary, some of the digital services rooted in their national conditions have become vigorous sources of economic development.”