Digital payments and e-commerce booming in South and South-east Asia

INDIA, Indonesia and Singapore are expected to lead the pack both in the absolute value of digital payments and the compound annual growth rate (CAGR) between 2020 and 2024, according to Deloitte and Inclusion Fintech Conference in their latest study of emerging digital life in South and South-east Asia.

India leads the pack at nearly US$69.17 billion in terms of value of digital payment with an expected 2020-2024 annual CAGR of 19.5 per cent. Indonesia takes the second spot at about US$35.51 billion and 15.7 per cent CAGR.

Singapore rounds up the top three spots at nearly US$14.94 billion and 9.3 per cent CAGR.

Indeed in just two years from 2017 to 2019, global users of electronic wallets skyrocketed from 500 million to 2.1 billion. China and India accounted for 70 per cent of all users.

China, Japan and South Korea hold the lead in terms of the quantity and scale of digital payment use. India and Indonesia meanwhile have reached the second echelon of digital payment volume because of the sheer size of their population bases.

The report noted that this trend of digital payments is still at an initial stage across both South and South-east Asia. Singapore is the only exception, as the Republic has a fairly mature digital payment landscape.

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In Malaysia, the Philippines and Thailand, the business model of digital payment is in its initial stage but there has been a rapid increase in digital payment transactions, noted the report.

In Pakistan and Bangladesh on the other hand, digital payment started late and had a lower level of development due to less advanced financial technology. As such, the digital payment growth rate is strong and the number of users is increasing much faster than it is in South-east Asia.

Deloitte and Inclusion identified four factors driving the rise of digital payment:

1. the huge and young population in both regions;

2. the high degree of smartphone penetration and extensive choice of mobile applications which makes users more inclined to use mobile e-commerce than those in developed economies;

3. smartphones and digital payment are able to help people access financial services quickly and conveniently, reducing the time and cost of transactions. This is particularly attractive for countries in both regions that lack inclusiveness in traditional finance; and

4. most countries realised the importance of the digital economy long ago and have introduced a series of policies that support its development and facilitate the development and promotion of digital infrastructure.

In fact, several national governments have launched basic digital hardware projects to accomodate 4G and 5G networks, creating broad prospects for the financial technology sector in these two regions, thus setting the stage for increases in digital payment volume, said the report.

Asia leads the world in e-commerce and mobile e-commerce

Meanwhile, Asia leads the world in terms of popularity and growth of e-commerce. Driven by South-east Asia's increasing number of Internet users and growing familiarity with online shopping, the region's spending on e-commerce is expected to continue to achieve double-digit growth in the coming decade.

Asia's US$2.45 trillion of e-commerce retail sales are set to account for 62.6 per cent of the global total in 2020. The region has four countries in the 2020 global top 10 for e-commerce retail volume: China (first), Japan (fourth), South Korea (fifth) and India (eighth), and four of the top 10 e-commerce growth rates: the Philippines (25.0 per cent), Malaysia (23.0 per cent), India (21.0 per cent) and South Korea (19.5 per cent).

It is estimated that by 2024, sales in Asia will exceed US$4 trillion and account for 65.9 per cent of the global market.