KUCHING: ASEAN’s digital economy is projected to reach USD1 trillion (RM4.05 trillion) by 2030, but the benefits may not reach beyond the major cities.
Mastercard Division President for Southeast Asia, Safdar Khan, said ASEAN’s digital economy could expand well beyond that mark if the ASEAN Digital Economy Framework Agreement (DEFA) is implemented effectively.
“But the real test is whether this progress will narrow divides or deepen them,” he said.
Malaysia, he said, reflects the same crossroads playing out across ASEAN, with growth in fintech, e-commerce and digital payments sitting alongside stubborn gaps outside major cities.
“In 2023, the digital economy accounted for 23.5 per cent of GDP, with projections rising to 25.5 per cent by 2025,” he added.
The pressure point is rural participation, where connectivity, affordability and literacy still limit access to the digital economy.
“According to the Malaysian Communications and Multimedia Commission (MCMC), rural broadband penetration remains below 60 per cent, compared to nearly full coverage in major cities,” Khan said.
The test for leaders is whether they can build the conditions that make digital participation easier and safer to adopt.
“However, it’s crucial for leaders to understand that the path toward inclusive growth lies not in technology alone,” he reiterated.
Khan said the priorities include building collaborative ecosystems, strengthening support for micro, small and medium enterprises (MSMEs), reinforcing digital trust and using tourism to widen participation.
He said a functioning ecosystem rests on five pillars, spanning policy and governance, access to finance, infrastructure beyond city limits, education and digital literacy and inclusive design built on trust.
“Innovation does not flourish in isolation; it requires an ecosystem where policy, infrastructure, capital and education move in tandem.
“Those pillars become measurable only when they translate into day-to-day adoption by businesses, especially smaller firms that anchor employment and local commerce,” he added.
MSMEs sit at the centre of ASEAN’s economic fabric, yet too many are blocked from finance and digital systems that could lift productivity and revenue.
“They constitute 95 per cent of businesses and more than half of all jobs across the region and in Malaysia, contribute 39.5 per cent to GDP, employing nearly half the workforce,” he stressed.
Khan said the financing gap remains a structural constraint, compounded by access hurdles.
“SMEs face a USD5.7 trillion financing gap and many remain excluded from digital financial systems,” he lamented.
He pointed to tailored solutions such as open-loop payments for transit, real-time payments, flexible credit lines and card-based lending models as ways to widen participation without adding heavy debt burdens.
“Such solutions succeed because they meet entrepreneurs where they are, simplifying access while building digital confidence,” he said.
Cyber risks, he noted, are a direct brake on adoption by merchants and consumers, making trust a central test of inclusion.
“Cybercrime costs ASEAN economies $27 billion to $36 billion annually, according to United Nations (UN) estimates,” he shared.
Malaysia’s own fraud losses show why confidence must be built into digital systems through partnerships, cyber defences and education.
“Malaysia alone recorded RM1.22 billion in cyber-enabled fraud losses between January and October 2024,” Khan added.
He also framed tourism as a practical route to widen everyday digital use, particularly for smaller operators.
“In 2024, Malaysia welcomed 38 million visitors, up 31 per cent year-on-year, with Southeast Asian travellers accounting for nearly half of total spending,” he said.
He said the push for seamless payments can spill into domestic opportunities when small hospitality providers, transport operators and street vendors gain access to digital payments.
“What begins as a convenience for international visitors becomes a gateway for local inclusion,” he shared.
Looking ahead, Khan said ASEAN’s diversity is both a challenge and a strength, with private capital signalling confidence even as large gaps remain in banking access and participation.
“Venture capital investment in the region’s digital economy has risen nearly sixfold, from USD777 million in 2015 to USD4.4 billion in 2024,” he added.
He said the numbers underline the scale of unfinished work, including adults still outside formal finance and digital financial participation that has not kept pace with connectivity gains.
“The reality is that 70 per cent of adults remain unbanked or underbanked and while the pandemic brought 400 million new internet users, digital financial participation still lags behind,” he reiterated.
He said the DEFA, set for completion in 2026, is a rare opening to close the gap by harmonising trade rules, fostering cross-border commerce and strengthening digital capabilities for women entrepreneurs, rural innovators and youth-led startups.
“The DEFA set for completion in 2026 offers a once-in-a-generation opportunity to close this gap,” Khan concluded.
