Taking Asia’s digital economy to the next level

The digitalisation of commerce in Asia brings choice to consumers and opportunity to businesses. It also provides the region’s societies with a path to greater economic growth and prosperity. Better government and business support of the digital economy is needed though to fully reap these benefits. Greater public and private sector collaborations are also key to unlocking the full potential of digitalisation.

While it can appear that the surge of digitalisation in Asia—driven by better digital infrastructure, deepening Internet and mobile penetration, and rapidly increasing discretionary incomes—is already driving market growth and development successfully, there is tremendous untapped potential ahead. According to Bain & Company, the digital economy contributes only seven per cent to gross domestic product (GDP) in the ASEAN region and 16 per cent in China (as compared to 35 per cent in the U.S.) and stronger digital foundations could contribute an additional $1 trillion to the GDP of ASEAN alone. In most of the Asian countries, cash still dominates, meaning many still cannot access the primary on-ramp into the digital economy. In India alone, digital payments penetration was only 3-5% of personal consumption at the point of demonetisation in 2016. It has since grown to 10%, despite the country being one of the fastest growing e-commerce markets. As of November 4, 2016, currency notes in circulation in India were worth ₹ 17.74 lakh crore, which increased to ₹21.22 lakh crore as of March 22, 2019.

To open new markets, the millions who are still excluded from digital marketplaces, particularly the elderly and the poor, must be addressed. Factors such as lack of access to the Internet and training and education have left millions unable to participate in this digital market revolution.

Further, according to a recent Economist Intelligence Unit report, commissioned by Mastercard, the digital age divide and the digital income divide have meant that the societal gains from today’s digitalisation have already been unequal. In each of the region’s economies, a greater share of those under the age of 35 have used the Internet to make an online purchase or bill payment than those over 55. There’s a similarly wide gulf between the rich and poor.

Differences in regulations and the level of digital infrastructure across the region compound the issue and hinder Asia’s ability to fully reap the benefits of the digital economy.

Digital inclusion

To successfully include all of Asia’s populations in the digital marketplace, it is imperative that people have the ability to acquire the necessary technological and financial skills, and governments ramp up investment and infrastructure.

However, this can’t be left to the region’s governments alone. For one, many governments don’t have the financial resources to allocate adequately to digitalisation. Two, several simply don’t have the bandwidth to look beyond other more basic problems.

This provides an opportunity for the private sector to step up and fill the void. Whether through partnering with regulators and policymakers to shape the regulatory agenda around what is still a relatively nascent industry, investing in people and businesses so they can leverage digitalisation, or helping bring digital infrastructure and services to those left behind, the private sector must play a more active role.

A number of similar ways can be found for companies to work closely with policymakers in offering digital solutions and enhancing digital skills. Governments, for their part, can also further support Asia’s digitalisation by harmonising regional regulations with the aim of supporting the creation of seamless, interoperable platforms with uniform governance across countries.

Ultimately, only a rising tide of a collective regional effort that includes a combination of greater cross-border collaboration and increased financial and digital inclusion will unlock the full potential of Asia’s digitalisation. It will also help create a digital economy that benefits all.

Views are personal.

The author is executive vice-president, digital and emerging partnerships & new payment flows, Asia-Pacific, Mastercard.