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Bridging Southeast Asia's digital divide to drive financial inclusion

Tech is a boon for financial inclusion in Southeast Asia.

Tech is a boon for financial inclusion in Southeast Asia. Image: GoTo Group

Andre Soelistyo
Chief Executive Officer, Gojek
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The Digital Economy

This article is part of: World Economic Forum Annual Meeting

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  • Southeast Asia is experiencing incredible change, driven by the rapidly increasing availability and adoption of technology.
  • The digital economy has brought unprecedented opportunities and sources of income and growth through platforms and tools previously unavailable.
  • Digitization is boosting Southeast Asia’s efforts to accelerate financial inclusion.
  • Opportunities are not equally accessible to all; a pressing digital divide continues to exist in the region and will require localized solutions and strong partnerships in order to ensure truly inclusive growth.

Home to over 660 million people across 10 countries, Southeast Asia is one of the largest and most culturally and geographically diverse regions in the world.

While widely considered a developing region with strong growth potential, Southeast Asia faces several unique challenges. Infrastructure is underdeveloped in many countries across the region. At the same time, micro, small and medium enterprises (MSMEs) – the backbone of the region’s economy – have traditionally operated offline. Furthermore, 70% of the population remains unbanked or underbanked, with little or no access to credit or financial tools to invest and save for the future.

For a long time, these factors have hindered the ability to unlock Southeast Asia’s full potential. But in the last few years, change has been evident, led by the growing use of technology among its population.

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Technology: a boon for financial inclusion

With the increasing affordability and availability of smartphones, access to the internet has risen rapidly in parallel. The COVID-19 pandemic has accelerated this process, with 60 million new consumers in Southeast Asia joining the digital economy during the pandemic alone. This adoption of technology, both hardware and digital services are creating a more level playing field, enabling people to tap into new opportunities and improve their lives in a way that was not accessible before.

In the vast archipelagic state of Indonesia with over 10,000 islands, for example, infrastructural challenges have meant MSMEs could only reach customers in their immediate vicinity, limiting their ability to grow and earn. But with access to e-commerce platforms and on-demand services with logistics networks across the country, even small shops in rural areas can now reach customers in other cities, creating more growth opportunities.

The opportunities brought about by technology have also helped accelerate inclusive growth from a gender parity perspective. Today, women across the region can start their own enterprises and generate income on digital platforms, providing an opportunity to break from more traditional caregiving roles.

The opportunities brought about by technology have also helped accelerate inclusive growth from a gender parity perspective.

Andre Soelistyo, CEO, GoTo Group

From enabling the sale of homemade dishes via food delivery platforms to providing tools to promoting handmade goods on social media, technology is becoming the key to unlocking female labour force participation in this region.

Rapid digitization is also boosting Southeast Asia’s efforts to accelerate financial inclusion, with smartphones and technology services proving to be crucial entry points into personal finance.

Today, gaining access to credit is as simple as utilizing Buy Now Pay Later solutions when making purchases online. In Indonesia, where only 61.7% of the population have a bank account, opening an account can also be done digitally in just a few minutes via an on-demand, multi-service app like Gojek, thanks to a partnership between the platform and a digital bank in the country, Bank Jago.

A bridge for communities

But beyond all of these economic opportunities, technology is also acting as a force for good in Southeast Asia, bringing communities together and helping people support one another.

During the pandemic, we saw small businesses forming and joining online communities to share tips on effectively managing an online business, while ride-hailing drivers went out of their way to help fellow drivers develop new skills and serve others. We refer to this as the Gotong Royong spirit, referring to the Indonesian sense of community and support, which can now be even more impactful thanks to technology.

Fast progress, but not fast enough

The progress made in Southeast Asia is incredibly positive and there can be no doubt digitization will continue to power its rapid growth. However, without ensuring the wave of digitization sweeping across the region is truly inclusive – accessible by all – this growth and its economic benefits will only be for a select few. Around 150 million adults in Southeast Asia – or nearly a third of the population – still lack access to digital technologies.

That is made all the more challenging by the diverse nature of the region. The myriad of different cultures, languages and levels of development mean technological solutions cannot simply be scaled across the region in a blanket manner. There is no one-size-fits-all solution.


Technology as a force for good

Two things are crucial to ensuring equitable access to technology and driving digital adoption across the region. Firstly, local markets need local solutions. Given Southeast Asia’s diversity, what works for one market may not work for another. What will be needed is a deep understanding of each market and a localized approach to addressing specific pain points.

Second, collaboration is essential. No one player can do this alone and there are many areas where governments and businesses can work together to enhance digital and financial inclusion so that technology can be a real force for good.

There are already success stories that demonstrate the importance of each stakeholder playing their part, such as the Bank Indonesia’s move in 2019 to launch the Quick Response Indonesia Standard (QRIS) code system. A national standardized QR code that has universalized digital payments in Indonesia, QRIS enables businesses to accept non-cash payments from any e-payment app. Supported by e-payments providers’ push to accelerate digital payment adoption and help small businesses transit to QRIS has proven to be a game-changer for financial inclusion in the country.

It might still be early days for Southeast Asia but with the right innovation, partnerships and the region’s relentless community spirit, this region is ready and poised to usher in a new era of inclusive growth.

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Institutional update

World Economic Forum

May 21, 2024

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