Tech trends and trust: Making Southeast Asia’s digital economy work for all

This article was first published in The Business Times.

South-east Asia has seen a confluence of factors in recent years that have driven incredible economic transformation: the rapid growth of the digital economy, and subsequent hyper-acceleration of digitisation through the pandemic.

The region’s gross transaction value for digital payments is expected to exceed US$1 trillion in 2025. Alternative payment methods, from digital wallets to QR code payments, have reshaped the marketplace, offering consumers more choice and convenience while ushering in a new era of innovation.

Looking ahead, there are some key trends that will shape the banking and payments sector in South-east Asia in 2025.

From the growing use of generative artificial intelligence (AI) to the need for innovative solutions for small and medium-sized enterprises (SMEs) and the ever-pressing demand for advanced cybersecurity, these trends will mean significant technological change in a region where large parts of the population are still digitally disconnected and may find it difficult to adapt.

We stand at something of a crossroads. How can these innovations and technologies be thoughtfully implemented so that they offer the broad-based, tangible benefits and opportunities that they have the potential to unlock?

Rise of generative AI in banking

Generative AI is making waves across the banking sector, thanks to advances in technology, rising demand for personalised experiences, and supportive regulatory frameworks.

Some banks in the region are already using AI to streamline operations and foster new customer engagement channels – for instance, by training proprietary large language models to drive faster regulatory compliance, offer more responsive customer service, and improve access to product information.

Building on these advancements, generative AI could also democratise access to financial services, promoting greater economic equity.

By integrating bank accounts, investment portfolios, and small business accounts – and even engaging with governmental revenue offices – AI has the potential to act as a personal wealth management assistant.

Imagine an AI-driven platform that not only guides users through loan procurement but also implements complex financial strategies typically out of reach for the average investor.

Building consumer trust will help to enable these equity-focused technologies to thrive, and so the ethical use of AI needs to be of paramount importance. As institutions develop these capabilities, transparency around technology implementation and data usage will be essential to secure the buy-in needed to maintain customer confidence.

Demand from SMEs to drive new acceptance and financing options

Given that SMEs make up 99 per cent of all businesses in South-east Asia and account for over 90 per cent of employment, it’s essential to foster confidence through providing accessible payment solutions and credit options.

According to data from Mastercard’s global network, the period between 2018 and 2022 saw a 12 per cent increase in SME transactions through payment facilitators such as third-party platforms GrabPay and Doku.

In South-east Asia, an increasing number of small businesses are looking to implement or expand their acceptance of digital payments, and they’re seeking options that match their needs for scalability, speed and affordability.

Mobile-based point-of-sale technology will play an important role here. One example is FOMO SoftPOS in Singapore, a cloud-based solution which allows merchants to accept contactless payments easily using virtually any Android device via near-field communication.

When developing acceptance solutions for small businesses, financial providers should emphasise straightforward processes and lighter infrastructure requirements to deliver tangible benefits to SMEs.

Despite being significant drivers of economic growth, roughly 60 per cent of micro SMEs in the region face challenges obtaining loans from traditional financial institutions.

Given that traditional loans often come with high interest rates or strict credit requirements, financial institutions could look to develop more SME-friendly options.

New card-based loans and “fungible” credit lines offer flexibility, giving SMEs the liquidity they need to manage everyday expenses without burdensome, high-interest debt.

For instance, CIMB Malaysia’s SME BusinessCard allows small businesses to pay supplier invoices, payroll, and utilities – beneficiaries who don’t typically have card acceptance capabilities – via digital payments platform EzyPayment, enabling SMEs to extend their cashflow at a cost-effective rate.

By providing new ways to access funds, these innovations meet SMEs’ needs while building their trust in the financial system’s responsiveness – and retaining them in the system. This could also enable financial institutions to engage better with the largely untapped SME market.

Greater need for advanced cybersecurity

Cybercrime is escalating at an alarming rate in the region. Data from Singapore’s Ministry of Defence indicates that the number of such incidents in South-east Asia increased by a staggering 82 per cent between 2021 and 2022. The United Nations Office on Drugs and Crime estimates that the cyber-enabled fraud industry in South-east Asia generates between US$27.4 billion and US$36.5 billion annually.

In response, financial institutions are stepping up investment in security, deploying AI-driven fraud detection, biometric authentication, and advanced encryption.

In a digital landscape with an increasing number of entry points, advanced cybersecurity measures will be necessary.

On its part, Mastercard has invested US$7 billion in cybersecurity capabilities since 2018 and contributed to the launch of more than 20 cybersecurity-focused startups. Recently, we have started deploying new generative AI technology that scans one trillion data points to predict whether a transaction is likely to be genuine or not.

But in the world of cybersecurity, no man (or company) is an island, and so fostering trust in the digital economy is going to require more collaboration between all stakeholders. There needs to be a united front in tackling these challenges to build trust and participation in the ecosystem – not just for the safety of individuals and businesses, but ultimately for the integrity of the entire system.

Advancing the digital economy

These advancements are transforming how commerce is being conducted in South-east Asia, but for them to reach their full potential, a balance will need to be struck.

Trust will need to play a pivotal role in their adoption. From AI-driven banking to mobile-first digital payments, every innovation must prioritise the user experience without compromising on privacy or security.

It’s only by ensuring that trust is central in these new technologies and innovations that they can be widely accepted and truly beneficial to everyone, living up to the promise of an inclusive, transparent and resilient digital economy.