By Safdar Khan
As rapid technological shifts continue to reshape the global landscape in 2026, ASEAN stands at a critical juncture. The region’s digital economy is expected to reach US$1 trillion by 2030, potentially far more with the effective implementation of the ASEAN Digital Economy Framework Agreement (DEFA). But the real test is whether this progress will narrow divides or deepen them.
Malaysia reflects this broader regional crossroad. In 2023, the digital economy accounted for 23.5% of GDP, with projections rising to 25.5% by 2025. Fintech, e-commerce and digital payments are flourishing in urban centres. Yet, rural communities remain constrained by gaps in connectivity, affordability and literacy. According to the Malaysian Communications and Multimedia Commission, rural broadband penetration remains below 60%, compared to nearly full coverage in major cities. This tension between technological progress and equitable access is the crux of Malaysia’s development challenge and is emblematic of a broader challenge across ASEAN.
However, it’s crucial for leaders to understand that the path toward inclusive growth lies not in technology alone. Leaders must build conditions that allow for trust to be fostered, by: Building collaborative ecosystems, empowering micro, small and medium enterprises (MSMEs) as growth engines, strengthening digital trust and leveraging tourism as a catalyst for participation.
Building Inclusive Ecosystems
Innovation does not flourish in isolation; it requires an ecosystem where policy, infrastructure, capital and education move in tandem, and a thriving one rests on five pillars:
- Forward-looking policy and governance that enable interoperability and cross-border collaboration.
- Access to finance that channels capital to MSMEs, startups and underserved segments.
- Infrastructure beyond city limits, encompassing reliable connectivity, logistics and digital payments.
- Education and digital literacy to equip citizens with the skills to participate meaningfully.
- Inclusive design, ensuring products are accessible, affordable and built on trust.
Collaboration is what gives these pillars strength. Governments establish the regulatory foundation. Businesses bring scale, innovation and investment. Society provides local insights and trust networks. When these sectors align, impact multiplies — MSMEs gain affordable access to digital payments, tourism ecosystems become more resilient and urban-rural gaps narrow through shared platforms and open-loop transit systems.
MSMEs: The Region’s Growth Engine
According to Mastercard research, three in four SMEs globally are using digital services in their day‑to‑day operations. Studies show that four out of five MSMEs adopting digital financial solutions report growth in revenue, profits and customer reach. This points to the transformative potential of accessible, tailored financial tools, especially crucial in the region, with MSMEs central to ASEAN’s economic fabric. They constitute 95% of businesses and more than half of all jobs across the region and in Malaysia, contribute 39.5% to GDP, employing nearly half the workforce.
That said, SMEs face a US$5.7 trillion financing gap and many remain excluded from digital financial systems. In Southeast Asia, Mastercard finds that roughly three out of five MSMEs face challenges obtaining loans from traditional financial institutions. Barriers such as high hardware costs or rigid lending criteria continue to limit participation.
Tailored innovations can bridge these gaps. For example, open-loop payments for transit and real-time payments solutions that are driving the adoption of digital payments and making secure, cashless transactions accessible to even the smallest merchants Meanwhile, flexible credit lines and card-based lending models offer liquidity without heavy debt burdens.
Such solutions succeed because they meet entrepreneurs where they are—simplifying access while building digital confidence.
Digital Trust as the Foundation
Cybercrime costs ASEAN economies US$27-US$36 billion annually, according to UN estimates. Malaysia alone recorded RM1.22 billion in cyber-enabled fraud losses between January and October 2024. Entrepreneurs hesitate to embrace cashless systems for fear of fraud; consumers resist artificial intelligence (AI)-driven banking amid concerns over data privacy. What this means is that trust remains the most undervalued element of digital inclusion and a deficit of it slows progress just as much as any infrastructure gap.
Addressing this requires more than enforcement; it demands collaborative resilience. Trust must be designed into every layer of the digital economy. That means transparent partnerships, robust cyber defences and education that demystify digital tools. Understanding this critical need, Mastercard has developed solutions such as tokenisation, real-time payments and AI-driven fraud prevention, which are not merely technical safeguards; they are confidence builders that assure even the smallest merchant that digital transactions are as safe as cash, with far greater potential.
Tourism as a Catalyst for Inclusive Growth
Tourism illustrates how inclusive innovation can be scaled organically. In 2024, Malaysia welcomed 38 million visitors, up 31% year-on-year, with Southeast Asian travellers accounting for nearly half of total spending. As governments and industry collaborate to make payments more seamless and secure for travellers, the benefits extend far beyond airports and hotels.
When small hospitality providers, transport operators and street vendors gain access to digital‑payments systems, they open the door to new customers and new confidence. What begins as a convenience for international visitors becomes a gateway for local inclusion — embedding digital habits into the daily economy.
Recognising this, Mastercard is working with Tourism Malaysia as its exclusive payments partner to digitise the visitor journey and broaden participation by leveraging Mastercard’s global payments network and insights to bring digital payments to the front lines of tourism services, helping local merchants accept cashless payments and capture international spend that then spills into domestic economic opportunity. Tourism’s multiplier effect shows how digital adoption spreads through practical benefit rather than policy alone.
The Path Forward
ASEAN’s diversity, of economies, demographics and digital maturity, is both its greatest challenge and strength. Venture capital investment in the region’s digital economy has risen nearly sixfold, from US$777 million in 2015 to US$4.4 billion in 2024, signalling deep private-sector belief in Southeast Asia’s potential. The reality is that 70% of adults remain unbanked or underbanked, and while the pandemic brought 400 million new internet users, digital financial participation still lags behind.
The DEFA, set for completion in 2026, offers a once-in-a-generation opportunity to close this gap. As the world’s first region-wide digital economy pact, covering 680 million people, it promises to harmonise trade rules, foster cross-border commerce and strengthen digital capabilities for women entrepreneurs, rural innovators and youth-led startups.
When ASEAN places inclusivity at the centre, treats trust-building as integral as innovation while evaluating progress by its reach rather than its speed, it can redefine the global narrative of digital development.
The author is Mastercard Division President for Southeast Asia
