The third edition of the DBS Digital Readiness Survey has revealed that although there has been continued momentum in digitalisation efforts by businesses across the Asia-Pacific (APAC), there remains room for further improvement.
Involving around 2,600 corporate treasurers, CEOs, CFOs and business owners across 13 markets in APAC, as well as the US and UK, the survey showed that seven in 10 (70%) large corporates and middle-market companies in APAC have a digital transformation strategy in place, with Taiwan leading the way at 95%, followed by Singapore (91%), China (87%) and Hong Kong (86%).
This is a marked increase from last year, when the proportion of APAC businesses with a digital strategy was only 57%. There was also a significant jump in the proportion of businesses with clearly defined digital strategies – to greater than three in 10 companies (35%) from 26% the year before.
However, about half (53%) of large corporates and middle-market companies in the region remain in the nascent stages of digitalisation, having just started developing their digital roadmaps or with current plans remaining underdeveloped.
Lim Soon Chong, Group Head of Global Transaction Services, DBS, said, “Embracing digital is now a non-negotiable imperative for corporates, regardless of their size. But the digital landscape is rapidly-evolving, and businesses have to keep pace with the latest developments while navigating ongoing economic headwinds.
“The pace of digital technology change makes it challenging for businesses to develop and implement holistic and effective digital strategies.”
SMEs making steady digital progress, but lag behind larger corporates
Small and medium-sized enterprises (SMEs) make up more than 96% of all Asian businesses, and are integral to the success of the region’s economy. To better understand their needs, the DBS Digital Readiness Survey was expanded this year to garner insights from more than 1,000 small and medium-sized enterprises (SMEs) across APAC on where they are in terms of digitalisation.
In terms of digital progression, SMEs in Singapore are the pacesetters with 72% having a digital transformation strategy in place, followed by Hong Kong (47%), China (44%), Taiwan (38%), India (25%) and Indonesia (20%).
However, the region’s SME segment lags behind large corporates and middle-market companies in terms of digital readiness with only four in 10 SMEs (41%) having a digital transformation plan in place, and one in 10 with a clearly defined digital strategy (12%).
Joyce Tee, Group Head of SME Banking, DBS, said, “Most SMEs in the region recognise the benefits of digital transformation and have a genuine interest in digitalising their businesses. They see going digital as essential for their businesses to survive and thrive in the new normal.
“But the cost of adopting new technologies and the steep competition for digital talent have been impeding their progress. For some SMEs, there also appears to be a knowledge gap or lack of confidence on exactly where to begin, so it is incredibly important for partners such as banks to not only be providing digital solutions, but also educational resources on where to start and how to progress.”
Pressure to digitalise and barriers to digital adoption
As the pandemic accelerates the demand for contact-free services and questions the resiliency in supply chains, virtually all businesses in the region (97%) have indicated that they are facing external pressure to transform digitally. Key external pressure driving the need to change arises from customers and key market demand (35%), growing supply chain complexities (26%) and the threat of competitors (20%).
The challenges to digital adoption however vary across large corporates and middle-market companies, and SMEs.
The top three challenges in terms of digitalisation for large corporates and middle-market companies are the speed of change and complexity in the enabling technologies (88%), execution complexity (87%); and the availability of digital talent (77%).
Meanwhile, those for SMEs are the high costs of adopting new technology (63%); the availability of digital talent (37%); and cybersecurity concerns (23%).
In terms of digital spend, around half of large corporates and middle-market companies in the region cite that trade and supply chain financing (65%), ongoing cash management (56%) and sales and distribution channels such as eCommerce storefronts (48%) represent the three most significant digital investment areas.
For SMEs, their top three priorities for digital investments are sales and distribution channels (55%), trade and supply chain finance (47%) and procurement (47%).
In particular, when it comes to investments in digitalising sales and distribution channels, APAC SMEs as a proportion of their overall technology budgets, invest double that of large corporates and middle-market companies (21% compared to 10%).
Trends ahead – Digital and sustainability
The use of APIs and smart contracts is expected to continue gaining traction among businesses large and small across the region. 90% of APAC businesses see the use of smart contracts and 82% view APIs as a critical component of their digital strategies going ahead. As an example, API connectivity with banks is expected to flourish over the next 12 months, with 56% of SMEs and 65% of large corporates and middle-market companies looking to adopt APIs in their banking connections.
In terms of digital support, banks remain the preferred partner for businesses in APAC for keeping pace with fintech innovations and finding the right digital solutions, with more than eight in 10 businesses (85%) citing this as a preference (up from 69% in 2020).
Sustainability is also pipped to be the next growth frontier with businesses allocating greater digital spend towards ESG purposes over the next 12 months.
Sharing his views on how sustainability has reached a tipping point globally, Lim said, “There is now an increased expectation on companies to adhere to better business practices that will lead to measurable sustainable outcomes. Businesses are seeking to leverage digital solutions for their sustainability drives, including efforts to record sustainability identifiers and to prove sustainable transactions using digital forms.”