MSMEs Go Digital: Moving Up a Class or Merely Changing Stalls?

There is great optimism behind the jargon of ‘MSMEs go digital’—the belief that when business owners enter the digital ecosystem, markets will expand, transactions will increase, productivity will improve, and ultimately, MSMEs will move up a class. This optimism is certainly not without reason.

Indonesia possesses a massive MSME base. Government data shows the number of MSMEs reached approximately 64.2 million units in 2024, contributing about 61.9% to the national GDP, or more than Rp9,000 trillion. Given this scale, the digitalisation of MSMEs is not merely a technological agenda, but a national economic agenda. The question then arises: is digitalisation truly helping MSMEs move up a class, or are we simply moving stalls from traditional markets to smartphone screens?

This question becomes increasingly relevant as digital transactions accelerate. Bank Indonesia noted that as of June 2026, QRIS has reached 65.77 million users and 44.86 million merchants. Interestingly, 96.68% of QRIS merchants are MSMEs. Throughout the first semester of 2026, QRIS transactions reached 12.55 billion transactions with a value of approximately Rp1.12 quadrillion, growing 93.92% annually. These figures show that MSMEs in Indonesia are becoming increasingly digitised. However, being digital does not necessarily mean moving up a class.

Let us look at the changes occurring for an MSME operator. Previously, an MSME might only have a small shop in a market. Customers would arrive, select goods, and pay in cash. Now, that shop may have social media accounts, products are marketed through marketplaces, payments use QRIS, promotions are conducted via live shopping, and orders are sent via logistics services. At first glance, the transformation is extraordinary. But if this entire process only changes the way things are sold, while the methods of production, financial management, pricing, market analysis, and branding remain unchanged, has a true transformation occurred?

This is where we must distinguish between digitalisation and digital transformation. Digitalisation means using technology to perform activities previously done conventionally. Digital transformation goes much deeper, as it changes how a company creates value, interacts with consumers, manages business processes, makes decisions, and builds competitive advantages. In other words, possessing QRIS does not make an MSME a digital company. Having a marketplace account does not necessarily make an MSME a digital business. Even having tens of thousands of social media followers does not guarantee a healthy business.

Ultimately, a business must still answer the classic questions: what is the turnover, what is the margin, what is the cash flow, and is the business capable of sustainable growth? This is a paradox that is often overlooked in discussions about MSME digitalisation. Digital platforms do indeed open much wider markets. However, a wider market also means much fiercer competition. Competition then enters the realms of price, discounts, advertising, shipping costs, consumer reviews, service speed, and product positioning within platform algorithms. Consequently, MSMEs may experience a paradoxical situation where transactions increase, but profit margins are actually squeezed.

A business owner might see turnover increase by 30%. However, after deducting promotion costs, discounts, platform commissions, packaging, logistics, and other expenses, the increase in profit may be much smaller, or there may be no increase in profit at all. Therefore, the measure of success for digitalisation should not stop at the number of transactions. We must begin to ask: how much productivity has increased? How much has profit risen? How much has repeat purchasing increased? How much have operational costs decreased? And is the MSME becoming more resilient to economic shocks?

From a payment perspective, Indonesia already has a very strong digital foundation. As of June 2026, nearly 45 million merchants have used QRIS, and almost 97% of them are MSMEs. Bank Indonesia even refers to QRIS as one of the gateways for MSMEs into the digital financial ecosystem. Digital payments do more than just make transactions easier. If utilised correctly, digital transactions can generate a business track record. And that track record has economic value.

MSMEs that previously struggled to demonstrate their actual turnover now have the potential to possess structured transaction data. In time, this data can help financial institutions assess business capacity and financing needs. However, this is where the next challenge arises. We must ensure that transaction data does not merely become the property of platforms, while MSMEs are unable to convert it into knowledge to develop their businesses. Business owners must be able to read their own data.

In its study on marketplaces, BPS (Statistics Indonesia) mentioned that marketplace platforms act as the main engine of e-commerce because they expand markets, increase transactions, and support competitiveness. Businesses using them are also recorded as having higher revenues. However, BPS also warns of risks such as the imbalance of power between platforms and business owners, limited access to data, algorithmic issues, uneven competition, and the risk of unilateral delisting. This is a very important issue.

MSMEs certainly need platforms. However, MSMEs must not become entirely dependent on them. Because whoever controls access to the consumer ultimately holds greater bargaining power. If all customers come from a single marketplace, and then the algorithm changes, promotion costs rise, or platform policies shift, the MSME will be impacted.