There is your problem. In Etsy's vocabulary, a digital download is an item that can be uploaded at the point of listing, and every buyer receives a link to download that file at the point of sale. When they use the link, the order is considered received. These buyers are zero effort and pretty much immediate delivery. As I said above, if you list an item that requires personalisation, IE the buyer sends you a photo for you to integrate into the design or sketch by hand, then digitize and send to the buyer by email or Etsy messages, that is NOT the same as a digital download. It is listed as a physical item because it cannot be uploaded at the point of listing. If it requires you to edit or create the file AFTER the sale, based on the buyer's input, it may be a computer file but it still has to be manually sent by you, and counts as manual shipping. If you are in the US you can purchase the stamp label and that counts as Etsy can verify you sent something. Outside the US Etsy doesn't have such an option, so they put a $ minimum over which tracking is required, so most items like the ones you describe will either be under the threshold and not require tracking, or over the threshold by a sufficient amount to allow you to send a tracked letter (where available).
It is what it is. If your sales are high enough that you can wear the occasional hit for not shipping with tracking, you are lucky. There are workarounds you can do to show the order has been sent. For US sellers it is pretty cheap, the 60c letter stamp option through Etsy labels covers it. We Aussies have no option for tracking regular letter mail, we have to use expensive registered post or prepaid envelopes which, while they don't always have proper tracking (often on receipt only), do have a "tracking" number that Etsy accepts as proof of shipping. If you have to send the file manually after it is modified, you will need to use one of these methods to send a receipt to the buyer so that Etsy can see that it has been sent. If you are selling a digital file valued at under $10, and just need to send a receipt, none of these methods are cost effective.
