Google, Temasek and Bain & Company returned with the latest edition of its annual report on Southeast Asia’s (SEA) internet economy, e-Conomy Southeast Asia (SEA) Report – Roaring 20’s: The SEA Digital Decade.
In its sixth edition, the report stated that the region’s internet economy is expected to reach US$1 trillion in GMV by 2030, a prospect that led Google Southeast Asia Vice President Stephanie Davis to dub the region as one that will “define the future of the global digital ecosystem.”
The report further revealed that SEA’s internet economy is estimated to reach US$174 billion in GMV by the end of 2021. It is also expected to reach around US$360 billion by 2025, outgrowing the earlier projection of US$300 billion.
The region now has more than 440 million internet users with 80 per cent (350 million) of them being defined as “digital consumers” –or internet users who have bought at least one online service.
How the pandemic impacts the internet economy
The report touched upon the topic of how the COVID-19 pandemic has impacted the internet economy in SEA by changing customer behaviour and propelling the growth of several verticals. It highlighted how since the pandemic began, SEA has added 60 million new digital consumers, of which 20 million joined in the first half of 2021 alone.
This growth is “primarily driven” by the e-commerce and food delivery verticals.
Also Read: Google Temasek Report: Southeast Asia’s internet economy to hit US$240B by 2025
“In a strong lead-up to 2030, e-commerce GMV could exceed US$120 billion by end 2021 (a near doubling from 2020) with the potential to reach US$234 billion by 2025. The food delivery sector emerged as a bright spot, growing 33 per cent y-o-y to reach US$12 billion in GMV. It has now become the most penetrated digital service, with 71 per cent of all internet users ordering meals online at least once,” the report wrote.
In addition to e-commerce and food delivery, digital lending services are also expected to grow due to an appetite for consumer financing options and supply chain financing.
“By 2025, digital payments are forecasted to reach over US$1.1 trillion in gross transaction value (GTV), up from a forecast of US$707 billion in 2021. Digital lending could see a 50 per cent increase in outstanding balance from US$26 billion in 2020 to US$39 billion in 2021, led by a rebound in lending appetite and growth in usage of buy-now-pay-later services,” the report said.
How about verticals that have taken a hit during the pandemic, such as travel tech? The report stated that while growth remains muted, it is likely to see a recovery in the medium-to-long term, driven by pent-up demand and vaccination progress.
Startup investments: Reaching “all-time high” in 2021
One of the highlights of SEA’s internet economy in 2021 was the resurgence of startup funding and the so-called race to IPO, which led the report to declare the region’s internet economy to be “expected to reach an all-time high in 2021.”
“Deal value came up to US$11.5 billion in the first half of the year, surpassing the US$11.6 billion for the entire 2020,” it wrote. “Investors see SEA as a lucrative investment destination for the long-term, especially in sectors such as e-commerce and digital financial services, which continue to attract the majority of investments (more than 60 per cent of deal value).”
“Increased deal activity and larger valuations that led to bigger funding rounds have spurred the induction of 11 new consumer technology unicorns in 2021, bringing the total number to 23.”
The year 2021 had also seen IPOs of notable tech companies in the region, such as Indonesia’s Bukalapak. According to the report, more tech companies are exploring IPOs as viable pathways to raise capital or allow early investors to monetise their holdings, especially in view of strong valuations and novel listing approaches such as special purpose acquisition companies (SPACs).
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