SINGAPORE (Nov 19): As the world’s fastest-growing internet region, Southeast Asia is brimming with potential.

According to e-Conomy SEA 2018, a report jointly conducted by Google and Temasek, the region stands to gain up to US$200 billion ($274.8 billion) from the growth of online travel, e-commerce and online media – but only if the region can overcome these challenges in the following decade.

1. An even more accessible mobile internet

Considering how the number internet users have surged from just 260 million to 350 million over the last three years, internet user growth is identified as a tailwind that is due to continue going forward amid demographic and technological trends. Google and Temasek note that while there have been significant improvements in Southeast Asian mobile network speed and affordability, coverage is not yet fully reliable in the rural areas.

2.  Securing full consumer trust

There has been encouraging progress in gaining consumer trust in the internet economy, notes the report, which notes that Southeast Asia has hit an inflection point in 2018 after having stepped up consumer adoption of online transactions across multiple sectors. However, Google and Temasek believe there is still work to be done for sectors still in the early stages of development such as financial services, education and healthcare – which are still hindered by a lack of trust and have not yet secured mainstream appeal.

3. Growing the talent pool and productivity  

According to the report, Southeast Asian internet economy companies will need to grow their existing talent teams by more than an estimated 10% per year. This is significantly faster than growth in the rest of the economy, which is averaging 1-3% per year in most countries in the region. Likewise, Google and Temasek are also expecting productivity in the internet economy to improve from approximately every US$700,000 of gross merchandise volume (GMV) in 2018, to one employee for every US$1.2 million of GMV by 2025.

4. Logistics network growth

Based on the report’s observations of a rapid increase in deliveries throughout the region, logistic networks have faced “huge challenges”, especially with peaks of more than thrice daily averages experienced during shopping festivals such as Singles Day. Understanding this challenge, it notes that some e-commerce players such as Redmart have investment to develop their own logistics networks, while others have elected to rely on third-party services with built systems specifically catered to handle such deliveries. Winning consumer preference with service differentiators such as same-day delivery capabilities is key, suggest Google and Temasek.

5. Increasing digital payment adoption

Digital payment services account for a small share of overall transaction values in most Southeast Asian countries, unlike in China where Alipay and WeChat Pay reign in usage among both online and offline merchants. The Google-Temasek report suggests this could be due to a fragmented landscape of digital payment solutions and their respective benefits. To solve this, it recommends implementing policies that promote common standards and interoperability – as well as partnerships between leading players.