Eight out of 10 Southeast Asians view technology as very helpful during the pandemic, with digital adoption spiking due to lockdowns imposed in response to the Covid-19 outbreak earlier this year. 

More than 1 in 3 digital services consumers in the region (36%) are new users, with 40 million new Internet users this year. Among the new users, 94% intend to continue their newfound habits post-pandemic, states a research report by Google, Temasek and management consulting firm Bain & Company.

According to the Southeast Asia e-Conomy report released Nov 10, there are 400 million internet users in the region, compared to 360 million last year. Overall, some 70% of the region’s population is now online. 

For leisure, Southeast Asians spent on average an hour more a day on the Internet during the imposed lockdowns. Across Indonesia, Malaysia, the Philippines, Singapore, Thailand and Vietnam, Internet users went from spending an average of 3.6 hours online daily to 4.7 hours during lockdowns. 

The Internet sector will remain resilient at US$100 billion ($134.27 billion) gross merchandise value (GMV) by the end of 2020, and is poised to grow to over US$300 billion in GMV by 2025, which the reports calls a clear indication that momentum has not been derailed by the year’s challenging environment. 

The report is the fifth in an annual series by Singapore’s sovereign wealth fund Temasek and Internet giant Google since 2016. 

Unicorns past

Since peaking in 2018 at US$14.1 billion, funding for unicorns in mature sectors (e-commerce, transport & food, travel, and media) has slowed. “Platforms are now refocusing on their core business to prioritise a path to profitability, and are addressing consumers’ broad range of needs through partnerships,” states the report. 

1H2020 deal value is reported to be US$6.3 billion, less than half the 2018 peak and only slightly above the halfway mark of US$12.0 billion in the following year. 

In 2019, there were 11 unicorns in Southeast Asia: Bigo, Bukalapak, Gojek, Grab, Lazada, Razer, OVO, Sea Group, Traveloka, Tokopedia and VNG. In 2020, Vietnam-based payments firm VNPay joined this group for a total of 12 unicorns. 

Together, transport and food unicorns received the lion’s share of all funds raised between 2016 and 2019 – US$15 billion out of US$40 billion, while e-commerce unicorns come in second with US$7 billion.

That said, the tech investment landscape in the region continues to flourish in spite of Covid-19, with the number of transactions increasing by 7% from 1,444 in 2018 to 1,546 in 2019, and 17% y-o-y in 1H2020 from 626 to 735. 

“The emerging digital financial services (DFS) battleground is one of the few spaces where the super-services do collide, and though it’s too early to tell the outcome, we expect that continued funding and a strong cash-generating core business to be key,” says the report. 

The report also highlights the healthtech and edtech spaces with their high adoption rates during the pandemic. “Even so, these sectors remain nascent and challenges need to be addressed before they can be commercialised at a larger scale.”

Pain points

The report’s six key momentum drivers remain the same as last year. In its 2019 report, Google, Temasek and Bain identified six key barriers to growth: Internet access, funding, consumer trust, payments, logistics and talent. 

Cash as payment method fell from 48% of transactions to 37% in 2020. In comparison, e-wallets rose from 18% to 25%.

While the 2020 report acknowledges significant improvements in payments and consumer trust, talent remains a “key blocker” in Southeast Asia’s digital economy. 

The report highlights a shortage of workers with right skills and an urgent need to reskill and upskill workers so that they can find jobs in growing Internet sectors amid the tough employment climate.