Digital payments in Southeast Asia have grown from $600 billion last year to $620 billion this year, according to a new report released jointly by Google, Temasek and Bain & Co.
Overall, Southeast Asia's booming internet economy continues to grow at an unprecedented rate. The epidemic has also caused significant changes in the entire Southeast Asia region, with the report showing that about 40 million people went online for the first time this year, increasing the total number of internet users in Southeast Asia to 400 million.
The report also notes that more than one-third of digital service users have started using new online services as a result of the epidemic, with a significant number of new digital consumers coming from non-metropolitan areas, especially in Malaysia, Indonesia and the Philippines.
"The COVID-19 has fundamentally changed how people live on a daily basis, and digitalisation is expected to be realised within a few years," said Stephanie Davis, vice president of Google Southeast Asia.
Singapore remains a leader in economic growth in Southeast Asia, despite its internet economy shrinking 24% this year. The report said that once industries severely impacted by the outbreak resume operations, Singapore's internet economy could reach US$22 billion by 2025.
As expected, due to the government’s lockdown and travel ban, travel industry was the worst-affected sector, which shrank by 58%.
"Investors are obviously very cautious, but inspired by the resilience of the region's internet economy, we believe the tourism market will return to normal in 2021 and M&A transactions will pick up again," said Rohit Sipahimalani, Temasek’s chief investment strategist and head of Southeast Asia.
Despite a challenging year, investors remain confident and cautiously optimistic. According to the report, from the first half of 2019 to 2020, the number of technology investment transactions in Southeast Asia grew by 17%, but the total transaction value fell slightly from US$7.7 billion to US$6.3 billion.
The value of transactions in the financial technology sector soared from US$475 million in the first half of 2019 to US$835 million in the first half of 2020. According to the report, the overall number of mergers and acquisitions has increased by 24% during this period.
Aardash Baijal, Bain & Co’s Southeast Asia partner and head of digital business, said: "Despite major challenges this year, the long-term prospects of Southeast Asia's digital economy are still stronger than ever."
Aardash Baijal expects a number of factors to give the digital economy in the region a permanent boost, including a dramatic increase in consumer acceptance, greater trust in technology and market power to create greater online supply.
As with last year's report, the latest report states that the region continues to face difficulties in addressing talent constraints. The lack of available talent remains an unresolved challenge. In the fast-growing digital economy ecosystem, talent is the key. The current shortage of important technical talents is still an urgent problem.
