SE Asia digital payments hit $620b during pandemic: Google-Temasek report

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Digital payments in Southeast Asia hit $620 billion so far this year, from $600 billion last year, as the region registered 40 million first-time online users during the coronavirus pandemic bringing the total number of users to 400 million, according to the latest report launched by Google, Singapore’s state investment firm Temasek, and Bain & Co.

Overall, the region’s burgeoning internet economy continues to grow at an unprecedented pace, surpassing $100 billion this year and is on track to cross $300 billion by 2025.

The COVID-19 pandemic has also led to big shifts across the region, with the report revealing that the total number of Internet users in Southeast Asia has grown to 400 million after some 40 million people came online for the first time this year.

The report also noted that more than one in three digital service consumers started using a new online service due to COVID-19. A large number of new digital consumers are from non-metropolitan areas, specifically in Malaysia, Indonesia, and the Philippines.

“COVID-19 has changed people’s daily lives in fundamental ways. The digital adoption that was projected to happen over several years has accelerated,” said Stephanie Davis, vice president, Google Southeast Asia.

Singapore remains a regional enabler for growth, even as the country’s Internet economy contracted by 24 per cent to $9 billion this year. The report said the city-state’s Internet economy could reach $22 billion by 2025, as sectors severely disrupted by the pandemic resume.

The trend of new consumers coming online held across the Southeast Asian region, including in Singapore, where internet penetration has long been high, Davis said in press conference launching the report.

She noted that many new users were also coming from rural areas in Indonesia, Malaysia, and the Philippines. “What really stands out for us is not just the usage pattern, but it is those who tell us that they continue or plan to continue using digital services going forward. Nine out of 10 of these new digital consumers say that they will continue consuming online, even after COVID.”

Consumers actually subscribing or purchasing online for the first time is also on the rise, she said.

The report also noted a major shift in the verticals contributing to the region’s digital economy, with e-Commerce becoming the largest vertical with a 63 per cent growth to $62 billion. This trajectory is expected to continue to hit $172 billion by 2025.

As expected, travel was the most affected segment, thanks to the lockdowns and travel bans imposed by governments. This segment contracted 58 per cent to $14 billion.

Around 50 per cent of Singapore’s gross merchandise value online was from the travel sector last year, more than any other Southeast Asian market, Aadarsh Baijal, partner and head of digital practice in Southeast Asia at Bain, said in the press conference. Excluding travel, Singapore’s digital economy grew around 20 per cent on-year, he said.

Cautious optimism

Despite a challenging year, investors remain confident and cautiously optimistic.

“Investors are obviously cautious but they are encouraged by the resilience of the region’s Internet economy… We think deals will pick up again in 2021 as travel is expected to come to normal… It will not be a constraint to good deals in the region,” Rohit Sipahimalani, Chief Investment Strategist and Southeast Asia Head at Temasek said,

According to the report, the number of tech investment deals in Southeast Asia grew 17 per cent between the first half of 2019 and 2020 but the total deal value dropped slightly to $6.3 billion from $7.7 billion.

The deal value in the fintech sector surged to $835 million in the first half of 2020, from $475 million in the first half of 2019. Overall, there was a 24% increase in the number of deals during this period, according to the report.

“Despite significant challenges this year, the long-term outlook for Southeast Asia’s digital economy remains more robust than ever,” said Baijal in the report.

He expects that a number of factors, including dramatic growth of consumer adoption, greater trust in technology, and market forces creating significantly greater online supply, will give a permanent boost to the region’s digital economy.

As with last year’s report, the latest Google-Temasek-Bain report said the region continues to struggle when it comes to addressing talent constraints. According to the report, the lack of readily available talent remains an unresolved challenge for the ecosystem.

“Talent constraints remain a pressing concern as companies look for skilled workers who are critical enablers to a fast-growing digital economy,” the report said.

Broad-based funding

Temasek’s Sipahimalani pointed to broader-based funding options for a larger group of companies in the region.

“Before 2019, about two-thirds of all the funding went to a handful of unicorns. In the last year or so since 2019, and first half of 2020, you’ll be seeing a majority of the funding, 53 per cent, go to non-unicorns,” Sipahimalani said.

Funding for seed series through series B rounds remained “very very strong,” with the average deal size rising “significantly” over the past few years, he said. He noted series A deals have tripled in size in the last five years, while series B deals have doubled over the same period.

Series C and D has plateaued, he said, but noted new funds have cropped up in the past few years to target the segment and that a couple of others were expected to launch in the next few months.

Leslie Shaffer contributed to this story.

Singapore Reporter/s

In Singapore, we are looking to double our reporting team by this year-end to comprehensively cover the fast-moving world of funded startups and VC, PE & M&A deals. We want reporters who can tell our readers what is really happening in these sectors and why it matters to markets, companies and consumers. The ability to write precisely and urgently is crucial for these roles. Ideal candidates must have to ability to work in a collaborative, dynamic, and fast-changing environment. We want our new hires to be digitally savvy and ready to experiment with new forms of storytelling. Most importantly, we are looking for hard-hitting reporters who work well in a team. Collaboration and collegiality are a must.

Following vacancies can be applied for (only in Singapore).

Following vacancies can be applied for (only in Singapore).   

  • A reporter to track companies/startups that have raised private capital, and have the potential to become unicorns. SEA currently has over 40 companies with a valuation of over $100 million and under $1 billion.
  • A reporter who can get behind the scenes and reveal how funding rounds are put together, or why they’ve failed to materialise. She/he in this role will largely focus on long-format stories. 
  • A journalist to track special situations funds, distressed debt and private credit (from the PE angle) across Asia.

Singapore Reporter/s

In Singapore, we are looking to double our reporting team by this year-end to comprehensively cover the fast-moving world of funded startups and VC, PE & M&A deals. We want reporters who can tell our readers what is really happening in these sectors and why it matters to markets, companies and consumers. The ability to write precisely and urgently is crucial for these roles. Ideal candidates must have to ability to work in a collaborative, dynamic, and fast-changing environment. We want our new hires to be digitally savvy and ready to experiment with new forms of storytelling. Most importantly, we are looking for hard-hitting reporters who work well in a team. Collaboration and collegiality are a must.

Following vacancies can be applied for (only in Singapore).

Following vacancies can be applied for (only in Singapore).   

  • A reporter to track companies/startups that have raised private capital, and have the potential to become unicorns. SEA currently has over 40 companies with a valuation of over $100 million and under $1 billion.
  • A reporter who can get behind the scenes and reveal how funding rounds are put together, or why they’ve failed to materialise. She/he in this role will largely focus on long-format stories. 
  • A journalist to track special situations funds, distressed debt and private credit (from the PE angle) across Asia.