The global pandemic has pushed 40 million people across Southeast Asia to come online for the first time this year, up from 10 million in 2019, and will see 94% continuing to use at least one digital service even after COVID-19 is contained. The outbreak also helped the region's e-commerce sector clock a 63% growth rate to ring in $62 billion, up from $38 billion last year.
The spike in new users pushes the Southeast Asian online population to 400 million, with 36% or one in three having begun using a new online service this year due to COVID-19, according to the latest iteration of the e-Conomy SEA report. Released Tuesday by Google, Temasek Holdings, and Bain & Company, the annual report assesses six markets -- Singapore, Vietnam, Thailand, Malaysia, Indonesia, and the Philippines -- with an overall population of 583 million and seven sectors, including online travel, digital financial services, healthtech, and edtech.
A large number of new online users hailed from non-metropolitan areas in Malaysia, Indonesia, and the Philippines, the report noted. In addition, 8 in 10 across the region felt that technology was helpful in dealing with the pandemic.
The gross merchandise value of Southeast Asia's internet economy remained at $100 billion this year -- a figure it exceeded for the first time in 2019 -- and was projected to cross $300 billion by 2025.
The e-commerce industry saw the largest growth this year and was expected to hit $172 billion by 2025, while digital financial services were increasingly essential amidst a dip in the average share of cash transactions, from 48% before the pandemic to 37% post-COVID.
Fuelled by the increase in digital adoption amongst both consumers and businesses, the annual value of digital payment transactions for the region was projected to almost double by 2025 to hit $1.2 trillion, up from $620 billion this year and $600 billion in 2019.
Higher demand for online media also helped push the sector to $17 billion this year, up 22%, as video streaming providers saw spikes in search interest including an 18-fold increase in Thailand and 12-fold climb in Vietnam.
Noting the significant shifts this year, Stephanie Davis, Google's Southeast Asia vice-president said in a blog post: "Eight out of ten people across the region said technology helped them get through the virus, and they used the internet for a wide range of reasons. In most of the sectors we looked at, new users made up more than 30% of total, but education, groceries, and loans saw the biggest jumps.
"The pandemic also saw demand for -- and access to -- digital services continue to expand beyond Southeast Asia's biggest cities," Davis noted. "In Indonesia, Malaysia, and the Philippines, more than half the people new to digital services live in non-metropolitan areas. This is encouraging progress, given that the urban-rural digital divide is one of the main challenges the report has highlighted over recent years."
Tech companies focus on profitability
According to this year's report, the number of tech investment deals grew 17% from the first half of 2019 to the first half of this year, although total deal value dipped to $6.3 billion from $7.7 billion year-on-year. The report pointed to lower investments in big-ticket unicorns, which pushed down the overall value, but the number of smaller, non-unicorn investments grew upwards to now account for 53% of total deal value, up from 34% the previous year.
The fintech sector alone clocked a total deal value of $835 million in the first half of this year, up from $475 million during the same period in 2019.
Online travel, however, dipped 58% to $14 billion. The sector was expected to recover by 2025, when it would hit $60 billion.
And while the travel industry was hit hard by the global pandemic, healthtech and edtech saw new growth as a result of COVID-19. Digital health apps saw a four-fold increase in usage compared to pre-pandemic days, while education apps were used three times more.
Davis said: "Global uncertainty means Southeast Asia's major technology companies are focusing on strengthening their business and becoming profitable, rather than on expanding into new areas. Funding for companies valued at more than $1 billion has dropped from $5.6 billion in 2019 to an estimated $3.5 billion in 2020."
She added that investors generally were "cautiously optimistic", with interest shifting towards new areas of opportunity in financial services, education, and healthcare. "For startups with strong ideas and business plans, there's an available pool of capital worth almost $12 billion," she said.
Temasek's Southeast Asia head and chief investment strategist, Rohit Sipahimalani, said the Singapore company continued to see "investible opportunities" in the region's internet economy and expected to increase its investments here over the next few years.
"While COVID-19 has been challenging for everyone, the changing behaviour of consumers has massively accelerated the digital adoption rate, even in a country like Singapore, where it was already very high," Sipahimalani said.
Some 30% of online users in the city-state had logged on for the first time this year, and more than 90% planned to continue to do so post-pandemic. Singaporeans also were spending an average of 4.1 hours a day online, compared to 3.6 hours before the pandemic.
The country's e-commerce market climbed 87%, though, its travel industry dipped 70%.
Singapore's internet economy this year would shrink 24% to $9 billion, before regaining its growth trajectory to hit $22 billion by 2025.