A recent report from Google, Temasek, and Bain & Company reveals that Southeast Asia’s digital economies are poised to reach a total transaction value of $218 billion this year, marking an 11% increase from the previous year. This growth has been achieved despite global economic challenges.
The report, titled “e-Conomy SEA 2023,” highlights Southeast Asia’s resilience in the face of global economic headwinds. It also notes a rebound in consumer confidence during the second half of 2023, following a dip in the first half.
The report’s analysis covers the five key sectors of Southeast Asia’s digital economy: e-commerce, travel, food and transport, online media, and digital financial services. It predicts that revenue in the region’s digital economy will reach $100 billion this year, growing 1.7 times faster than the total transaction value. This is attributed to businesses shifting their focus from growth at any cost to prioritizing profitability and the development of sustainable operations.
Fock Wai Hoong, head of Southeast Asia at Temasek, commented on the region’s shift toward profitability and the emphasis on high-quality revenue and monetization, highlighting the positive direction of this transformation.
The report’s scope encompasses six major economies: Indonesia, Malaysia, the Philippines, Singapore, Thailand, and Vietnam. Notably, it does not cover Brunei, Cambodia, Laos, Myanmar, East Timor, and Papua New Guinea.
The report emphasizes the importance of addressing the digital participation gap and removing barriers to enable more Southeast Asians to become active users of digital products and services, which will contribute to further growth in the digital sector in the coming years.
The report also points out that online businesses are moving away from acquiring users at high costs and are instead focusing on deepening engagement with existing customers to achieve profitability. It highlights that e-commerce platforms are working on engaging high-value users, increasing transaction sizes, and exploring revenue streams like advertising and delivery services to drive long-term growth.
Digital lending is a significant contributor to the digital financial services sector, with the report indicating that it accounts for the majority of the $30 billion in revenue in this sector. Singapore is expected to lead the digital lending market in the region through 2030.
The report notes that the post-Covid recovery is expected to bring the online travel and transport sectors back to pre-pandemic levels by 2024. Despite the return to in-person dining and reduced promotions, food delivery revenue, categorized under the transport sector, saw a significant increase of 60% from the previous year, reaching $800 million in 2023. Thailand is experiencing notable growth in the online travel sector, with an 85% year-on-year increase in 2023.
The report also discusses macroeconomic headwinds such as inflation and a high cost of capital, which have led to a decline in private funding deployment. However, it notes that the “dry powder” available for investment increased to $15.7 billion at the end of 2022, indicating the potential for further growth in Southeast Asia’s digital economy in the near future.