Southeast Asia’s tech investment landscape continues to flourish with an increase of 17 per cent in the number of deals between H1 of 2019 and 2020, as says the ‘e-Conomy SEA Report’, jointly conducted by Google, Temasek and Bain & Company.
The total deal value declined slightly from US$7.7 billion to US$6.3 billion, over the same period, attributable to the slowdown in big-ticket unicorn investments, reveals the study.
This has meant smaller, non-unicorn investments which continue to grow, made up more than half (53 per cent) of the total deal value, against 34 per cent the preceding year.
According to the study, titled ‘e-Conomy SEA 2020. At full velocity: Resilient and racing ahead’, the deal value in the fintech sector surged to US$835 million in H1 2020, from US$475 million in H1 2019. Overall, there was a 24 per cent increase in the number of deals during this period.
Funding for unicorns in mature sectors such as e-commerce, transport & food, travel and media decreased from US$5.1 billion in H1 2019 to US$3 billion H1 2020. Platforms are now refocusing on their core business and established strengths in order to prioritise a path to profitability.
The study further reveals that the COVID-19 pandemic has led to big shifts across the region, which included the coming of 40 million people online for the first time this year, bringing the total number of Internet users in the region to 400 million.
The region’s digital economy remains strong and resilient despite the headwinds. The adoption and usage of e-commerce, food delivery, and online media have surged.
Fintech solutions are set for a tailwind in the long run as consumers and small and medium-sized enterprises (SMEs) have become more receptive to online transactions.
Owing to the surge in digital adoption by customers and businesses, digital payments continue to see growth from US$600 billion in 2019 to US$620 billion in 2020 and is expected to reach US$1.2 trillion by 2025.
As per the findings of the report, the hardest-hit sector in the region is online travel. There are, however, signs of recovery in domestic tourism. Online travel is expected to bounce back to US$60 billion by 2025.
Also Read: Here are the 5 predictions for Southeast Asia’s travel industry trends post-COVID-19
Similarly, while lockdowns and restrictions have eased within the region, the continued work-from-home arrangements and reduced confidence in shared transportation will likely see muted resurgence through the first half of 2021.
The transport and food sector is expected to bounce back to US$42 billion in gross merchandise volume (GMV) by 2025.
The pandemic has also brought about growth in adoption of nascent sectors such as healthtech and edutech. Digital health apps were used four times more than before the pandemic while leading education apps were used three times more. This has prompted growing investment in these sectors.
Southeast Asia continues to make progress in overcoming the initial challenges of the internet economy by making internet access more affordable and strengthening consumers’ trust in digital services.
The average number of cash transactions declined from 48 per cent pre-COVID-19 to 37 per cent after the pandemic, while the exponential spike in e-commerce prompted numerous logistical improvements across the region.
However, talent constraints remain a pressing concern as companies look for skilled workers that can thrive in a fast-growing digital economy.
Also Read: How to bridge the tech talent gap in a post-pandemic world
Commenting on the report insights, Stephanie Davis, Vice President, Google Southeast Asia said, ”COVID-19 has changed people’s daily lives in fundamental ways. The digital adoption that was projected to happen over several years has accelerated.”
“With its young, diverse and mobile-first population, and a host of innovative startups, Southeast Asia will continue to define the future of digital ecosystems,” she added.
Rohit Sipahimalani, Chief Investment Strategist and Head (Southeast Asia), Temasek remarked, “The region’s internet economy will be the key driver of social progress in areas of interest to us and support more sustainable and inclusive growth.”
“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,” he elaborated.
Aadarsh Baijal, Partner and Head of Digital Practice in Southeast Asia, Bain & Company, opined, “Despite significant challenges this year, the long-term outlook for Southeast Asia’s digital economy remains more robust than ever.”
“We expect 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 digital economy,” he explained.
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