Southeast Asia's internet users：mobile-first，most engaged globally

Supported by the increasing availability of affordable smartphones and the rollout of faster and more reliable mobile telecommunication services, Southeast Asia’s internet user base continued to grow in 2018. There are more than 350 million internet users across Indonesia, Malaysia, Philippines, Singapore, Thailand, and Vietnam in June 2018 — 90 million more than in 2015. Also, with more than 90% of Southeast Asians connecting to the internet primarily through their smartphones, this is one of the most mobile-first internet regions globally.

Southeast Asia's internet economy hits an inflection point

The Southeast Asian internet economy has reached $72 billion in gross merchandise value (GMV) in 2018 across Online Travel, e-Commerce, Online Media, and Ride Hailing. Growing at 37% from a year earlier,2 it has accelerated beyond the 32% compounded annual growth rate (CAGR) that we recorded between 2015 and 2018, therefore hitting an inflection point.

The three largest e-Commerce companies

The three largest e-Commerce companies in the region, Lazada, Shopee, and Tokopedia, have played a critical role in the development of the sector. They are estimated to have grown collectively more than 7X since 2015, well above the rest of the sector. By offering tens of millions of products, world-class mobile user experiences, frequent consumer promotions, and far-reaching logistics networks, they have been the leading forces behind the dramatic growth of e-Commerce in Southeast Asia.

Less than one in two internet users in Southeast Asia has adopted digital payment services.

Google Survey suggests that less than one in two internet users in Southeast Asia has adopted digital payment services, with adoption as low as one in five users in the Philippines and one in four users in Vietnam. Digital payment services account for an even smaller share of the overall transaction values, anecdotally in the low single digits for most internet economy players. That is remarkably low when compared, for example, with China, where digital payment solutions like Alipay and WeChat Pay have gained ubiquitous usage among both online and offline merchants.

This has hindered the growth of digital goods such as Gaming and Subscription Music & Video on Demand, with most Southeast Asian internet users still favoring free or advertising supported alternatives, despite being open to pay for the services if more convenient digital payment solutions were available. On the other hand, for physical goods, while all leading e-Commerce players in the region accept payments via cash on delivery, this comes with friction and costs for both users and for e-Commerce players, which face a higher proportion of cancelled orders and incur higher charges by delivery companies.

Recognizing the need for widely accepted digital payment solutions in the region, many companies have invested to build their own over the last several years. In order to incentivize adoption among users, these players are offering loyalty programs and rewards schemes, democratizing benefits that are otherwise typically only available to credit card users.

Ride Hailing companies have made digital payments a cornerstone of their strategy to become the “everyday apps” of Southeast Asians, launching their own digital payments solutions like Go-Pay and GrabPay. They have also actively partnered with startups operating in this space, such as Kudo and Ovo in Indonesia, recognizing the opportunity to leverage existing networks of agents and merchants as well as the need to secure regulatory licenses to operate.

Leading telecom carriers across the region have continued to promote their own e-wallets and digital payment solutions, including t-cash by Telkomsel in Indonesia, GCASH by Globe in the Philippines, and TrueMoney by True in Thailand.

Southeast Asia’s largest banks have also been active, launching and promoting their own digital payment applications connected to existing banking relationships, including DBS PayLah! in Singapore and Mandiri e-money in Indonesia.

Global tech companies are progressively rolling out their digital payment solutions among Southeast Asian users and merchants. These include Apple Pay, Google Pay, and PayPal as well as Alipay and WeChat Pay.

The information in this report is provided on an "as is" basis. This document was produced by and the opinions expressed are those of Google,Temasek and other third parties involved as of the date of writing and are subject to change.