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1、Overly Conservative?The SEA e-Conomy Report A Deep Dive into the Google-Temasek-Bain Report on Southeast Asias Digital EconomyResearchReinventedSmartkarma is a globalinvestment research networkthat brings togetherindependent Insight Providers,institutional investors,andcorporate investor relationspr
2、ofessionals and management.2At Smartkarma,We Do Things DifferentlyWe leverage the online economy,applying this innovative mindset to capital markets.For a single subscription,Smartkarma users can consume all the research they need,just like Netflix enables viewers to watch unlimited hours of content
3、 on its platform.At the same time,we address a growing need for a modern approach to corporate access.In 2019,we launched Corporate Solutions,which allows company executives and investor relations personnel to connect seamlessly to investors and analysts,all within a single network.In this effort,we
4、 work closely with global exchanges such as Singapore Exchange,which became our investor,to provide such services to listed companies worldwide.Our model ensures that the research on our platform is objective and unbiased,independent and free from conflicts of interest.The platform determines approp
5、riate pricing according to the quality and value of each research piece.This helps independent Insight Providers monetise their research and incentivises them to produce truly quality,differentiated work that stands out from the rest of the market.A commitment to quality is also why we carefully vet
6、 and select our Insight Providers.Less than 10 percent of the independent analysts who apply are approved as Insight Providers on Smartkarma.We currently have over 100 such curated Insight Providers publishing on the platform,ranging from one-person operations to teams of multiple members around the
7、 world.In the following pages,you will be able to see for yourself the result of our efforts.In the meantime,we will be busy bringing you more exciting developments over the course of the year!Cover Photo by Bill Oxford on UnsplashVincent Fernando,CFAThematic(Sector/Industry)In-Depth Analysis:Google
8、s E-Conomy SEAReport UnderestimatesSoutheast Asias DigitalPotentialBy Vincent Fernando,CFA|01 May 2020EXECUTIVE SUMMARYA Deep Dive into the e-Conomy SEAReports AssumptionsThe e-Conomy SEA report is a widely cited annual study on the state ofSoutheast Asias internet economy.The resource,jointly produ
9、ced byGoogle,Temasek,and Bain&Co,analyzes the growth of digital enablerssuch as internet penetration and smartphone penetration and its impact onthe adoption of digital services.Our report dives into the underlying assumptions used in the report andcompares this against how other countries internet
10、economies havedeveloped to get a sense of how conservative or aggressive the forecasts are.Whats Original in This Insight?Despite the bullish outlook presented in the e-Conomy SEA report,webelieve that Google and Temasek still underestimate the potential forSoutheast Asias growth.In particular,we fi
11、nd that if Southeast Asia even partially follows thetrajectory of Chinas mobile payments adoption several years ago,then theregions digital economy can easily grow faster than currently expected.Thisis because e-wallets and mobile payments can serve as a gateway forconsumers to more seamlessly enter
12、 into the digital economy andconveniently adopt different digital services such as e-commerce,onlinetravel,and online media.In-Depth Analysis:Googles E-Conomy SEA Report Underestimates Southeast Asias Digital PotentialVincent Fernando,CFA3We argue that this scenario is more than likely given that:1.
13、Big Tech in China is aggressively investing in the region.Companies like Alibaba and Tencent are leveraging their past successesscaling the adoption of digital services in China and applying theirplaybook to Southeast Asia.Chinese tech companies,having gainedmaturity and experience through years of
14、growing in the space,can nowapply their know-how to capitalize on untapped opportunities inSoutheast Asia.We note that out of Southeast Asias 11 unicorns,10 arebacked by Chinese investors.These unicorns regularly receive guidanceon how best to scale adoption and build ecosystems,and often sendexecut
15、ives to their China investors headquarters to learn.2.Developing markets like Southeast Asia can more readily adoptdigitalservices.Developing markets have an advantage over developedmarkets when it comes to digital adoption.This is because developingmarkets tend to have poorer infrastructure outside
16、 of capital citiescreating gaps that digital services can then plug in.For example,e-commerce is more invaluable in tier 2 or 3 cities where brick&mortaroutlets are relatively sparse given than it can take hours to reach theclosest mall.3.Southeast Asia benefits from favorable demographics andaccele
17、rating digital enablers.The region is still relatively young withmedian ages ranging from the late 20s to early 30s.This is supported byrapidly improving digital enablers such as access to the internet andincreasing smartphone penetration.Table of ContentsI.Southeast Asias Internet Benchmark:The e-C
18、onomy SEA ReportII.Overly Conservative?The Report has Revised Forecasts UpwardsThree Times AlreadyIII.E-commerce,the Largest Driver for SE Asias Digital Economy,isUnderestimatedIV.Southeast Asia E-commerce can Grow Much Faster Assuming itEven Partially Follows Chinas Mobile Payments Trend1.Rising In
19、ternet and Smartphone Penetration2.Favorable&Younger DemographicsV.Developing Markets Have an Advantage Over Developed MarketsWhen it Comes to Digital AdoptionVI.Chinese Investment is Influencing Southeast Asias InternetEconomy to Evolve in Similar China-like Ways1.Grab and Gojek Adopt Chinas Super-
20、App StrategyIn-Depth Analysis:Googles E-Conomy SEA Report Underestimates Southeast Asias Digital PotentialVincent Fernando,CFA42.Lazada and Shopee Take Notes from China E-commerce3.Alibaba and Tencent Fight Proxy Payment Wars in Southeast Asia4.Digital Banking Another Major CatalystVII.Conclusion:So
21、utheast Asias Digital Economy Can Grow MuchFaster than ExpectedAppendix-Digitization Underway:Individual Country Snapshots1.Indonesia2.Singapore3.Philippines4.Thailand5.Vietnam6.MalaysiaDETAILSoutheast Asias InternetBenchmark:The e-Conomy SEAReportThe e-Conomy SEA report is a well renowned joint stu
22、dy by Google,Temasek,and most recently Bain&Company on the state of the interneteconomy in Southeast Asia.The report dives into Southeast Asias internetadoption and its implications on four main verticals:e-commerce,onlinetravel,online media,and ride-hailing.In the 2019 report,the joint study foreca
23、sted that Southeast Asias digitaleconomy will grow to US$300bn by 2025-three times its current size today.This represents an increasing share of the regions GDP with the interneteconomy expected to capture 8.5%of Southeast Asias GDP by 2025 up from3.7%in 2019.In-Depth Analysis:Googles E-Conomy SEA R
24、eport Underestimates Southeast Asias Digital PotentialVincent Fernando,CFA5Source:e-Conomy SEA 2019 Report,Zero OneSource:e-Conomy SEA 2019 Report,Zero OneOverly Conservative?The Reporthas Revised Forecasts UpwardsThree Times AlreadyDespite the reports bullish outlook for Southeast Asias digital eco
25、nomy,webelieve it could still significantly underestimate the potential for the regionto adopt digital services based on an analysis of how the digital economyevolved in other countries,particularly China.As seen in the chart below,Google and Temasek have had to revise their2025 internet economy for
26、ecasts upwards every year for the past three yearsindicating that prior forecasts were too conservative.E-commerce,inparticular,has seen the largest upward revisions over the years as consumersshift spend from traditional brick&mortar outlets to digital channels at afaster pace than expected.Hence,t
27、here have already been multipleinstances where the reports initial forecasts have later appeared too low.In-Depth Analysis:Googles E-Conomy SEA Report Underestimates Southeast Asias Digital PotentialVincent Fernando,CFA6Source:e-Conomy SEA 2019 Report,Zero OneE-commerce,the Largest Driver forSE Asia
28、s Digital Economy,isUnderestimatedTo see how the digital economy can grow much faster than what is currentlyestimated in the e-Conomy SEA report,we primarily analyze e-commerce,the largest contributor to the internet economy.As seen in the chart below,the Google and Temasek report forecasts e-commer
29、ce GMV to grow at aCAGR of 26%from 2019 to 2025.Sources:China-Unido,eMarketer;US-Census.gov,eMarketer;India-IndiaBrand Equity Foundation,PwC;Korea-IT Statistics of Korea;SE Asia-e-Conomy SEA 2019 Report;Zero OneWhile a 26%expected CAGR may seem high at first blush,we believeSoutheast Asias growth is
30、 likely to be significantly higher than this ex-post,given how other countries e-commerce industries havedeveloped.In-Depth Analysis:Googles E-Conomy SEA Report Underestimates Southeast Asias Digital PotentialVincent Fernando,CFA7For example,China e-commerce posted a CAGR of 38%from 2014-2018despite
31、 coming from a higher saturation point than where Southeast Asia istoday(China e-commerce share of total retail spend was already 12.4%in2014 versus Southeast Asias 4.3%in 2019).South Korea,despite having e-commerce penetration at 13.2%in 2014,alsomanaged to grow at a CAGR of 26%from 2014 to 2018.Th
32、is is exactly thesame growth that is being forecast for Southeast Asia from 2019 to 2025,fora market that at the time was already at a much later stage of itsdevelopment.E-Commerce Penetration Sources:eMarketer,Statista,Zero OneGMV CAGR Sources:China-Unido,eMarketer;US-Census.gov,eMarketer;Korea-IT
33、Statistics of Korea;SE Asia-e-Conomy SEA 2019 Report,ZeroOneIt thus stands to reason that Southeast Asia,coming from a low e-commercepenetration base in 2019,could be able to grow e-commerce faster than amore mature market given that its players can grow substantially by bringingnew users into the d
34、igital economy to increase revenue(growing userbase)in addition to monetizing each existing user more(increasing averagerevenue per user,or ARPU).Southeast Asia,being at an earlier stage of digital economy penetrationtoday than China or Korea in 2014,has a lot of low hanging fruit for digitalcompani
35、es to capture.Hence the 26%CAGR given by the Google Temasekreport seems too low even after considering that comparing CAGRs fordifferent time periods isnt an exact science.In-Depth Analysis:Googles E-Conomy SEA Report Underestimates Southeast Asias Digital PotentialVincent Fernando,CFA8Southeast Asi
36、a E-commerce canGrow Much Faster Assuming it EvenPartially Follows Chinas MobilePayments TrendA major catalyst for faster e-commerce growth is the adoption of e-walletsfor mobile payments.E-wallets can serve as a gateway to introduceconsumers into the digital ecosystem-allowing them to more seamless
37、lyadopt other digital services such as e-commerce or online travel.As seen from the charts below,Chinas e-commerce GMV experienced aninflection point around 2013 and just continued rising from there.Thisoccurred around the same time as the boom in adoption&usage of mobilepayments(WeChat Pay was laun
38、ched in 2013).While we acknowledge that there are many other factors driving the growthof e-commerce,we believe that the availability of smartphones andconsumer uptake of mobile payments was one of the most significant factorsin shifting consumer behavior to rapidly adopt digital services.Sources:Un
39、ido,eMarketer,Peoples Bank of China,Caixin Data,CEIC,ZeroOneAlso,as we saw from the success of WeChat in China and super-app unicornsGrab and Gojek in Southeast Asia,it becomes much easier to influence andincentivize certain consumer behaviors when you own the medium by whichconsumers purchase goods
40、.This is because these companies have captiveaudiences they can cross-sell and upsell personalized products to rightinside their wallets.Digital services become far more convenient toconsumers than their traditional alternatives.Southeast Asia can thus experience significantly faster growth in digit
41、alservices like e-commerce assuming the region successfully adopts e-wallets&mobile payments at even a fraction of the rate China did.In-Depth Analysis:Googles E-Conomy SEA Report Underestimates Southeast Asias Digital PotentialVincent Fernando,CFA9e-Conomy SEA report assumes e-wallet penetration in
42、crease from 1.6%in 2019 to 5.0%in 2025Source:e-Conomy SEA 2019 Report,Zero OneAccording to the e-Conomy SEA report,Google and Temasek expect e-wallets gross transaction values to grow 5x from US$22b in 2019 to US$114bin 2025.This implies an e-wallet penetration rate increase from 1.6%to5.0%in six ye
43、ars time,as seen above.However,In spite of this bullish outlook,we still believe that the reportunderestimates the potential for rapid growth of e-wallets.Mobile paymentsin China,for example,grew exponentially from 3.5%in 2011 to 83%in 2018.Sources:Statista,WalktheChat,Ipsos,Daxue Consulting,Zero On
44、eSoutheast Asia today shares many similarities with China back in 2011 suchas rising disposable incomes and a relatively young population(althoughSoutheast Asia today is actually still younger than China back in 2011).However,compared to China back then,Southeast Asians also have theadditional advan
45、tage of far easier access to the internet and even cheapersmartphone prices than were available in the past.E-wallets have the potential to be especially effective in Southeast Asiagiven that almost 3 in 4 adults in the region are either underbanked orunbanked.This means that for most consumers,e-wa
46、llets might be theirIn-Depth Analysis:Googles E-Conomy SEA Report Underestimates Southeast Asias Digital PotentialVincent Fernando,CFA10first experience with financial services-allowing them to more readily adoptthe product given that they have no prior brick&mortar mindsets hinderingthem.As of Janu
47、ary 2019,we see that Southeast Asias usage of mobile walletsalready outstrips other Western more developed markets supporting thisthesis.Southeast Asia is going to follow Chinas development path morethan the Wests,in our view.Note:Figures represent the findings of a broad survey of internet users ag
48、ed16-64.Source:GlobalWebIndex,Zero OneBroadly,we see two main factors that can drive Southeast Asiasadoption of e-wallets and digital services to be faster than the GoogleTemasek report implies,namely:1.Rising internet&smartphone penetrationNotes:US&Korea data as of 2018.Southeast Asia,China,and Ind
49、ia data asof 2019.Source:ITU,Zero OneIn-Depth Analysis:Googles E-Conomy SEA Report Underestimates Southeast Asias Digital PotentialVincent Fernando,CFA11Sources:Newzoo,BankMyCell,Korea Communications Commission,Statista,Zero OneSoutheast Asias internet&smartphone penetration still lags behind manyde
50、veloped markets.According to the e-Conomy SEA report,internet penetration in SoutheastAsia was 63%as of 2019(360mn internet users across 570mn population insix countries).This is significantly below developed countries that havevirtually full internet penetration already(Korea is at 96%while the USA
51、 isat 88%).The disparity in internet penetration represents a long runway for growthfor developing nations like Southeast Asia,China,and India given that e-commerce GMV has dual engines for growth-adding more internet usersand monetizing each user more.2.Favorable&younger demographicsSoutheast Asia
52、also boasts favorable demographics allowing its populationsto more readily and quickly adopt digital services such as e-commerce.Asseen in the chart below,approximately 50%of Southeast Asians are belowthe age of 30 with 22%of the population between 30 and 45 years old.This isin comparison with the U
53、nited States that has over 40%of its populationabove the age of 45,and Korea that has 47%of its population above 45.In-Depth Analysis:Googles E-Conomy SEA Report Underestimates Southeast Asias Digital PotentialVincent Fernando,CFA12Source:World Bank,Zero OneIn the USA for example,a large proportion
54、of the countrys online shopperscomes from the younger population(ages 18-34)and over 60%of allshoppers were below the age of 54.This indicates that younger consumerstend to adopt newer and more innovative technologies faster than the oldergeneration.Southeast Asias youth likely exhibits similar dyna
55、mics and has amajor advantage in this regard.Southeast Asias relatively young populationis easier to shift to mobile payments,which in turn can drive digitaleconomy expansion.Source:Verto Analytics,Zero OnePutting the e-Conomy SEA reports forecasts in the context of e-commerce penetrations shows jus
56、t how conservative they really are.Sources:China-Unido,eMarketer;US-Census.gov,eMarketer;India-IndiaBrand Equity Foundation,PwC;Korea-IT Statistics of Korea;SE Asia-e-Conomy SEA 2019 Report;Zero OneIn-Depth Analysis:Googles E-Conomy SEA Report Underestimates Southeast Asias Digital PotentialVincent
57、Fernando,CFA13As seen in the chart above,Southeast Asias implied e-commerce dollarvalue penetration growth appears to lag behind China and the world.Wecalculated Southeast Asias e-commerce dollar penetration by taking the e-Conomy SEA reports 2019 and 2025 e-commerce GMV forecasts anddividing that b
58、y total retail sales across all six geographies that the Google&Temasek study used.We note that despite our conservative calculations(we only grew 2019stotal retail sales in-line with the World Banks forecasted GDP growth up till2025),e-commerce penetration in Southeast Asia is implied to only grow
59、to11.4%in 2025 from 4.3%in 2019 based on Google&Temaseks GMVforecasts.This is below Chinas e-commerce penetration of 12.4%in 2014and South Koreas penetration of 13.2%in 2015.Sources:eMarketer,Statista,Zero OneWe view this number as too low given that the forecasts imply thatSoutheast Asia six years
60、from now wont even be at parity with China in 2014nor Korea in 2015.This is in spite of the rapid adoption of smartphone andinternet penetration in the region,and quickly changing consumerbehaviors being led by unicorns Grab and Gojek.Other countries show that an e-commerce growth rate of 30%+can be
61、sustained for a prolonged period of timeA key assumption behind the e-Conomy SEA report is the tapering of growthas the industry becomes larger and more mature.This is why the 2019-2025e-commerce forecast CAGR falls to 26%from 66%CAGR in 2015-2019.We note,however,that countries with higher e-commerc
62、e penetration&saturation still managed to maintain robust growth for many years.China,for example,exhibited CAGRs north of 50%prior to 2014,and even now with36%e-commerce penetration,the industry is still exhibiting growth ratesnorth of 30%.In Korea,e-commerce growth actually even accelerated in rec
63、ent years from16%CAGRs to 26%CAGRs.This is in contrast with the USA,which hasbeen growing at a stable 14%for close to a decade now.In-Depth Analysis:Googles E-Conomy SEA Report Underestimates Southeast Asias Digital PotentialVincent Fernando,CFA14We believe a key reason for the disparity between the
64、 two developed nationsis the adoption of e-wallets in the former,which has allowed for a lot ofcross-selling and upselling opportunities(e.g.Naver has a lot of otherservices in its ecosystem,which are seamlessly integrated and introduced tousers of Naver Pay).We show e-commerce 5-year rolling CAGRs
65、for a few countries in the chartsbelow:In-Depth Analysis:Googles E-Conomy SEA Report Underestimates Southeast Asias Digital PotentialVincent Fernando,CFA15Sources:China-Unido,eMarketer;US-Census.gov,eMarketer;India-IndiaBrand Equity Foundation,PwC;Korea-IT Statistics of Korea;Zero OneIf relatively m
66、ore e-commerce saturated countries can maintain strong e-commerce momentum growth,we believe that Southeast Asia can sustaineven higher growth rates given that it is still in its earlier stages ofdevelopment(internet penetration remains low at 60%and e-commercesshare of total retail spend is still o
67、nly at 4.9%).This is especially true if Southeast Asias adoption e-wallets and mobilepayments even partially follow Chinas trajectory-allowing the region tomore conveniently and seamlessly adopt other digital services in theinternet economy.Although still in its beginning stages,we are alreadyseeing
68、 this trend materialize as more merchants integrate e-wallet paymentsolutions,and companies like Grab roll out“virtual debit cards”linked totheir e-wallets encouraging users to transact more online.With the current coronavirus pandemic,we believe the structural shift to thedigital services is also s
69、et to accelerate even faster as trends that would havegradually played out over several years are now brought forward.This ismuch in the same way that SARS accelerated the adoption of e-commerce inChina back in 2003 and only continued going up from there.Developing Markets Have anAdvantage Over Deve
70、loped MarketsWhen it Comes to Digital AdoptionIn many ways,Chinas digital progress serves as a glimpse into the potentialfuture of Southeast Asias internet economy.Although more fragmentedthan China,Southeast Asia shares many similar dynamics with China adecade ago such as an underdeveloped brick&mo
71、rtar network but rapidlygrowing“digital enablers”such as smartphones and internet penetration.In-Depth Analysis:Googles E-Conomy SEA Report Underestimates Southeast Asias Digital PotentialVincent Fernando,CFA16In fact,Southeast Asia being a less developed market can even work to itsadvantage given t
72、hat digital services can potentially have a larger role toplay in the economy.This is because digital services can“plug in”the gapsthat are formed from the lack of a proper infrastructure outside of the majorcapital cities,while also reducing“economic leakage”from corruption incertain industries.For
73、 example,for consumers in tier 2 or 3 cities,buying daily necessities orshopping for clothes can mean a one or two-hour drive out to the nearestmall.Due to lower population densities outside of capital cities,businessesare not incentivized to invest in an extensive brick&mortar distribution.Digital
74、services,like e-commerce,can thus fill in this gap to receive muchfaster adoption and offer more convenience&value than in an otherwisedeveloped setting.Jack Ma explains it well in the quote below when he says that e-commerce is“dessert”for countries like the USA,but the“main course”in China.Wedargu
75、e that this is the same case for digital services in Southeast Asia.“But I tell you one thing,one of the reasons why Chinese e-commercegrew faster than the United States is that the infrastructure ofcommerce in China was too bad.Because“we dont have this,we donthave that”,when Internet came,we made
76、the infrastructure really work,and its sophisticated.But in America,because the Wal-Mart all theretailers are everywhere,so e-commerce is just like a dessert.In China,e-commerce become the main course.”-Jack Ma,APEC CEO Summit 2015Sources:China-OECD;US-US Bureau of Economic Analysis;Korea-KoreaInter
77、net Business Association;India-Ministry of Electronics andInformation Technology;SE Asia-e-Conomy SEA 2019 Report;Zero OneAs seen from the chart above,Chinas internet economy in 2018 contributedover a third of the countrys entire GDP,while the Indian digital economysproportion to the total economy i
78、n 2017 was similar to that of the USA andSouth Korea despite being a less developed country with lower access to“In-Depth Analysis:Googles E-Conomy SEA Report Underestimates Southeast Asias Digital PotentialVincent Fernando,CFA17internet and smartphones.Moreover,by 2025,it is expected that Indiasdig
79、ital economy can contribute 18-23%of the countrys total economy,according to the Ministry of Electronics and Information Technology ofIndia.This supports our thesis that digital services can help fill in gaps indeveloping economies and even potentially take a larger role.WithSoutheast Asia coming fr
80、om a low base of 3.7%in 2019 but supported byrapidly accelerating“digital enablers”,we believe the region can grow muchfaster than expected-making the e-Conomy SEAs 2025 implied penetrationforecast of 8.5%look too low.This is especially the case given that Googleand Temaseks 2025 forecast only impli
81、es parity with India back in 2017despite all the tailwinds and structural trends behind Southeast Asia.Source:e-Conomy SEA 2019 Report,Ministry of Electronics and InformationTechnology of India,Zero OneAs seen from the chart above,the Indian digital economys share of the totaleconomy went from 5.6%t
82、o 8%in one year and is expected to reach 18-23%by 2025.We see no reasons why Southeast Asia cant follow a similar growthtrajectory to this.While we acknowledge that comparing internet economies as a percentageof GDP may not be perfectly comparable given differences in GDPcomposition,we believe the a
83、bove analysis still provides a useful high-levelbenchmark.In-Depth Analysis:Googles E-Conomy SEA Report Underestimates Southeast Asias Digital PotentialVincent Fernando,CFA18Chinese Investment is InfluencingSoutheast Asias Internet Economyto Evolve in Similar China-like WaysSeeing the digital opport
84、unity in Southeast Asia,Chinas tech giants haveinvested(and continue to invest)large sums of money in the region.As seenfrom the table below,many of Southeast Asias most prominent startups arebacked by at least one of the major Chinese tech players.In fact,10 out of 11 of Southeast Asias unicorns ar
85、e backed by Chineseinvestors.Sources:e-Conomy SEA 2019 Report,Caixin Data,Zero OneWe believe Chinas tech giants can leverage their experiences of successfullygrowing digital adoption in Mainland China,and employ a similar playbookin Southeast Asia.As explained by Michael Zhu of Gobi Partners,China t
86、echhas already gained maturity across multiple verticals and are now in aposition to leverage their know-how to capitalize on untapped opportunitiesin Southeast Asia-guiding and influencing consumer behaviors in a similarmanner as to how they have done at home.In-Depth Analysis:Googles E-Conomy SEA
87、Report Underestimates Southeast Asias Digital PotentialVincent Fernando,CFA19Chinese entrepreneurs have gained maturity in the fields of socialmedia network and consumer internet,and they are bringing thatexperience from China into the Asean region.-Michael Zhu,Shanghai-based managing partner at Gob
88、i PartnersWe elaborate on the several ways China tech is influencing Southeast Asiasinternet economy below:1.Grab and Gojek Adopt Chinas Super-App StrategyOne of the reasons why Chinas internet economy developed so quickly isbecause of the super-app nature of many of its business strategies.Takingth
89、e popular example of WeChat,consumers that tried any of the platformsdigital services were immediately introduced into the whole ecosystem ofproducts available.This made the adoption of other digital services moreseamless given that everything was already conveniently placed in a singleapp.Due to in
90、vestor influence from Big Tech in China,we see similardevelopments happening in Southeast Asia with the rise and evolution ofsuper-app unicorns like Grab and Gojek.Both startups initially focused ontransportation,have evolved to offer a multitude of services across fooddelivery,payments,accommodatio
91、ns,travel,and even healthcare.For example,Grab-Southeast Asias largest unicorn with a presence in allsix major geographies-takes a lot of inspiration from how China tech hasdeveloped given the similarities between consumers of the two regions.Asexplained by Hooi Ling Tan,co-founder of Grab:We take a
92、 healthy amount of inspiration from the Chinese players wholed the way many years before us.in many different ways,the reasonwhy we started on the super-app journey is because we were inspiredby Meituan and WeChat.-Hooi Ling Tan,Grab Co-founderMeanwhile,Grab-rival Gojek has also leveraged Tencents e
93、xperiences inbuilding ecosystems ever since the Chinese tech giant invested US$1.2bn inthe startup in 2017.According to Andre Soelistyo,co-CEO of Gojek,the company regularly sendsemployees to China every half-year to learn from China techs pastexperiences.For example,executives working for the deliv
94、ery arm were sentto Meituan-Dianping,while those working in payments were sent to Tencentto learn about WeChat Pay.“In-Depth Analysis:Googles E-Conomy SEA Report Underestimates Southeast Asias Digital PotentialVincent Fernando,CFA20Sources:Grab,Gojek2.Lazada and Shopee Take Notes fromChina E-commerc
95、eBeyond unicorns Grab and Gojek being patterned after super-apps in China,heavy Chinese influence can also be seen in how e-commerce has developedin Southeast Asia.This is no surprise given that two of the regions largest e-commerce companies by GMV,Lazada and Shopee,are backed by Chineseinvestors.L
96、azada is 83%owned by Chinese giant Alibaba,while Shopeesparent company SEA has Tencent as a cornerstone investor.Both Lazada and Shopee are currently employing tried-and-tested e-commerce models used in China in order to quickly scale in Southeast Asia.Namely:“Shoppertainment”with Concerts and Games
97、“Shoppertainment”is the amalgamation of the words“shopping”and“entertainment”.Primarily pioneered by Chinese e-commerce firms likeAlibaba,JD.com,and Pinduoduo,the main goal of shoppertainment is toincrease the engagement and stickiness of a platform.By having users spendmore of their lives inside th
98、e e-commerce platform,there are moreopportunities to constantly sell them new products&services.In-Depth Analysis:Googles E-Conomy SEA Report Underestimates Southeast Asias Digital PotentialVincent Fernando,CFA21For example,Lazada hosted a live concert starring Dua Lipa right inside itsapp during it
99、s birthday in 2019,while Shopee has built in-app mini-gameslike“Shopee Slice”to drive more engagement and sharing in its user base.Source:ShopeeLive Streaming Shopping with InfluencersA major aspect of e-commerce in Southeast Asia is the implementation ofinfluencer live streaming.Both Lazada and Sho
100、pee have adopted livestreaming practices from companies like Taobao in China in order to bettershowcase their products.During live streams,users can ask questions,makerequests,and even purchase items all in real-time.This is important as itgives consumers the chance to“digitally interact”with the pr
101、oducts evenwhen they cant physically touch them.In-Depth Analysis:Googles E-Conomy SEA Report Underestimates Southeast Asias Digital PotentialVincent Fernando,CFA22Source:LazadaEmpowerment and Digitization with Seller ToolsBeyond implementing games and live streaming to boost engagement ontheir plat
102、forms,many e-commerce players in Southeast Asia also empowermerchants by offering tools to help them market,brand,and sell betteronline.This is in-line with the broader effort so shift traditional sellers tobecoming digitalLazada,for example,has adopted Alibabas technology to offer sellers a suiteof
103、 tools on its online shopping center“Lazmall”.These tools range fromcustomizing the look of their virtual stores to more insightful data analytics.3.Alibaba and Tencent Fight ProxyPayment Wars in Southeast AsiaSoutheast Asias payments scene is quickly becoming a proxy battlegroundfor Chinas tech gia
104、nts Alibaba and Tencent.Leveraging their previousexperience scaling the adoption of mobile payment services(e.g.WeChatPay,AliPay,etc.)in China,the two players are now extending theircompetition into Southeast Asia by partnering with local payment operators.As seen in the table below,Alibaba and Tenc
105、ent have built a strong networkof partnerships and investees as they extend their reach and influencebeyond Mainland China.ENTITYCOUNTRYPARTNERGCashPhilippinesAnt FinancialPayMayaPhilippinesTencent(via Voyager)Go-PayIndonesiaTencent(via Gojek)DANAIndonesiaAnt FinancialTouchn GoMalaysiaAnt FinancialW
106、eChat Pay MYMalaysiaTencent(Direct)Ascend MoneyThailandAnt FinancialIn-Depth Analysis:Googles E-Conomy SEA Report Underestimates Southeast Asias Digital PotentialVincent Fernando,CFA23AirPayThailandTencent(via SEA)eMonkeyVietnamAnt FinancialAirPayVietnamTencent(via SEA)GrabPaySingaporeDidi ChuxingRa
107、ther than go in directly with their own payment solutions,Chinas techgiants have realized the importance of localizing their offerings in order toreceive adoption and scale.This is a win-win-win for Chinas tech giants,local operators,and the broader Southeast Asian public.This is because local opera
108、tors can leverage the existing technologyinfrastructure and learnings of their partners,while China tech can focus onimproving their core payment solution and leave market localization andexecution to the local players.The general Southeast Asian public alsobenefits from this as many unbanked or und
109、erbanked consumers are giventhe opportunity to access formal financial services for the first time.4.Digital Banking Another MajorCatalystSimilar to how mobile payments can serve as a gateway into the broaderdigital economy for the unbanked/underbanked,digital banking is anothermajor catalyst.As cov
110、ered in our previous in-depth analysis,In-DepthAnalysis:Digital Banking Strategies Across Asia,many existing andupcoming digital banks in Asia plan to focus on extensive partnerships(connecting via APIs)to drive growth.This implies many cross-selling andupselling opportunities with digital players i
111、n other verticals such as onlinetravel agents and online media&streaming companies.Those that are partnered with or have the backing of Chinas tech giants alsohave the added advantage of being able to leverage a super-app strategygiven the possibilities for more direct integrations with said platfor
112、msecosystems.In-Depth Analysis:Googles E-Conomy SEA Report Underestimates Southeast Asias Digital PotentialVincent Fernando,CFA24In-Depth Analysis:Googles E-Conomy SEA Report Underestimates Southeast Asias Digital PotentialVincent Fernando,CFA25Source:Zero OneConclusion:Southeast Asias DigitalEconom
113、y Can Grow Much Fasterthan ExpectedWe continue to believe that the e-Conomy SEA report is an extremelyvaluable resource and serves as a useful benchmark for the whole SoutheastAsian technology industry.The goal of this report is to build upon that andoffer another perspective on how Southeast Asias
114、internet economy cangrow significantly faster than expected if it even partially follows Chinastrajectory.The combination of the factors described above(capital infusions,ecosystem-building mentorship,and user-scaling experiences from Chinastech giants)along with the regions favorable demographics a
115、nd improvingIn-Depth Analysis:Googles E-Conomy SEA Report Underestimates Southeast Asias Digital PotentialVincent Fernando,CFA26digital enablers lead us to believe that Southeast Asias adoption of digitalservices is more than likely to follow a faster trajectory-similar to what wehave seen in China.
116、As seen from the chart below,Chinas internet economy as a%of GDP grewtremendously from 10%in 2002 to 35%in 2018.If Southeast Asia evenpartially follows this,then the region can easily surpass the e-Conomy SEAs2025 forecast.Source:OECD,Zero OneSource:e-Conomy SEA 2019 Report,Zero OneIn-Depth Analysis
117、:Googles E-Conomy SEA Report Underestimates Southeast Asias Digital PotentialVincent Fernando,CFA27Digitization Underway:IndividualCountry SnapshotsIndonesia:Southeast Asias BiggestMarketSources:Hootsuite,e-Conomy SEA,Newzoo,Caixin,J.P.Morgan 2019 GlobalPayment TrendsIn-Depth Analysis:Googles E-Cono
118、my SEA Report Underestimates Southeast Asias Digital PotentialVincent Fernando,CFA28Singapore:Southeast Asias MostDeveloped Market&Testing GroundSources:World Bank,Hootsuite,e-Conomy SEA,Statista,J.P.Morgan 2019Global Payment TrendsIn-Depth Analysis:Googles E-Conomy SEA Report Underestimates Southea
119、st Asias Digital PotentialVincent Fernando,CFA29Philippines:Highest Engagement Timein Southeast AsiaSources:World Bank,e-Conomy SEA,Newzoo,Worldometer,HootsuiteIn-Depth Analysis:Googles E-Conomy SEA Report Underestimates Southeast Asias Digital PotentialVincent Fernando,CFA30Thailand:Startup Friendl
120、y LandscapeCultivating InnovationSources:World Bank,e-Conomy SEA,Newzoo,Worldometer,Hootsuite,J.P.Morgan 2019 Global Payment TrendsIn-Depth Analysis:Googles E-Conomy SEA Report Underestimates Southeast Asias Digital PotentialVincent Fernando,CFA31Vietnam:Rapidly Accelerating DigitalConversionSources
121、:World Bank,e-Conomy SEA,Newzoo,Statista,Hootsuite,J.P.Morgan 2019 Global Payment TrendsIn-Depth Analysis:Googles E-Conomy SEA Report Underestimates Southeast Asias Digital PotentialVincent Fernando,CFA32Malaysia:Strong Government Push toDrive Accelerated AdoptionSources:World Bank,e-Conomy SEA,Newz
122、oo,Statista,Hootsuite,J.P.Morgan 2019 Global Payment TrendsDisclosure&CertificationI/We have position(s)in one or more of the securities referenced in this insightViews expressed in this insight accurately reflects my/our personal opinion(s)about the referenced securities and issuers and/orother sub
123、ject matter as appropriate.This insight does not contain and is not based on any non-public,material information.To the best of my/our knowledge,the views expressed in this insight comply with Singapore law as well as applicable law in thecountry from which it is postedI/We have not been commissione
124、d to write this insight or hold any specific opinion on the securities referenced thereinI/We have signed the Insight Provider Agreement and this insight does not violate any of the terms specified therein.Vincent Fernando,CFA(30 Apr 2020)In-Depth Analysis:Googles E-Conomy SEA Report Underestimates
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