A warm welcome to the Deeper newsletter, dear reader!
You’re reading this because, just like us, you’re tired of the non-stop tech and startup news cycle, where there seems to be something new and trendy to keep up with in Southeast Asia.
What you want to know about is the important stuff that matters—period.
And that’s what we’re bringing to you. We’ll dive deep into a trending topic in Southeast Asian tech, and their impact on society (i.e. me and you).
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Is it February already? Suffice to say the last year has felt like both a blur and a slow crawl. It’s crazy to think how this time last year was a completely different time in our lives—a sort of twilight zone where people could hug and dine and not wear masks.
In a matter of a few months, this virus has managed to speed up digital adoption, too. It’s made remote work the norm, turned online shopping into a fact of life, and fed our digital content addictions all at the same time. These changes have forced businesses to scramble for relevance, with some emerging victorious and others, not so much.
As we creep up to our first Covid-versary, it might be worth slowing down and taking a look at the many ways Ms. Rona has managed to move the startup tech landscape forward, and in some cases, back.
TL;DR
- 2020: the year the fire nation (Covid-19) attacked
- Fintech: continuing the momentum
- Travel, tourism, and hospitality: recovery is in the horizon
- E-commerce and logistics: stars of the show
- Telehealth: expanding use-cases
- Edtech: overcoming challenges
- Looking forward to a different future
2020: the year the fire nation (Covid-19) attacked
2020 has been full of ups and downs for everyone, the Southeast Asian tech scene included.
Some startups were able to adapt to the changes fast enough, making sound decisions and maintaining conservative momentum. Other sectors were lucky and found renewed relevance and adoption in light of the behavioral changes brought about by the “new normal”. Others still found it difficult to adapt, and suffered losses.
A startup’s ability to remain resilient is also influenced by context. Countries like Thailand, Malaysia, and Singapore were successful in mitigating the crisis, which gave more leeway for startups to recover. Meanwhile, Indonesia and the Philippines were badly affected by the virus, with a cumulative 1.07 million and 525,618 confirmed cases respectively to date.
In some cases, this prompted swift and stringent measures on the part of the government, which further restricted business activity. In the Philippines, for example, lockdown measures were so severe for a time that only businesses operating “essential services” like hospitals, banks, and supermarkets were allowed to remain open. This took a toll on the logistics sector, which was not considered “essential”.
If there’s anything certain in the wake of coronavirus (besides the unprecedented overuse of the word “unprecedented”), it’s that things have changed. Let’s examine the ways Covid-19 has shaped the industry in the past year from the perspective of a few key sectors:
Fintech: sparking the momentum
Southeast Asia is a region that has been showing great promise for fintech over the years, with its large, mobile-first, and unbanked population. Prior to the pandemic, there were only a handful of companies able to penetrate the market thanks to the regulatory hurdles brought about by a fragmented landscape.
The pandemic has caused a massive shift in consumer behavior, with fintech becoming integral in the response to Covid-19. As GDPs continued to fall, e-wallets and online payments companies provided an avenue for government aid to reach micro small and medium enterprises (MSMEs). Philippine-based online payment company PayMaya disbursed PHP1.4 billion (S$38 million) in financial aid through its platform.
MSMEs also needed fintech technology to keep business operations going. Things like online banking, digital payments, and loan-financing services allowed companies to operate in a safe and convenient manner. An industry survey found that 66% of fintechs saw an increased demand in their business during Covid-19. Singapore-based digital payments startup MatchMove said that demands from companies wanting to digitize their payments system had “shot up ten times” since the beginning of 2020.
The pandemic also accelerated the shift to cashless. DBS, Singapore’s largest bank, noted that the volume of cashless transactions doubled in the first three months of 2020, compared with the same period the year prior. And these transactions weren’t just coming from the usual suspects.
More people tried out new digital services for the first time during lockdown, with many new users seeing themselves using these digital services in the future, too. DBS bank noted that 30% of customers above 50 were making cashless transactions for both online and food deliveries.
Businesses are also getting in on the action with a survey revealing that 74% of companies in Singapore expect to use at least one fintech product this year. Mobile wallets, robo-advisory or chatbots, and open banking APIs were among the top fintech products cited.
According to the Google e-Conomy SEA 2020 report, among the fintech services available, both consumer and SME lending saw the largest influx of new customers. Mobile banking, digital payments, digital remittances, online investment, and online insurance purchases also saw positive uptakes due to the pandemic.
In terms of investments, fintech started the year strong with fintech companies around the world raising US$1 billion in Q1 of 2020, before the pandemic. Two of these fintechs came from Southeast Asia.
Singapore-based super app Grab led the charge securing US$856 million in funds, with Mitsubishi UFJ Financial Group providing more than US$700 million of that chunk. The ride-hailing giant, which is also one of the most well-funded private fintech startups in the market, had its shares of ups and downs. In June last year, Grab CEO and co-founder Anthony Tan announced that the company would be letting go of 360 employees as a cost-cutting measure driven by the pandemic. But Grab ended the year contributing to reportedly half of Southeast Asia’s food delivery gross merchandise value in 2020 at US$5.9 billion.
Other fintechs that were able to raise funds amid the pandemic include Hong Kong’s digital payment service platform Statrys and Thai fintech holding company Synqa. Until now, fintechs left and right are announcing successful fundraises across the region. Just recently, Indonesia-based CrediBook and Pintek, and Malaysia-based CapBay announced new investments.
But not every fintech experienced a happy ending. Indonesia-based digital procurement startup Mbiz—the other startup in the midst of raising funds early in the year—had to postpone its fundraising efforts to the second half of the year. There have been no updates so far on the company’s progress.
Travel, tourism, and hospitality: recovery is in the horizon
The travel, tourism, and hospitality sector was one of the most hard-hit by Covid-19. Travel bans and movement restrictions have made it difficult for many businesses to pivot.
In September last year, Singapore Airlines attempted to make flights relevant again by offering “flights to nowhere” — plane rides that take off and land in the same place, after circling around for a few hours. A month later, the company canceled its proposal after receiving backlash from environmentalists.
Meanwhile, Indonesian travel unicorn Traveloka has been having more luck with domestic travelers. After an initial setback of over US$100 million in flight cancellations, the company conserved cash and raised funds during the pandemic. It moved into the fintech space and provided credit lines to customers so they could book flights and hotels more easily, even without a credit card. Towards the end of the year, the travel sector was showing some signs of recovery as Indonesian hotels were achieving 75% pre-coronavirus occupancy rates. This made the travel unicorn optimistic about its path to profitability.
Traveloka wasn’t the only one to secure funding during this time. Taipei-based e-commerce travel platform KKday closed US$75 million in a Series C round led by Cool Japan Fund and the National Development Fund of Taiwan last September. And travel and leisure booking platform Klook managed to raise US$200 million in a Series E round led by Aspex Management. Many investors are bullish about the travel sector’s recovery post-Covid, and have placed their trust in these companies’ ability to stay resilient when faced with crises.
Other travel startups took this time to double down on product improvement and long-term strategy planning as they waited for conditions to improve. But in light of the devastation of Covid-19, layoffs were inevitable. Prominent startups including Airbnb and TripAdvisor laid off at least 25% of staff in the second quarter.
As the possibility of international leisure travel remains to be seen, the future of the travel, tourism, and hospitality sector remains shrouded in mystery.
E-commerce and logistics: stars of the show
One of the most obvious winners of the pandemic was the e-commerce sector. With a trip to the supermarket now coming with huge risk, more people have turned to online shopping for all their essential needs.
Research from Bain & Company and Facebook show that at least 44% of digital consumers across Southeast Asia have spent more on both packaged and fresh groceries online as compared to pre-Covid-19, and 80% said they’ll keep doing this in the future. These consumers aren’t just young adults, or people in their 20s to 30s either. People in their 40s and older are saying they’re more willing to shop online now, too.
This isn’t just good news for industry giants Shopee and Lazada, but for local players as well, like Vietnam’s Sendo and Indonesia’s Tokopedia and Bukalapak.
The success in this sector is opening doors for other players in the industry, from e-commerce enablers to social commerce startups that cater to both retailers and micro-retailers and SMEs. The latter has been seeing increased adoption over the past year. An iKala survey found that the average growth of social commerce by orders across Singapore, Philippines, Vietnam, and Thailand stood at 116%, and growth of social commerce by gross merchandise value was at 307%.
Tools like AI chatbots, payment reminders, and order management systems thrived across the region. Live-selling has also become a trend, becoming the tool with the highest growth in the past year.
TikTok owner ByteDance wants a piece of all that action, launching its new business unit for e-commerce last June. With 800 million monthly active users, this move is not one to be trifled with. The plans seem to revolve around turning Douyin, TikTok’s Chinese counterpart, into a live-streaming e-commerce platform.
Subsequently, the rise in e-commerce, alongside ride hailing and food delivery, has also paved the way for the logistics sector. According to logistics company Parcel Monitor and e-commerce aggregator iPrice Group, parcel volumes across four Southeast Asian markets jumped by 34% as of October 2020. Items like vitamins, sanitizers, and face masks unsurprisingly made up the bulk of deliveries.
While this might be a huge opportunity for logistics service providers, few were prepared for the sheer volume of orders. Flights and movement restrictions have also caused substantial delays in deliveries. The worst off was Malaysia, where delivery times increased from 2.1 days prior to Covid-19 to 4.6 days in the midst of movement control orders. The situation was similar for Indonesia, with parcels taking three days to reach destinations, as opposed to the previous average of 2.3 days.
Singapore-based logistics company Ninja Van also noted that shippers were operating on shorter hours for health and safety reasons. This, coupled with a spike in orders, meant that shippers had to resort to bulk shipments, which slowed down operations and affected productivity.
These hurdles led to new solutions, like the idea of parcel locker networks. By deploying thousands of lockers across markets, logistics providers can deliver items with minimal human contact. Singapore, for example, announced it would deploy 1,000 parcel locker stations by the end of 2020.
Telehealth: expanding use-cases
An obvious consequence of the pandemic has been a rise in telehealth use-cases. As the virus puts health at the forefront and simultaneously makes hospitals a hotbed for catching disease, telehealth has offered a safe alternative for people to receive healthcare.
According to Market Data Forecast, the global telehealth market is expected to grow from US$8.51 billion in 2020 to US$22.45 billion in 2025, with growth continuing to be accelerated by the pandemic.
The need for telehealth dates back to pre-covid days, with the shortage of physicians to cater to a large population as well as the lack of access to health facilities being prime reasons for adoption. A Bain & Company report released in March 2020 shows that consumers are increasingly interested in preventative health via a single touchpoint. More customers have been embracing technological and medical transformation over the years.
In the context of the pandemic, telehealth has been crucial in addressing shortages in medical facilities and practitioners, lessening the load on hospitals, and providing safe and accessible healthcare remotely. This has been instrumental in countries like Indonesia and Thailand, for example, where there are only 0.4 and 0.8 doctors per 1,000 people, respectively.
This has put the spotlight on telehealth startups across the region. Indonesia-based Halodoc noted a surge in Covid-19-related inquiries in March last year, with 7.2 million users accessing the startup’s Covid-19 special feature and a 300% increase in mobile app downloads. Thailand-based Doctor Raksa saw 300% year-on-year growth in the third quarter of the pandemic. And Singapore’s Doctor Anywhere raised US$27 million (S$38.4 million) by the end of Q1 2020, and is now going regional with the establishment of regional tech hubs in Vietnam, Ho Chi Minh, and India, Bengaluru.
New trends are arising as well, with telehealth being used for mental wellness and reproductive and sexual health advice. The non-confrontational nature of teleconsultations makes it easier for people to bypass the stigma associated with highly taboo topics. Insurance company AXA Asia rolled out a dedicated mental wellness helpline via chat and video WeChat in China.
Meanwhile, there’s been more interest across Singapore, Philippines, India, and Australia for sexual health advice. Several startups have begun offering such services. Singapore-based Ferne Health, for example, have begun offering home-based sexually transmitted infections (STI) kits. Other startups like Ease and Dear Doc let women purchase contraceptives online.
As telehealth becomes more widespread, the healthtech sector will start using broader use-cases for online services.
Edtech
Edtech has been gaining momentum in the region for a few years now. The demand for better education in Southeast Asia has opened the door for non-traditional approaches. Things like online video learning and tutoring, AI-powered apps, and classroom management portals are gaining momentum in light of social distancing measures.
India’s BYJU’s and Indonesia’s RuangGuru are leading the way in the edtech sphere, with the former becoming the highest-valued edtech company in the world.
Covid-19 has accelerated edtech adoption at breakneck speed, but with social and economical inequalities in the region, adoption has not been even and lower-income families are getting left behind. A previous newsletter of ours explored the ways the widespread adoption of edtech has resulted in parents stealing mobile devices so children can attend school.
Internet connectivity is also an issue, particularly in countries like the Philippines or Indonesia where there’s a stark lack of it in rural areas.
In spite of these challenges, the role of edtech in light of social distancing is shaping institutions. For example, Singapore’s higher education institutions and polytechnics are rolling out hybrid learning curriculums. The National University of Singapore’s (NUS) president stated that he no longer sees “a return to pre-Covid learning” and is pushing for more interdisciplinarity in its courses amid the pandemic.
While there have been countless debates over the readiness of countries and universities to take education online, now proves to be the right time to be testing plausible solutions.
Looking forward to a different future
Covid-19 has accelerated the trend toward a more digital future. And while that opens doors and bodes well for a lot of tech-based startups, another thing that the pandemic has shown us is that a purely digital world with little to no human interaction is a bleak one. There is still merit in attending classes with live professors and comfort in getting healthcare advice from a real-life medical practitioner.
Personally, I would love to be able to visit a shopping mall with my family and feel and try on the things that I plan to purchase.
We’re entering 2021 the same way we entered 2020: with lots of uncertainty. But there’s comfort in knowing we survived a whole year full of surprises. As we look forward to another year, we are at least more prepared for the future that lies ahead.
A warm welcome to the Deeper newsletter, dear reader!
You’re reading this because, just like us, you’re tired of the non-stop tech and startup news cycle, where there seems to be something new and trendy to keep up with in Southeast Asia.
What you want to know about is the important stuff that matters—period.
And that’s what we’re bringing to you. We’ll dive deep into a trending topic in Southeast Asian tech, and their impact on society (i.e. me and you).
Sound compelling? Subscribe now, and we’ll send it straight to your inbox:
