Digital services play crucial role as Malaysia's Internet economy predicted to hit US$35bn by 2025

Malaysia's Internet economy is predicted to reach a gross market value of US$35 billion in value bu 2025 and have a compound annual growth rate of 14% from 2021, said a recent study by Google, Temasek, and Bain & Company, titled "e-Conomy SEA 2021, Roaring 20s: The SEA Digital Decade". Meanwhile, GMV for 2021 is expected to rise by 47% from last year to hit US$21 billion. According to the report, the steep increase is underpinned by a 68% growth in eCommerce. Transport and food also grew 35% between 2020 to 2021, while online media jumped by 14%. Although online travel grew, it still came in last at 4% due to border restrictions. 

At the same time, digital financial services are also in focus this year, as the race for new digital banking licenses from Bank Negara heats up. Companies such as Axiata Group and RHB Banking Group have thrown their hats into the ring for a digital banking licence. 

Digital merchants are getting tech-savvy and are expected to become even more so in the future, said the study. Meanwhile, 43% of digital merchants believed they would not have survived the pandemic if not for digital platforms. While the pandemic has caused some challenges for most businesses, it has accelerated digital adoption by merchants, with 98% of them now accepting digital payments and 72% using digital lending solutions. 

According to the study, many merchants are also embracing digital tools to engage with consumers, with 70% expecting to increase usage of digital marketing tools in the next five years.

At the same time, plenty of the merchants also likely to increase usage of digital analytics (45%), website services (46%) and cloud storage (39%).

Since the start of the pandemic in 2020, Malaysia has seen new digital consumers, with 81% of all Internet users now consuming digital services, said the study. As the country starts to adopt and embrace digitalisation, many consumers have continued the use of digital services as it is more convenient.

While the pandemic has accelerated the usage of digital consumption, the study said it is not a one-off phenomenon and is now a way of life for Southeast Asians. As a result, merchants who want to thrive in today's digital economy are required to understand that digital services are now integral to everyday life, and must meet the rising expectations of consumers. 

Usage frequency of digital services has mostly increased, with basic essentials such as groceries (62%) and food delivery (67%) seeing the most striking surges. 

Meanwhile, investors in Malaysia are growing more accustomed to the "new normal" in dealmaking, said the study. This has resulted to deal activity rebounding strongly in the first half of 2021 and is on track to hit the highest record in recent years. As digital services such as eCommerce, health tech and edtech see a surge due to the pandemic, the investment appetite for such services has remained strong. Furthermore, with the emergence of the country's first unicorn this year, the outlook for funding growth is optimistic. 

Whereas in Southeast Asia, the region is on the path to becoming a US$1 trillion digital economy by 2030. Propelled by a fast-growing base of digital consumers and merchants, acceleration in eCommerce and food delivery, Southeast Asia is estimated to reach US$174 billion in GMV by the end of 2021. This region’s digital economy is further expected to reach approximately US$360 billion by 2025, outgrowing the earlier projection of US$300 billion. Southeast Asia is also touted to be entering its "digital decade" as the Internet increasingly becomes an integral part of consumers’ daily lives. 

Google commissioned Dynata to run the survey across countries such as Malaysia, Singapore, Indonesia, Philippines, Thailand and Vietnam. The fieldwork for the consumer research ran from 16 July to 16 August this year online via a 25-minute computer-assisted web interview survey with a total of 9,402 respondents interviewed. The fieldwork for the merchant research ran from 4 to 16 August this year online with a total of 3,036 respondents surveyed.

Join our Digital Marketing Asia conference happening from 9 November 2021 - 25 November 2021 to learn about the upcoming trends and technologies in the world of digital. Check out the agenda here.

Photo courtesy: 123RF

Related articles:
Study: Uncovering growth areas as SEA to become US$1 trillion digital economy by 2030
7 areas about Twelfth Malaysia Plan the marketing and biz sectors should take note of
'Less digitalised' ASEAN firms unambitious in pursuing further digital adoption, says study