Indonesia's Internet economy to hit US$146bn by 2025, digital financial services a growth area

Indonesia's Internet economy is poised to reach US$146 billion by 2025, a 20% increase from US$70 billion that has been predicted for this year, according to a recent study titled "e-Conomy SEA 2021, Roaring 20s: The SEA Digital Decade" by Google, Temasek, and Bain & Company.

The US$70 billion in gross merchandise value for 2021 marks a 49% year-on-year surge underpinned by a 52% growth in eCommerce. Aside from eCommerce, transport and food, online travel, and online media also experienced double-digit growth rates in 2021. Transport and food saw a 36% growth rate while online travel and online media had a 29% and 48% respective increase in growth rates.

According to the study, Indonesia continues to be one of the most vibrant digital financial services markets due to its relatively open regulatory framework and is showing rapid growth across fintech and digital platforms. Digital financial services are also becoming critical enablers, with 98% of digital merchants now accepting digital payments and 59% of digital merchants now adopting digital lending solutions.

Many are also embracing digital tools to engage with their customers, with 69% expecting to increase usage of digital marketing tools in the next five years and 45% saying they will increase investment in website analytics.

At the same time, 43% said they will invest in digital analytics in the next five years.

Meanwhile, 28% of digital merchants in Indonesia believed that they would not have survived the pandemic if not for digital platforms. While digital merchants utilise an average of two digital platforms, the study found that profitability remains a top concern.

Since the beginning of the pandemic until the first half of this year, Indonesia has seen 21 million new digital consumers. Of these users, 72% are from non-metro areas, which the study said is a highly positive sign of growing penetration in the region's largest market. Majority of them (96%) are still using the services and 99% intend to continue using going forward. Individuals who have used the services before the pandemic have consumed an average of 3.6 more services since the pandemic began, and amongst all users, satisfaction with the services sit at 87% across verticals.

Aside from the growth in the Internet economy, deal activity also rebounded in the first half of the year. According to the study, this made Indonesia "the hottest investment destination" in Southeast Asia, edging out Singapore. Indonesia's deal value in the first half of this year alone (US$4.7 billion) has since surpassed the deal values of each of the last four years: US$4.4 billion in 2020, US$3.2 billion in 2019, US$3.8 billion in 2018, and US$3.0 billion in 2017.

Overall, the study painted a rosy picture of Southeast Asia's Internet economy, stating that it is expect to reach approximately US$360 billion by 2025, outgrowing the earlier projection of US$300 billion. The region is also touted to be entering its "digital decade" as the Internet increasingly becomes an integral part of consumers’ daily lives. Southeast Asia now has more than 440 million internet users, and importantly, 350 million of them, or about 80%, are digital consumers who have bought at least one online service. Since the pandemic began, Southeast Asia has added 60 million new digital consumers, of which 20 million joined in the first half of 2021 alone.

Dynata was commissioned by Google to run the survey across Indonesia, Malaysia, Singapore, Philippines, Thailand and Vietnam. 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. Fieldwork for the merchant research ran from 4 to 16 August this year online with a total of 3,036 respondents surveyed.

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Photo courtesy: 123RF

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