E-commerce and other sectors such as travel, media and ride-hailing services have built a thriving Internet economy in South-east Asia.
The segment is on track to exceed US$240 billion (S$330 billion) in gross merchandise value (GMV) by 2025, according to a report yesterday - US$40 billion higher than earlier estimates.
The region's Internet economy stands at US$72 billion in gross merchandise value. The report from Google and Temasek covers Indonesia, Malaysia, the Philippines, Singapore, Thailand and Vietnam, and studied online travel, online media, ride hailing and e-commerce.
It noted that regional growth will be powered by the large Internet user base, especially as affordable smartphones become increasingly available and mobile telecommunications services grow faster and more reliable. There were more than 350 million Internet users across the six countries in June this year, 90 million more than in 2015.
Indonesia is the biggest Internet economy market with US$27 billion GMV this year and an expected US$100 billion by 2025. It also has the largest Internet user base in the region, at around 150 million.
While Singapore is small, it punches above its weight with an estimated US$10 billion in GMV this year, making it the region's third-largest Internet economy.
The report said new sectors that have emerged with the growing Internet economy include online vacation rentals, food delivery, and subscription music and video on demand.
In the past three years, e-commerce has been the most dynamic sector in the region's economy, with GMV likely to exceed US$23 billion this year and having grown more than fourfold since 2015.
This expansion has been driven by e-commerce firms Lazada, Shopee and Tokopedia, which have grown collectively more than sevenfold in GMV since 2015.
The second-fastest growing sector is online media, which includes advertising, gaming and subscription music and video on demand.
Travel is booming as well, with the proportion of travel bookings made online rising from 34 per cent in 2015 to 41 per cent this year.
"This has been driven primarily by the continuous increase in consumer trust for players like Agoda, Booking, Expedia and Traveloka, which offer a wide range of flights, hotels, vacation rentals and other travel services," the report said.
"Online travel aggregators give travellers the ability to easily compare and find the best products and prices as well as the convenience to check availability and to complete the booking in one go."
Consumer adoption of ride-hailing services also continues to increase, with an estimated 35 million South-east Asians actively using these firms and booking eight million rides on an average day. Online food delivery has also grown, with ride-hailing players such as GrabFood and online delivery platforms like Foodpanda at the forefront.
However, the use of digital payments is lagging, said Mr Rohit Sipahimalani, joint head of the Investment Group at Temasek.
"The adoption of digital payments is increasing, yet usage remains low due to the lack of widely accepted solutions. The big issue here is also merchant acceptance. We need large players willing to invest to build the ecosystem and one or two dominant ones to establish certain standards."