[B-SIDE Podcast] PHL digital economy: $40 billion by 2025, despite Omicron
Follow us on Spotify BusinessWorld B-Side
The Omicron surge doesn’t dampen expectations that the Philippine internet economy will hit $40 billion in terms of gross merchandise value (GMV) by 2025.
“We don’t look at our estimates from an event point of view because we can’t forecast individual events like Omicron and who knows what’s going to happen next,” said Willy Chang, associate partner at Bain & Company. “It’s based on foundational views.”
In this B-Side episode, Mr. Chang explains the e-Conomy SEA Report 2021 by Google, Temasek, and Bain & Company to BusinessWorld reporter Revin Mikhael D. Ochave.
He identifies “pockets of opportunity” for small and medium enterprises and how they can become part of Southeast Asia’s fastest-growing digital economy: “The headroom for growth is tremendous.”
TAKEAWAYS
E-commerce is driving the growth of the PHL internet economy.
“In terms of the billion gross merchandise value (GMV) in the future, if we look at what’s driving it, most of this growth will actually come from e-commerce. It is one of the biggest sectors not only for the Philippines but also for the region,” Mr. Chang said.
“The Philippines is the fastest-growing market this year between 2020 and 2021, about 93% growth year on year — highest around the region, and primarily driven by two factors, the first being Philippines saw the largest proportion of new users since COVID-19 started. About 20% of all digital consumers, or people who have used at least one service online, have joined since 2020 and into 2021,” Mr. Chang said.
He also mentioned that the estimated GMV can be reached by the Philippines in 2025 due to improving internet access and its large headroom in terms of potential growth.
“[The] Philippines belongs in the category of where online penetration is a little bit behind, and as a result, the headroom for growth is tremendous. If you look at this year’s report, about 68% of internet users consume online services in the Philippines. This is lower than the other markets such as Indonesia and Singapore,” Mr. Chang said.
“If you look at the internet economy today, as well as what is happening in the Philippines, we do see a lot of very fast-growing adoption of digital payments, not only e-wallets like GCash and PayMaya but also Pesonet and Instapay,” he added.
To take advantage of opportunities, SMEs should deepen digital financial services.
“From an SME and from a [digital] platform point of view, I think the first one is continuing to onboard more and more merchants not just on e-commerce but also on food delivery, etc. There is still a lot of room to grow,” Mr. Chang said.
“The second one is deepening into financial services not just accepting payments. But there is also opportunity for merchants to offer things like buy now, pay later. At the same time, once they start adopting digital payments, they have transactions recorded digitally, they build credit assessment data and that will potentially allow them to access digital banking services or digital lending,” he added.
Mr. Chang also added that SMEs can also tap digital tools to help their productivity — not just in marketing but in areas such as accounting, for example.
“[There are] many pockets of opportunity … that will benefit the SMEs and also deepen the relationship between platforms and SMEs,” Mr. Chang said.
As Omicron rages on, not all sectors in the digital economy will flourish. (Winners: e-commerce, food delivery. Losers: ride-hailing, on-demand transportation, online travel.)
Mr. Chang said not all sectors will be able to cope with the COVID-19 pandemic, especially with the Omicron variant, despite the surge in the internet economy and digital adoption.
“We probably expect e-commerce and food delivery to benefit. But ride-hailing, on-demand transportation, as well as online travel will be muted,” Mr. Chang said.
“If we look at some of the enablers, environmental, social, and governance (ESG), sustainability, data regulation, and privacy, I think these are some of the tough policy questions that need to be addressed collectively by digital insurgents themselves: regulators, businesses, merchants, even consumers. Depending on how some of these factors could evolve, they could affect how different sectors will evolve,” he added.
Recorded remotely on Nov. 30, 2021. Produced by Paolo L. Lopez and Sam L. Marcelo.
Follow us on Spotify BusinessWorld B-Side
