Morgan Stanley
  • Research
  • Jun 10, 2020

Rise of the ASEAN Super Apps

Digital disruption has been slow to arrive in Southeast Asia, but several factors are converging to put the region at an inflection point and drive adoption of multipurpose super apps.

In China, the typical tech-savvy consumer uses multipurpose “do everything” apps to send texts, manage finances, shop online and play games. These so-called super apps such as WeChat have defined the consumer experience in China, and they're now likely to play a prominent role in the rise of digitization in Southeast Asia, which has lagged other regions.

“Improving infrastructure in logistics, mobile networks and payments are driving super app adoption in Southeast Asia," says Mark Goodridge, head of the ASEAN technology, media and telecommunications team at Morgan Stanley Research. The Association of Southeast Asian Nations, an intergovernmental organization, comprises 10 countries within the region. “Add to that the current COVID-19 crisis, which is driving more consumers online.”

In a recent report, Goodridge and his colleagues outline why Southeast Asia is expected to embrace the one-app-fits-all model, creating a $23 billion revenue opportunity by 2025 while delivering an increasingly seamless digital consumer experience for hundreds of millions of users—and opening doors for investors to get in on the ground floor of the next region ripe for digital disruption. While there a few contenders for which app could dominate, the eventual leader will likely succeed with widest array of services and operate in multiple countries in the region.

The super app revenue opportunity could reach $23 billion by 2025.

Source: Google, Temasek, Bain, Euromonitor, Morgan Stanley Research (e) estimates.

The Power of a Single App

Historically, the digitalization of economies follows a fairly predictable path: Consumers socialize more online, begin shopping more online, then start using more services online. What is different region by region is how consumers access each of these services.

In Europe and the U.S., a user may use one app for social media, another to text family and friends, and others to transfer funds, order food, hail a ride and so on. In China, there is one, WeChat, which can serve any or all of these functions, and many more, a uniform and often friction-free experience for users. "Super apps are establishing themselves as gateways to this changed behavior," Goodridge says.

Investment into super apps across ASEAN has been significant so far
(2016-2019 = $43 billion)

Source: Google, Temasek, Morgan Stanley Research

Taking Share in Consumer Sectors

Super apps may not be the only players in key consumer segments—retail, transportation and food—but they appear better positioned than stand-alone apps. Bringing multiple segments onto a single platform not only creates consumer "stickiness," it can reduce sales and marketing expenses, which translates into shorter break-even periods for participating companies.

Not surprisingly, retail could see rapid transformation, with e-commerce gateways breaking even within five to seven years after launch, on average. All told, the Morgan Stanley team forecasts ASEAN e-commerce revenue could grow at a compound annual rate of 31% over the next five years.

As it did in U.S. and European markets, the COVID-19 pandemic could accelerate an increase in online grocery penetration, with significant potential upside. Excluding Singapore, online grocery’s ASEAN market share stands at less than 3%. Likewise, food delivery could also take off; Morgan Stanley forecasts a compound annual growth rate of 25% for revenues over the next five years.

Meanwhile, the growth of ridesharing will likely impact car ownership in the region, with Indonesian apps benefiting from a large population, and Singapore seeing the highest gross bookers per trip. “We think ridesharing will be a significant opportunity in the area," says Goodridge, whose team is forecasting total ridesharing revenue growth for the region of 18% annually between now and 2025.

Banks Have the Most to Lose

Although fintech players initially represent a small share of the $23 billion super app opportunity, this segment could be the most disruptive. The reason: Online payments provide a likely entry point for other services, including insurance, investments and remittance.

Singapore, Malaysia and the Phillipines are moving forward with digital banks since 42% to 78% of the population is under- or non-banked

Source: Bain, Google, Temasek, Morgan Stanley Research

“The ecosystem integration that super apps create means it should be easy for them to persuade customers to start using their payment formats," says Goodridge, noting that lower operating costs, access to new data sources and less regulation could give apps an edge. “Once super apps enter the payments market, with the right licenses, they could build a deposit base that would allow them to use their strengths in customer intelligence to build a loan book."

Traditional banks potentially have the most to lose, but the outlook varies by country. “A key factor is whether there is an underserved market for financial services," says Goodridge.

With its large population, low banking penetration and a well-established super app, Indonesia, for example, could provide the biggest opportunity for a single app to gain significant market share in digital banking and other fintech services, provided regulation is supportive.

Singapore banks, conversely, are well positioned to defend their turf. They already serve a large percentage of the population, and have strong brand recognition and technology platforms.

For more Morgan Stanley Research on super apps, ask your Morgan Stanley representative or Financial Advisor for the full report, “Rise of the ASEAN Super Apps," (May 20, 2020). Plus, more Ideas.