DIGITALISATION has been unlocking new markets across various industries in Asia, particularly for low-income individuals. New consumer segments are being captured, at an intense pace and immense scale.
According to the World Bank and the Asian Development Bank, over one billion people in China and Southeast Asia live at the base of the economic pyramid (BoP), and they are already spending around US$2 trillion on an annual basis on critical goods and services such as food, housing, education and healthcare. In the coming decade, as this group continues to grow in size in tandem with rising income-levels, they are expected to continue to prioritise providing more for their families in terms of education, healthcare, and other basic needs.
However, access to these resources is often a roadblock for many individuals and families living at the BoP. A multitude of interplaying factors, including location, cost and knowledge, often contributes to this lack of access. For example, access to medical practitioners may be concentrated in the larger cities, thereby preventing a family living in a rural area from consulting a doctor and easily seeking medical help. The default option is often to delay seeking professional medical help until the situation becomes critical. However, when that happens, the distance needed to reach a doctor, the costs incurred for travelling and the time taken away from work for daily wages, has exacerbated the situation for the family.
Growth in digitalisation in Asia is rapidly changing the face of this issue. This is happening for both consumers, as well as the businesses that serve them.
According to Statista and GSMA, a decade ago, Internet penetration across Asia was only at 25 per cent of its population, and that has doubled to 48 per cent in 2019. Today, Asia is already the largest region of Internet users, globally. Smartphones make up the lion's share of the mode of access for these Internet users, particularly in South-east Asia where it accounts for about 90 per cent of users. In the next five years, Statista and GSMA estimates that there will be another 900 million more mobile Internet users in Asia. Improved mobile broadband infrastructure and cheaper data have also facilitated this growth.
At the same time, traditional businesses whose growth in scale were once limited by lack of reach to various customer segments have either gone digital themselves or faced an incursion of similar businesses that have successfully integrated digitalisation as the method and/or vehicle of growth in their offering.
Digitalisation is capturing a myriad of new consumers in Asia and the Covid-19 pandemic has accelerated this process. New markets are created at an unprecedented scale and this has led to better affordability, especially for those who once lacked that access.
Today, a daughter living in a rural town in Indonesia whose elderly father who has been running a fever for the past few days can easily set up an initial teleconsultation with a general practitioner, obtain a preliminary diagnosis, be given a prescription and receive the medicine, all within an hour and in the safety and comfort of their own home. This is made possible through innovative businesses such as Halodoc.
Halodoc's vision is to simplify healthcare in Indonesia. They do so by connecting various stakeholders in the healthcare system - the patient, doctors, pharmacies, hospitals and insurers. Now, the patient in Indonesia is connected to all these stakeholders through a simple application on his or her smartphone. General practitioners and in particular, specialists that are physically located in the bigger cities of Indonesia, are now connected to patients all across the country, even those in remote areas.
This is the epitome of synergy generated through tech-integrated businesses and the growth in Internet connectivity of its consumers. Many more low-income individuals who are newly connected to the Internet through their smartphones have gained access to a variety of critical goods and services, as well as new opportunities. For such companies, these are not simply additional customers, but in many cases, completely new target markets. Economies of scale occur as companies reach these new markets, at remarkable volumes. For the end consumer, this means access and affordability. For the company, this equates to attractive growth and profits.
Need for digital connectivity
The recent pandemic magnified the need for such digital connectivity. In the example of Halodoc, the mobile platform was crucial in reaching Indonesians across the archipelago, providing teleconsultations to patients, analysing and monitoring the development of symptoms and alerting the government's Covid-19 taskforce if patients required further treatment. This has alleviated the load on hospitals across the country, and at the same time provided timely support and relief to patients with milder symptoms. Over this period, Halodoc acquired many new users in and outside Java, experiencing growth across various segments of its business.
Such dynamics are not limited to the healthcare sector alone. In other sectors such as education, companies like Ruangguru have connected students all across Indonesia, even those living in rural areas, to quality supplementary education. Paying a fraction of what they would otherwise pay at brick-and-mortar tuition centres, these students gain access through their mobile phones to learning journeys and a network of teachers across the country. The company has millions of subscribers and has since expanded beyond the shores of Indonesia. There are many more such examples across Asia, particularly in sectors that provide access to critical goods and services.
The type of companies best positioned to capture this opportunity are the small and medium enterprises (SMEs) operating in these sectors and markets. SMEs are the backbone of Asia's economy, consisting of over 90 per cent of all registered businesses across Asia. As they better adapt to local needs, they are at the forefront of addressing lack of access for low-income individuals and other requirements - all the while capitalising on the opportunity for scale and growth.
Impact investing plays a crucial role in supporting such companies, and is one of the fastest growing areas of the investment industry, driven by investors who are seeking to not only deliver commercial financial returns but also fund solutions to the world's great challenges.
- Salman Shah is head of Alternative Fund Solutions, Private Banking Asia Pacific, Credit Suisse and Joyce Chee is Sustainable and Impact Investing adviser, Impact Advisory and Finance Department Asia Pacific, Credit Suisse