E-Commerce In SouthEast Asia To See Strong Growth Post-Pandemic, BNPL Companies To Fuel Growth Amidst Growing Adoption

Fitch Solutions / Corporates / Indonesia / Thu 30 Jun, 2022

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Key View: Globally, the Covid-19 pandemic acted as a catalyst for growth and adoption of e-commerce. As the pandemic effects wane, we explore the growing attractiveness of e-commerce in Southeast Asia's three largest economies, Thailand, Indonesia and Vietnam. While we do note that rising household debt levels may lead to weakened consumer spending, strong mobile internet penetration rates and real income growth make these markets an attractive destination for e-commerce growth. We believe the Buy-Now-Pay-Later (BNPL) platforms will benefit and contribute to the surge in e-commerce in Southeast Asia over the medium term (2022-2026).

Growing 5G Mobile Penetration An Opportunity For E-Commerce Growth

Southeast Asia’s addressable market for mobile penetration remains large and is set to continue growing robustly over the next 10 years. As mobile phones are typically cheaper and more portable than other electronic devices such as laptops and computers, they have one of the highest penetration rates in emerging economies. Most e-commerce platforms are also structured to be most compatible when accessing it via a mobile device. As such, rising mobile usage will see a greater proportion of the population having the ability to access e-commerce as well as modern retail. Below, we look at Southeast Asia’s three largest economies: Indonesia, Thailand and Vietnam.


As with its economy, the mobile market in Indonesia is the largest mobile market in Southeast Asia. By the end of September 2021, the market recorded 363.1mn subscriptions, an increase from the 355.2mn recorded a quarter earlier, but up 3.7% y-o-y. The market is expected to expand to 421.8mn subscriptions by the end of 2031. The mobile market remains volatile, given the high reliance of operators on prepaid subscriptions, which are frequently deactivated. 5G technology was launched in Indonesia in 2021, and our Telecoms team foresee a strong uptake will only begin to happen around the middle of the forecast period, given that operators right now are focusing their investments to bolster their 4G networks capacity and coverage, by deploying more broadband-capable base stations (BTS) as well as upselling mobile data plans to basic subscribers. In May 2021, market leader Telkomsel launches first commercial 5G in Indonesia, quickly followed by second place Indosat Ooredoo. By 2031, 5G will account for close to 45.3% (191.3mn) of Indonesia's mobile market.


Thailand was the first country in ASEAN to launch commercial 5G services in 2020. Our Telecoms team envisage the mobile market growing from 97.8mn users in 2022 to 98.7mn in 2023 and about 99.8mn by the end of 2031. The number of 5G subscribers will climb from 9.1mn in 2022 to 15.5mn in 2023 and is set to continue growing over the coming decade to reach almost 52mn by the end of 2031. Thailand-based Gulf Energy has increased its ownership of Thai telecommunications company Intouch Holdings from 19% to 42.3%. Intouch is the dominant shareholder in both AIS and satellite operator Thaicom. Gulf Energy's rationale for increasing its investment is not clear, but with Thaicom owning strategically important 5G spectrum, it is possible that Gulf Energy sought to transfer those resources to AIS before the government mandated its return and subsequent auction to other market players.


By the end of 2031, we forecast the Vietnamese mobile market to host approximately 128.8mn subscribers, with an average annual growth rate of just 0.5% over the 2022-2031 period. By 2031, 84.5% of connections will be 5G-capable, with initially-soft uptake set to accelerate toward the medium term once the ecosystem of consumer devices expands and becomes more affordable. Though limited 5G services are now available in Vietnam, we do not anticipate mass adoption until the middle of the decade, mostly due to the shuttering of 3G networks. We believe that 2G services will remain in place until the end of the decade in order to continue serving rural users. The Covid-19 Delta- and Omicron variant outbreak weighed on state-owned operators MobiFone and VNPT's efforts to roll out 5G services across the country, while potential investors may be deterred by the extent to which the state is prepared to involve itself in network shutdowns and the accelerated 5G rollout.

5G Adoption Provides Strong Base For E-Commerce Growth

Indonesia, Thailand, Vietnam - 5G Subscriptions ('000), 2022-2031

f = Fitch Solutions forecast. Source: Operator results, Fitch Solutions

Real Incomes Growth A Strong Boost For Retail

Across the region, average household disposable income will post real growth in the medium term. This will see households develop greater willingness and ability to spend, allowing them to trade up price points, gradually move away from the 2020-2021 focus on essentials and provide consumers with higher propensity to spend on non-essential retail in the medium term.


Over the medium term, the average disposable income for Thai households is forecast to grow by an average of 4.5% annually, from THB326,600 (USD9,521) in 2022, to THB388,400 (USD12,630) in 2026. Inflation in Thailand is forecast to average 2.8% annually for the same period. This means households in Thailand will see their disposable incomes increasing in real terms, estimated at an average of approximately 1.7% annually.


Over the next five years, the average disposable income for Indonesian households is forecast to grow by 8% annually, from IDR155.6mn (USD10,654) in 2022 to IDR211.4mn (USD13,463) in 2026. Inflation in Indonesia is forecast to average 3.8% annually for the same period. This means households in Indonesia will see their disposable incomes increasing in real terms, estimated at an average of approximately 4.2% annually.


Over the medium term, the average disposable income for Vietnamese households is forecast to grow by 9.3% annually, from VND158.9mn (USD6,908) in 2022 to VND226.1mn (USD9,542) in 2026. Inflation in Vietnam is forecast to average 3.5% annually for the same period. This means households in Vietnam will see their disposable incomes increasing in real terms, estimated at an average of approximately 5.8% annually.

Positive Real Growth In Disposable Incomes

Indonesia, Thailand, Vietnam - Real Income Per Household (2017-2026)

e/f = Fitch Solutions estimate/forecast. Source: National statistics, Fitch Solutions

Household Debt Outlook May Weigh on Consumer Spending

Globally, interest rates have been at historic lows, stimulating consumer debt. In Southeast Asia, household debt situations differ between the three largest economies. At last estimate, the Bank Indonesia puts household debt at 17.2% of GDP in Q321. This figure is on a slight uptrend from 2019's 16.9% and nominal figures also remain significantly high. Vietnam has experienced a household credit boom over the past few years. We highlight that rapid unwinding of this could pose a significant risk to domestic demand. Consumer loans accounted for roughly 50% of the workforce’s income in 2020, a relatively high figure for an emerging market like Vietnam. Of the 50%, over half was in the form of borrowing by small household businesses with a further 25% in housing-related loans (mostly mortgages). Although growth in household debt moderated significantly in 2020 with a 1% increase (compared to an average 3% since 2013), the level remained elevated. Thai households have one of the highest debt rates in the developing Asia region and over the course of the pandemic household debt as a percentage of GDP in Thailand increased significantly. While household debt averaged 69.2% of GDP in the pre-pandemic environment (2015-2019), reaching a low of 68.2% in Q218, it had risen to 72.8% by Q220. The latest available data indicate that household debt accounted for 90.2% of GDP in Q321, some 22% higher than the pre-pandemic average. However, while the Bank of Thailand voted to hold its benchmark monetary policy rate at 0.5% at its meeting on March 30 2022, we expect inflationary pressures will force it to hike the rate by 25 basis points (bps) by end-2022 (as compared with zero hikes previously forecast) and by a further 50bps by the end of 2023. As repo rates and interest rates begin to rise, so too will debt servicing costs. Across the region, we will see households having to allocate increasingly portions of disposable income towards debt financing, placing downward pressure on consumer spending going forward.

BNPL Platforms Will Be The Next Step In E-Commerce Growth In Southeast Asia

The Covid-19 pandemic has accelerated the adoption of e-Commerce in emerging economies, including in Southeast Asia. The pandemic has also seen strong partnerships between e-commerce and BNPL platforms, and we note that almost all e-commerce platforms in Southeast Asia currently offer a BNPL option alongside more traditional online payment options, such as Visa and Mastercard. These platforms are often integrated with online retailers and smartphones, allowing consumers to get easy access to BNPL options, without the involvement of credit checks. These allow consumers to defer payments or pay in interest-free instalments, even for small-ticket purchases, including cosmetics, clothing and footwear. As BNPL platforms become more widely used, they have the potential to weigh on credit card usage for e-commerce transactions. As consumers, most notably generation Z and millennials, are becoming increasingly willing to use online BNPL options to purchase goods, we expect more retailers and e-commerce platforms to partner with BNPL firms over the next few years. As Internet and e-commerce penetration rates rise in emerging markets and consumers develop a higher trust levels in online payment methods, we believe BNPL have the potential to weigh on credit card usage for e-commerce transactions.

Key BNPL Players In Southeast Asia
Company Country Overview
Atome Singapore Atome is the Singapore-based BNPL company in Southeast Asia. It is a leading player in the region and is available in over 10 Asian markets, including Thailand, Indonesia and Vietnam. the company has over 10,000 partnerships with online and offline retailers across sectors such as fashion, beauty, lifestyle and homeware.
Shopee PayLater Singapore Shopee PayLater is Singapore-based e-commerce giant Shopee's BNPL payment option. The most attractive element of Shopee PayLater's offering is convenience, allowing consumers to do their shopping as well as sort out payment all within the same platform and mobile app.
Traveloka Indonesia

Traveloka is an Indonesia-based superapp that began its BNPL offering in Indonesia in 2018. In 2021, the company expanded its BNPL offering to Thailand and Vietnam. In September 2021, the company launched Southeast Asia's first 'Virtual Card Number', a payment system that allows Traveloka BNPL customers to utilise BNPL payment services on other platforms outside of the Traveloka system.

Akulaku Indonesia Akulaku is an Indonesia-based BNPL company that is part of the Alibaba Group. In March 2022, the company obtained a USD100mn investment from Siam Commercial Bank.
Kredivo Indonesia Kredivo is one of the earliest BNPL companies in Indonesia, beginning operations in 2016. The company is also the biggest player in Indonesia with over four million users domestically.  
Fundiin Vietnam Fundiin is a Vietnam-based BNPL company, one of the few local companies competing for market share as the BNPL scene in Vietnam is largely dominated by regional players. The company raised USD1.8mn in a seed round funding in September 2021.
Source: Company website, news articles, Fitch Solutions

This report from Fitch Solutions Country Risk & Industry Research is a product of Fitch Solutions Group Ltd, UK Company registration number 08789939 ('FSG'). FSG is an affiliate of Fitch Ratings Inc. ('Fitch Ratings'). FSG is solely responsible for the content of this report, without any input from Fitch Ratings. Copyright © 2021 Fitch Solutions Group Limited. © Fitch Solutions Group Limited All rights reserved. 30 North Colonnade, London E14 5GN, UK.

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