AS Covid-19 maintains a grip on South-east Asia, the economic fallout continues to unfold in unpredictable ways. Yet one thing is certain. The coronavirus has brought about a massive digital adoption spurt for everything from online shopping and streaming entertainment to telehealth and digital banking. The big question now on everybody's mind: what will it take to maintain the momentum?

In a year of lockdowns and masks, Internet usage flourished like never before. A total of 40 million new users were added in Singapore, Indonesia, Malaysia, the Philippines, Thailand and Vietnam in 2020. That brings the total to 400 million users. It's to the point that 70 per cent of South-east Asia is now online, according to research conducted by Bain & Company, Google and Temasek.

More than one in three consumers of digital services is a new adopter - and 90 per cent intend to continue their newfound habits post-pandemic, our research found. Aside from Vietnam and Thailand, the majority of new consumers are from non-metro areas. Another finding: South-east Asians spent on average an hour more a day on the Internet during Covid-19-imposed lockdowns, with the highest spike in the Philippines.

In addition to tracking the digital services economy, our research identified the key trends across seven important sectors: e-commerce, online media, transport and food, online travel, digital financial services, healthtech and edtech. Those sectors combined are poised to grow from US$100 billion in gross merchandise volume in 2020 to over US$300 billion in 2025. The fastest growing countries are Vietnam and Indonesia, where the digital economies are expanding at double-digit rates.

DIFFERING IMPACTS

Each sector felt the impact of Covid-19 differently. For example, while e-commerce, online media and food delivery set new records for adoption, transport and online travel suffered. As consumers and small business enterprises became more receptive to online transactions, they set the stage for continuing growth in digital financial services. Meanwhile, healthtech and edtech, new digital frontiers that played a critical role during the pandemic, could make significant advances, assuming some fundamental challenges are addressed.

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Consider healthtech, which saw usage grow fourfold since the lockdown, and is generating rising interest from both investors and regulators, as well as from patients. As the burden on healthcare systems mounted, digital services helped reduce the pressure by enabling physicians to treat non-critical cases virtually. For example, MyDoc offered patients with respiratory symptoms universal access to their proprietary Covid-19 triage assessments, while Gojek and Halodoc, in collaboration with the Indonesian Ministry of Health, launched an online consultation that helped screen patients experiencing Covid-19 symptoms.

The digital solution is especially well suited for South-east Asia, where access to healthcare is a perennial problem. However, to maintain the pandemic-inspired boom, the industry requires wider integration with healthcare providers and business models need to be further developed to reach sustainable profits for many telemedicine and e-pharmacy startups. Also, the regulatory framework needs to be more developed to safeguard patient outcomes. That's a giant step that will build more trust from all parties, including providers, payers, and patients.

Similarly, edtech, another nascent sector, enjoyed a three-fold spike in the users of the top applications in South-east Asia. To maintain that growth, the larger education ecosystem needs to be fully convinced of the efficacy of various edtech solutions. A paradigm shift is required to help educators develop new methodologies that go beyond online lectures and digitised versions of problem sets. There also are the big issues of connectivity and affordability: online learning is a time-intensive activity that more often than not requires a dedicated digital device for each child.

Nonetheless, the boost in adoption, compounded with fast-growing funding, is likely to propel innovation in these frontier digital sectors over the coming years.

In the more mature digital services sectors of e-commerce, transport and food, travel and media, players need to aim for profitability. In the past, investors looked for scaling. Now they want sustained profitability. While investing in new frontier services has increased, funding in mature and consolidated sectors has slowed since 2018, leading companies to refocus on their core business to prioritise a path to profitability while also addressing consumers' broad range of needs through partnerships.

The emerging digital financial services battleground is one of the few spaces where super services collide, and though it's too early to tell the outcome, we expect continued funding and a strong cash-generating core business to be key to steady growth in that sector.

STEPPING UP FOR CHANGE

Last year's seismic consumer and ecosystem shifts have advanced the Internet sector in unimaginable ways, putting it in a stronger position than ever. Traditional players can help push the ecosystem forward, which in turn helps keep momentum on digital acceleration across the board. For digital natives and investors, the future will require late-stage companies to pivot from growth to sustained profit. Inclusive and open ecosystems will be core to healthier and faster growth for all parties, and sensible valuations and rewarding the right behaviour will be vital to the industry.

Last year, we identified six key barriers to growth - Internet access, funding, consumer trust, payments, logistics and talent. This year has seen significant progress on most (payments and consumer trust, especially). Talent, however, remains a key hurdle that all parties will need to keep working on to ensure the momentum gained in 2020 is sustained.

Public policymakers will need to help address the lack of digital talent. That means travel and immigration policies should take into consideration the needs of the digital sector, for example. Implementing digital job reskilling programmes would allow workers to find jobs amid the tough employment climate. Meanwhile, public infrastructure should be developed to serve as a catalyst for growth in budding sectors such as digital financial services, healthtech, and edtech. Ultimately, such regulatory support and open dialogue among all stakeholders will help shape and sustain growth for South-east Asia's Internet economy.

• The writers are partners at Bain & Company, based in Singapore. Florian Hoppe co-leads the firm's digital practice in Asia-Pacific.