The secret sauce – Why super apps proliferated in Southeast Asia but not (yet) in Latin America

Last week, we launched our latest report in collaboration with Cento Ventures about the Southeast Asian and Latin American markets for global investors. We analyzed how companies with similar business models evolved differently in these markets and the different factors that affected their growth.

We realized that we could attribute most of the variations in companies’ decisions and growth in these regions to four major factors. 

1. Availability of capital across markets and different investment stages

Over the past four years, Southeast Asia received four times more funding than Latin America. Companies in Latin America have been dissuaded by the lack of capital and so the exits were earlier and much smaller. Southeast Asia, on the other hand, always had a constant influx of capital across different growth stages. This gave companies the confidence to move forward and grow to later stages rather than exit early.

However, Latin America received more funding than Southeast Asia in 2021. There has also been a surge of mega deals in Latin America in 2021, which is a positive sign for the years to come.

2. Different development pathways as key reference templateThe investment ecosystems in Southeast Asia and Latin America are quite different from each other. Though there are a lot of similarities between these two regions, the growth of industries and companies are distinctly different.

The Southeast Asian landscape is predominantly focused on ‘super apps’ or multi-vertical apps. Companies that focus on e-commerce and local services have great reception. In stark contrast, Latin America’s ecosystem is driven by digital financial services.

The different development pathways in a particular region set precedence and greatly influence the growth of companies in any region.

3. Concentration and volume of demand for digitizationWhen you take Latin America and Southeast Asia, the level of digitization varies at the city level not just at a country level. In Indonesia, there’s a high drive from MSMEs to digitize the lower segment of the population. This drive to digitize also signals a push to digitize the entire key value chain to make accessibility easier. There is a lot of demand to digitize entire services like bookkeeping, reselling, sourcing, etc.

The concentration and size of the demand for digitization in these regions and a company’s efforts play a vital role in determining how a company shapes up.

4. Speed and response to digitization challenges

The strength (or weakness) of a particular industry greatly influenced their response to digitization. If you take Indonesia, the population is widely distributed and there’s a big gap in the products and services available in metros and other towns. So when digitization took over, people were quick to adopt e-commerce because it gave them access to unavailable services and products.

When you move to Latin America, traditional banks were not very strong. This gap in financial service and inclusivity was fulfilled by fintech companies, investment banks and other firms setting up their own digital banks.

This rapid digitization left traditional banks scrambling. To keep up with changing times, Itaú Unibanco Holding SA, changed its digital strategy and set up its own standalone digital unit, Iti. This digital leap resulted in an 80% increase in new customers, the majority of whom were new users.

These are the major factors that currently affect how a company shapes up in any economy. This is an evolving theory – as the economy develops, these factors could change.

We also analyzed other trends and similarities between the two emerging markets – Southeast Asia and Latin America. You can download the report here.

Feel free to reach out to us at [email protected] for any enquiries, questions and insights.