Here at Momentum Works we’re often tasked by our clients (and joint venture partners) to try and predict the future. Thankfully, due to our experience, and from keeping our ears to the ground, we’re happy to say that we’re right a lot of the time! As a company we cover a little bit of everything, we think that this is reflected very nicely in our predictions for 2018. Please have a read through and leave your comments below. Where do you think we have gone horribly wrong and what are your predictions for 2018?

Uber throws in the towel in South East Asia

Grab’s tech could be much better, and its way of spending money could be much more efficient. In short, Grab could have achieved much more with the resources they have. Nonetheless, that does not prevent Softbank from pumping in more and more money. And to be fair to them, Grab has been making improvements in a lot of areas. In terms of Market share, apart from Indonesia, Grab is beating Uber (and everyone else). Yes Uber is fixing scandals, yes Uber has hired really talented people. However, Uber has not fixed its fundamental problem, which is its business model. Simply going by take-rate is not as cool as it used to be, while Grab & Go-Jek both have sexy fintech story to tell. Many smart Uber executives in the region have shown weariness in private chats recently - and we think that unless magic happens, Uber is not that far away from throwing the towel in Southeast Asia.

Payday loan bubble bursts

The second half of 2017 saw a gold rush of Chinese payday loan players entering Southeast Asia, notably Indonesia but also Thailand, Vietnam and the Philippines. China’s tightening of its regulations, and the IPO of a few leading players, accelerated this trend. However, the markets in the region are not ready yet - most countries lack widely-adopted credit scoring system for consumers, and there are a lot of risks (e.g. illegal collections) associated with unregulated payday loan businesses. We believe the current heat will be short-lived, and by June most such loan providers will get their wings clipped. Regulators will catch up fast, but also the local players, who have always been providing consumer finance in the market using more traditional means. We also believe that as the whole consumer finance ecosystem moves to mobile, a lot of new opportunities will emerge.

E-commerce (and payment) continues to be fight of Chinese titans, with their local partners

Through an aggressive S$1.1 billion (US$750 million) investment into Tokopedia, Alibaba has effectively managed to control a leading player each in B2C (Lazada) and C2C (Tokopedia) space. JD.com, China’s number two e-commerce player and part of the Tencent portfolio, is finally making some inroads into Indonesia as well, despite being cut off the Tokopedia deal. The other leading player in Indonesia is Shopee, again with Tencent as the biggest shareholder. Similar battles are happening in Thailand, Malaysia and the Philippines. Korean conglomerates Lotte and SK (through 11street) are losing steam - another Korean company, Qoo10, is big in Singapore but is only big in Singapore. Japan’s Rakuten has already exited the region altogether. Also Read: A professional model built a startup to help brands reach influencers easily; raises US$200K The much anticipated Amazon entry into Southeast Asia, via Singapore, in 2017 has turned out to be a dud. People could not believe the poor quality of the app as well as that of the delivery service. We argued then that Amazon will fix it quickly, being a company that is used to fast iteration. However, this has not happened. Amazon Singapore continues to be underwhelming. Perhaps the best way for them to gain some real traction in 2018 is to make an acquisition, like what they did with Souq in the Middle East. So in the near future, Alibaba & Tencent will remain the bigwigs in Southeast Asia’s e-commerce scene. They have also realised the need for local partners, especially as they venture into more infrastructure spaces such as payment & logistics. Alibaba’s Ant Financial has built/invested-in a suite of local joint ventures; and Tencent is also putting cash here and there, notably with Go-Jek.

Chinese cross border e-commerce enters fierce competition

Traditional internal trade (with a long chain ) has shown its weakness especially after the financial crisis, and is gradually giving way to cross border e-commerce, which is much faster and more efficient. Armed with sophisticated supply chain, and data-driven marketing operations, more Chinese cross border e-commerce companies are entering the region. This is in addition to the cross-border efforts of Lazada and Shopee as platforms. Expect competition to be fierce. A good thing though, is for most countries the rules for customs clearance are becoming clearer and clearer. Both Indonesian and Filipino presidents are taking strong anti-corruption stances, and we expect trade flow to be more regulated, and people’s attention more on serving the customers better, rather than solving customs issues.

GoPay will rapidly become the preferred payment method in Indonesia

With their recent acquisitions, Go-Jek has proven that they are willing to invest heavily in tech & teams that support their plan into fintech. In the first half, the much delayed (and much anticipated) GoPay will be open to third party merchants. With its ride-hailing & other O2O use cases, and its army of tellers (riders and drivers), not to mention its huge warchest and aggressive team, GoPay will probably be the leading player in mobile payment in Indonesia. Nonetheless, we heard that they plan to charge 1.5% merchant fee which, although cheaper than most payment methods, is still more expensive than cash (and some of the COD players). This could be a roadblock for faster adoption before competitors catch up. There is a lot of competition as well. Ovo, backed by local conglomerate Lippo Group, has been very aggressive over the past few weeks, scoring both user downloads and commercial partnerships (notably with Lion Air & Grab); Indosat Ooredoo has spun off its payment business into a separate company called PayPro; and banks from BCA, BNI to Mandiri are all expanding their payment use cases aggressively. Ask ordinary consumers in Indonesia and they will most likely tell you GoPay is still the most convenient among all. How long this competitive advantage will last really depends on how quickly the others catch up, and how fast Go-Jek can run to stay ahead. Any strategic mistake, in the meantime, will cause the player to stumble. In December 2017, news came out that Go-Jek plans to expand into the Philippines. Good market - although Go-Jek will become a foreigner player this time, not enjoying the huge home advantage it has in Indonesia.

Vietnam and Philippines receive more attention

The time is right. Or rather, when Indonesia and Thailand become too hot, people start to look for the next growth engine. Both countries have a young demographic with robust growth - and politically they are more stable than ever. That said, many investors will still prefer the holding structure to be set up in Singapore.

Investors still struggle to find the next billion opportunity

People have long complained about lack of Series C (and later stage) funding in the region. However, with a number of big scale investments over the past 12 months - nobody seems to complain about the lack of serious money anymore. On the contrary, the headache now is, for late stage and PE investors, where can they find the next billion opportunity. Over the last quarter of 2017, we have spoken with at least a dozen investors (whose funds mandate ticket sizes of US$15 million and above) and they are all struggling to find the next big opportunity. As a result, some of the ‘subprime’ companies (you know whom we are referring to) received significant funding. In the coming year, more investors from outside the region will roam around the streets of Jakarta and Bangkok looking for good deals. We believe opportunities abound for the region, but finding the right one at the right growth stage with the right price tag will be hard, at least for 2018.

Corporate innovation goes to the tangibles - with bold moves

In 2017 we have been to at least two dozen corporate venture/incubator demo-days in the region. Most of them are underwhelming. We believe the whole model that many corporates have been adopting is flawed - especially hiring consultants who have never led any startup or innovation programmes. Also Read: These 13 startups have made it to the second batch of Plug and Play Indonesia accelerator programme However, a bright spot is that some of our good friends recently joined leading corporates to spearhead their innovation programmes, and they are happy with the autonomy they are given, and the resources they are provided with. We expect more companies to take the right approach in 2018, and achieve some tangible, bold results.

Bitcoin reaches $100,000, and blockchains enter the mainstream

Depending on who you ask, Bitcoin will either boom or bust. We are of the opinion that it will boom in 2018 - eventually. Although the road there will be very, very bumpy - skip the rollercoaster ride if you have medical conditions. Riding on the crest of the Bitcoin/cryptocurrency/blockchain hype, we expect to see more activity in this area. If corporations and governments in the region are serious about combating some of the more “grey” areas of business, blockchain technology will be one of the solutions. Banking and insurance companies have been speaking about blockchain for the last 12-18 months, we expect them to get more serious about it in 2018.

Deep tech remains elusive for the region

While there are plenty of tech startups in the region, there are very few companies that are really pushing the envelope in truly groundbreaking technology. The lack of talent, especially for artificial intelligence hinders this growth. Of course, some choose to brand rule-based trading algorithms as deep tech - well if that is the case, yes we will see a lot of deep tech opportunities in the region. — A version of this article first appeared on The Low Down, a blog site for Momentum Works. Copyright: akulamatiau / 123RF Stock Photo