Payment options have never been so diverse. Today, people can pay for their taxis to the office using a bank debit card linked to a super app, buy coffee using their phone’s NFC technology, settle the work lunch bill with a credit card, and grab an iced tea from a hawker stall by using the local real-time QR payment scheme. Later, they might get the dress they’ve been looking at the blog shop using a new Buy Now, Pay Later (BNPL) app that would give them a five-dollar cashback.
Customers love having the payment flexibility to suit their different needs. But this situation is challenging for merchants. If they fail to offer the customer’s preferred payment method, they risk adding friction to the customer experience and decreasing sales conversions.
At the same time, consumer behaviour is evolving fast. People’s preferred payment method today might be different in three months as a new champion might arrive on the block, promising fantastic incentives, or smoother usability.
Missing out is costly. So that it became imperative for merchants to keep track of trends and adapt quickly to new and emerging payment methods, to gain a competitive edge in this market.
The tide of cashless transactions won't go into reverse. Smooth, effortless digital payments are essential for future ecommerce success.
This article will closely explore Southeast Asia’s three largest ecommerce markets and propose some ways merchants can leverage the payment shifts taking place.
Despite uncertainty elsewhere, ecommerce's continued growth is assured. Ecommerce spending will rise by 162% to reach USD 179.8 billion by 2025 across Southeast Asia, with digital payments accounting for 91% of transactions, according to an IDC InfoBrief commissioned by 2C2P. The largest markets for ecommerce payments are forecast to be Indonesia (USD 83 billion), Vietnam (USD 29 billion), and Thailand (USD 24 billion).
The accelerator behind ecommerce's growth in Southeast Asia is high internet penetration and fast-growing smartphone usage. Internet usage saw an unprecedented leap during the pandemic. Penetration will reach 61.3% of the region’s population this year, according to eMarketer, with the highest annual growth in Indonesia (3.9%) and Thailand (3.2%).
Meanwhile, 88% of internet users in the region are smartphone users, with smartphone penetration at 79% in Thailand and 75.4% in Indonesia. In Vietnam, the government aims to speed up adoption rapidly, increasing the proportion of adults using smartphones from 73.5% to 85%, by the end of 2022.
Easy access to smartphones will make this the primary tool enabling online payments for cardless and unbanked consumers in Southeast Asia. Mobile wallet payments for ecommerce transactions are forecast by IDC to rise from 19% in 2020 to 27% by 2025, with mobile wallet spending growing by USD 35.3 billion, representing a 2.8x increase from 2020.
Mobile wallets – preferred for ease and convenience – constitute a significant force shaping the future payment landscape in Indonesia, Thailand, and Vietnam, and are likely to capture some market share from other alternative payment methods, such as cash on delivery, counter payments, and ATM payments.
Using payments strategically can help merchants cast a wider net to retain and attract new customers. This isn’t simply a matter of adding many payment options; merchants should prioritise those with the most relevance and acceptance in individual markets, while keeping in mind their target audience and the average ticket size of the product or service that they are selling.
The expansion of ecommerce increases the types of payment interfaces. Merchant stores and marketplaces can be both online and mobile, requiring solutions and Android software development kits (SDKs) for payments.
A single omnichannel payment partner supporting these different payment models will be critical in increasing potential revenue for online and offline payments. It gives merchants a unified master view and reference for all payments to enhance their records and serves as an aid in decision making.
Interestingly, an IDC 2021 Asia/Pacific survey found merchants could expect an average 10% increase in sales when adding a single new popular payment method.
Merchants must equip themselves with payment solutions which can cater to the increased variety, frequency, volume, and diverse locations in which transactions now take place, particularly as their business ambitions, geographies, and locations expand. Vital enhancements include improving uptime/reliability, reducing false positives, and increasing authorisation rates and enhancing security.
IDC’s data suggests that an extra 12% of transaction revenue online can be gained through the optimisation of these issues.
As their business expands, merchants’ operating costs will also increase. Payments cost optimisation will become a key focus as transaction volumes increase, new payment methods are added, or when merchants start accepting foreign payments.
The payments landscape never stays still for long. The speed at which new payment types are being introduced makes it challenging for merchants to adapt independently.
A payment partner like 2C2P can provide the most relevant payment options and quick support for new payment types that may emerge in Southeast Asia, giving merchants the flexibility and confidence to capture new opportunities.
This article was first published in Payment Methods Report 2022, the most updated overview of trends and developments in the payment methods space and the innovative technologies that these methods work upon, emerging consumers habits, and strategies on how to win at conversion and retention.
Based in Singapore, Jade Lim is a Director at 2C2P overseeing alternative payments and product development. Previously, Jade was an Assistant Vice President at NETS, responsible for the product management of EFTPOS and terminal services. She began her career as a Senior Product Analyst at leading travel facilitator, Abacus International.
2C2P is a full-suite payments platform, helping global enterprises operating in emerging markets to securely accept payments across online, mobile, and offline channels, as well as providing issuing, payout, remittance, and digital goods services. It is the preferred payments platform of tech giants, online marketplaces, retailers, and other global enterprises.
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