Interview with Arrow on payments orchestration and the particularities of the Southeast Asian ecommerce market

Thursday 2 December 2021 09:00 CET | Editor: Andra Constantinovici | Interview

Liat Beng Neo, co-founder of Arrow, tackles what merchants need to consider when moving into Southeast Asia and shares how payments orchestration can help with overcoming initial hurdles

Can you give us an overview of Arrow and what needs your organisation helps customers address? 

Arrow is aimed at building the best checkout experience for shoppers in Southeast Asia, which is one of the most fragmented regions when it comes to payments. With numerous digital payment methods gaining traction across the region, consumers now have an abundance of choices. 

Each country has their own local gateways, and every gateway has even more local payment methods. It`s very difficult for a business that enter the region to figure out payments from the start. For example, different payment gateways connected to the same payment methods might offer a completely different checkout experience, so the process in and of itself tends to become very jarring. Many businesses that come to Southeast Asia from China or from the West find payments to be a large challenge.

You may want to pay with a credit card, for example. You select credit card, go to a redirect, hit a page where you fill in information, and you may get redirected again, and so on. Thus, we built full stack checkout solution that handles shipping information, loyalty programs and discount codes, and payment methods. We present all the different payment methods to the customer to choose from on the checkout page itself and allow the consumer to complete the checkout process there and then without multiple redirects to the different payment gateways behind each payment method. Arrow reduces checkout to a simple tap. No more passwords, no more long checkout forms. Moreover, our tool works across all platforms, empowering anyone to collect payments, in one-tap.

Thinking about your customers who come to you seeking to expand into SE Asia, what are a few recommendations you can offer as it relates to payments? 

The key to the successful navigation of the Southeast Asian payments waters is localisation. People in Southeast Asia have their own way of shopping. Companies need to take all of this into consideration when defining a payments strategy. To win consumers’ trust, businesses/merchants must offer payment methods that those consumers know and trust. 

The payment preferences of Southeast Asian consumers are diversifying as digital payment experiences become more fragmented. Each market has different needs when it comes to online shopping. For instance, cards are most preferred in Singapore, likely due to widespread acceptance.

However, due to COVID-19, QR payments are also steadily gaining momentum across Southeast Asia. Consumers are familiar with using QR codes to scan or login to applications to get information on products or directions. QR codes are also particularly widespread in countries such as Singapore (high conversion rate versus cards). On the other hand, preference for bank transfers is preferred in  Indonesia.

In order to gain the advantage in such a fast-evolving environment, you must provide customers with payment options that already work for them. This is a critical part of ensuring they will adopt your services. When you provide your customers with options they are already acclimated to and prefer, the chances of success for your business will be much greater.

How is Payments Orchestration supporting your payments strategy? 

We wanted to build a checkout tool and Spreedly`s Payments Orchestration made it  really easy for us to one, have a tokenized vault that's PCI compliant and two, have pre-integrated gateways, as Spreedly offers hundreds of gateways that work well, already integrated on their platform.

This way, we could immediately offer a solution to customers, with payment gateway support. And because Spreedly is our payment orchestration platform, it gives us the flexibility to build our own end points, so we could easilyaugment what Speeedly already offers with local gateways in Southeast Asia.

By taking local gateways and integrating them into Spreedly`s setup, market expansion for us is very fast and the cost to run the business is low, since the cost of PCI compliance is deferred to Spreedly. This allows us to focus on our core business, which is building an amazing checkout experience for shoppers in Southeast Asia. And then allowing brands, businesses that want to launch, to easily integrate with us and gain access to hundreds of payment methodsacross the region. 

What needs are you seeing in organisations who are seeking to enter new markets?

The key need is, as ever, localising payment methods. And it’s more than just understanding consumer preferences and trends; it’s understanding the local payment methods, which consumers know and trust, along with the local payment culture, preferences, and ecommerce conditions.

Overall, to offer an example, It`s very difficult to launch into six or seven different Southeast Asian countries,  while also managing five to ten different payment gateways per country, and alsodealing with five to ten different payment methods per gateway for every service in the country.

But now, with Arrow and Spreedly, one can get access to the whole region easily and build a consistent checkout experience while at the same time localise the operations for each country with local payment methods; because in the end, as a business being set up in a new country, one key need is collecting payments for your services.

Payments orchestration helps manage multiple gateways. I think that is one of the key things for us and for a lot of the businesses we work with.

Payment orchestrations allows our customer to mix up the different gateways they want to partner with. We can even allow companies to work with more than one gateway, offering the same payment methods, so that they get competitive in terms of rates.  In the event one partner goes down, you can switch right away to another partner with the same payment methods and your business carries on.  

We’ve noticed a lot of strategic moves and partnerships between different Payment rails in different countries (like PayNow in Singapore, UPI in India, or DuitNow in Malaysia). For instance Monetary Authority of Singapore and the Bank of Thailand announced the linkage of both countries' real-time retail payment rails to facilitate faster and cheaper cross-border transfers. Does this offer any sort of new perspective for the localization payments and for companies offering payments orchestration and helping new merchants penetrate those markets?

There are two points to be discussed on this topic. First, across all Asian markets, especially Southeast Asia, the regulators are increasingly trying to promote their own real-time payment rails. Instead of using traditional Visa, Mastercard schemes, or even using closed-loop digital wallets, they're trying to promote these open payment rails that they built. A lot of the local gateways now must take this into consideration and apply to be a partner that can connect directly into these rails. 

It`s table stakes: if you only offer cards and you don't offer a real-time payment method (like PayNow or PromptPay etc), then you shut off a large group of customers who want to pay with these new (and cheaper) methods.

Secondly, we need to mention that regulators are virtually connecting all these rails. Singapore, Malaysia are going to be interoperable, same with Thailand, and I'm pretty sure this will go expand into Indonesia as well. So in Southeast Asia, we'll have local real-time rails connected regionally. This will pose huge competition to the card schemes.

The linkage of these systems aims to tackle key pain points associated with traditional cross-border remittances, such as long transition times and high fees. It will facilitate faster and cheaper cross-border transfers, which makes it very attractive to consumers and businesses. 

When it comes to payment orchestration, this means is that it's going to open up a whole new range of opportunities to orchestrate payments in the sense of running transactions through all these different rails. Furthermore, the payment gateways will have to innovate their traditional setups to stay in the game.

About Liat Beng Neo

Liat Beng Neo is a former executive at Grab, Ant Financial, and Tencent. At the present, he is the co-founder of Arrow.

About Arrow

At Arrow, we're building the best online checkout experience for shoppers in Southeast Asia that increases conversion rates drastically for ecommerce sellers. We offer a checkout solution that is `headless` - sellers are able to embed checkout into local ecommerce channels like chat, social media and store builder on top of a traditional ecommerce site. 

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Keywords: ecommerce, Spreedly, payments orchestration, payments infrastructure
Categories: Payments & Commerce
Countries: South East Asia
This article is part of category

Payments & Commerce