The COVID-19 pandemic was a catalyst to challenging economic and social conditions which, as seen in the past year, restricted many parts of the world to the confines of their own homes. This created an unprecedented spike in the need for online service, making e-commerce a shining beacon for many markets. This is particularly true in South East Asia, where the e-commerce market is expected to reach $105 billion by the end of 2025.
As economic uncertainty prevails and countries like Malaysia continue to go through national lockdowns, so too will the prevalence of online shopping in Southeast Asia. For many, the convenience of e-commerce has provided a life-line for consumers to access essential services and goods. PayU’s most recent report looking at consumer spending globally found that Southeast Asia is on its way to becoming a prominent region for emerging e-commerce leaders looking to tap into new markets. Indeed, for merchants who can provide a seamless personalised shopping experience, success in the region will be theirs for the taking.
Recognising the potential for growth
Over the course of the last 18 months, Southeast Asia saw significant growth across several areas, particularly in online food delivery and e-marketplaces, where people shopped in their millions. This is in part due to the demographics across the region. PayU data suggests that around half of the region’s population are under the age of 30 and also includes several of the world’s fastest-growing internet economies.
Despite this, there is still much work to be done, particularly considering that 50% of Southeast Asia’s population remains unbanked. However, due to its incredibly high mobile and internet penetration, this also meant that many countries were well placed to meet this acceleration of online behaviour.
Take QR codes as an example. For many countries, QR codes were introduced in 2020 to help reduce physical contact while shopping but in Southeast Asia, they were already commonplace. Data by Statista shows that over 40% of consumers in countries like Thailand and Malaysia used QR code payments between August and September of 2020 alone.
The advent of alternative payment methods
With a rich tapestry of countries, cultures and payments preferences, businesses looking to expand to Southeast Asia need to ensure they have a clear understanding of the preferred payment methods of a given country in order to succeed.
While QR codes have seen broad adoption and growth across the region, other payment methods like cryptocurrency also present a significant opportunity for e-commerce. It’s true that markets like Singapore are hesitant to fund crypto adoption but many are finding ways around this. Examples of this can be seen in Thailand where an estimated 10% of the population already own some form of cryptocurrency, second only to South Africa in global ownership rates. The opportunities cryptocurrency presents to those who are still unbanked across the region should not be underestimated as it removes barriers to e-commerce and opens up the market for many.
Another payment method to watch in Southeast Asia is Buy Now Pay Later (BNPL). As a result of the low credit card penetration across the region, BNPL presents a significant opportunity to provide access to the underbanked (or even unbanked) consumers looking to buy online. In fact, companies like Kredivo and Akulaku have both already had over 10 million installations of their apps on Google Play in Indonesia alone. As such, merchants who do not offer these alternative but often popular methods of payments could potentially result in cart abandonment and lost revenue.
Overcoming the challenges
As a result of the multitude of payment methods that have been popularised across the South East Asia region, it can be confusing and complicated for e-commerce businesses who are looking to enter new markets and trade across multiple countries.
Additionally, regulations also differ hugely from market to market. In countries like Indonesia, the government requires a payments business to be 51% controlled by local Indonesian players. The Thailand Central Bank on the other hand, recently issued its guidelines on data governance to provide financial institutions with recommendations on how to ensure that their data governance will be in compliance with accepted international principles.
It is well versed that navigating complex and vastly different regulations and preferred payment methods across markets can be a monumental and costly task for merchants. As such, e-commerce leaders looking to enter new countries would do well in partnering with a payments provider that has a wealth of knowledge around preferred payment methods across the regions they are interacting with. Indeed, a payments provider that has a single multinational API integration eliminates the strenuous process of individually integrating each local method.
For online merchants looking to grow and drive revenue following the devastating effects of COVID-19, international expansion strategies can be a vital way for reaching new growth trajectories. Those who form strategic partnerships and equip themselves with unrivalled market knowledge and tech capabilities for each unique market will ultimately be the ones to capitalize on emerging market trends and enter new countries with ease.