How SEA’s Digital Payments Economy Can Be The Envy Of The World
By Joaquin Moreno
As nations around the world battle inflation and reduced spending power, Southeast Asia’s digital commerce and economy continue to thrive. Getting ahead of digital payment innovations will help SEA businesses flourish and the region shine on the global map.
Southeast Asia’s eCommerce market is a story of remarkable resilience. Despite mounting global headwinds, the region’s online retail industry continues to flourish, generating US$70 billion in 2023. As goods and commerce flow seamlessly across SEA borders, it remains buoyed by an immense payment infrastructure.
In the past, cross-border payments posed a challenge for merchants wishing to expand overseas. Sellers frequently face complexity from foreign exchanges, overseas charges and a lack of interoperability between nations’ payment systems.
However, this is changing rapidly. SEA’s overall digital economy is now worth over US$100 billion and 88.9% of regional internet users have smartphones – a penetration rate higher than North America and Western Europe.
In addition, Southeast Asia boasts a young and tech-savvy population which is quick to adopt new technologies and shop online.
Given eCommerce’s continued success in SEA, it is no surprise that consumers are quickly embracing digital financial services (DFS). Digital payments now make up more than 50% of the region’s transactions.
Mobile payments and digital wallet usage have surged across SEA, especially in Indonesia, Thailand, and the Philippines.
Payment via QR code is also taking off in the region, with numerous SEA central banks offering a single interconnected QR code payment system that operates across multiple currencies.
Indonesia, Thailand, Malaysia, and Singapore have already implemented the necessary bilateral transaction agreement, with Vietnam, the Philippines, and Brunei set to join.
These agreements have been pivotal for boosting the region’s financial inclusion and also consumers’ ever-increasing desire for quick and efficient transactions in today’s fast-paced lifestyle.
Thanks to social media, particularly Instagram and TikTok, the path from advertisement to purchase has never been quicker. Through smartphones, users can jump from scrolling to buying from overseas within a matter of clicks.
However, to ensure this customer demand is met, merchants require robust payment solutions that facilitate smoother cross-border transactions. Speed and efficiency are not the only components required.
eCommerce businesses need to invest in robust cyber security measures, especially in a landscape of rising cyber breaches and attacks. It is vital to do this not only to protect consumers, but also to build trust in digital payment systems, and data usage transparency.
An engaging experience
Earlier this month, a report by Google Temasek and Bain & Company revealed online businesses are prioritizing deeper engagement with existing customers over the high-cost acquisition of new ones.
While many online retail owners apply this to sales or marketing, a critical and effective way of ensuring good customer service is a localized and user-friendly payment process.
For this to work across SEA’s borders, businesses need to promote cross-border interoperability by establishing common standards and protocols for payments. Interoperability is essential for eCommerce players to provide a smooth and secure checkout experience.
Digital business owners must be mindful that SEA is not one homogenous group of people. Currently, the region has around 688 million people, 60% of the world’s population, of numerous ethnicities and nationalities, speaking thousands of languages and dialects.
To speak to such an array of customers requires tailoring payment options to suit local preferences. Integration of alternative payment methods will enable more underbanked populations to reach international commerce.
Last but not least, there must be a focus on creating user-friendly interfaces, personalized experiences, and seamless integration with all services, from eCommerce, to travel and lifestyle platforms. With online travel and transport sectors returning to pre-pandemic levels by 2024, there is no better time to ensure a simple payment experience across a variety of platforms.
2024 should give rise to optimism among SEA businesses, especially those in online retail and marketplaces, and social media commerce. These are industries that exclude SEA’s previous cash-led economy, giving more motivation for businesses to transform and invest in digital payments. Due to advancements in cross-border payment technology, businesses can now implement this transformation easily and efficiently.
SEA’s global advancement in the digital payments landscape and digital economy should be the envy of the world. This region has the potential to shape the future of eCommerce and digital payments.
Ed. Article photo by CardMapr.nl on Unsplash. Joaquin Moreno is Head of APAC at dLocal.
