11 December 2016
Myles Dawson

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Myles Dawson - Adyen

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Southeast Asia: Your next 600 million shoppers

18 October 2016  |  4540 views  |  0

With a total population exceeding 600 million people, a fast developing economy and the rise of digital adoption, Southeast Asia should not be overlooked by retailers looking to expand into Asia.

Yet this highly fragmented region is not without its complications. It comes with a myriad of diverse cultures, languages and regulations, not to mention a huge discrepancy between developed countries such as Singapore and developing countries such as Thailand and the Philippines. But don’t let that put you off. A clear understanding of local purchasing behaviours will help you circumnavigate this varied yet promising market and reach shoppers from Bangkok to Makassar.

A market approaching tipping-point

Today, ecommerce accounts for less than 3% of the total sales across Southeast Asia, which is tiny, especially when compared with 14% in China and the US. But this is just the beginning. The market is estimated to grow 25% year on year.

And smartphones are leading the charge. Today, around 250 million Southeast Asians use a smartphone with 142 million subscribed to a mobile broadband subscription by the end of last year. This number is growing significantly and is expected to reach 292 million by 2020. This represents a huge opportunity for retailers, especially those with a strong mobile offering.

A mixed payment landscape 

Southeast Asia has a huge range of payment options and preferences. In countries such as Vietnam, Indonesia or Thailand for example, where credit and debit card penetration is low, cash is dominant, whereas Singaporeans use credit cards as much as European countries.

Notably, a perceived lack of security in the region makes Southeast Asian shoppers reluctant to give out card information, and they are more inclined to favour offline methods such as payments via ATM convenience stores, or online banking. It is worth noting however that mobile payment methods such as prepaid cards and e-wallets are increasing in the region due to the rise of smartphone usage.

In fact, Mobile is becoming a driving force behind ecommerce growth in Malaysia and Thailand, whereas Filipinos have long been among the most prolific mobile users in the world, with smartphone penetration expected to reach up to 40% by the end of this year. There are huge gains to be had for retailers that deliver an optimized mobile shopping experience.

But to really get to grips with the diverse landscape of Southeast Asia, you must look at each market individually:

Singapore: the gateway into Southeast Asia

It is often said that shopping is a national pastime in Singapore, and its shopping malls are the stuff of legend. The good news for retailers is that this enthusiasm extends online as well. Ecommerce is the most active in the region, 55% of which is cross-border, and mobile payments are commonplace, with 30% of online shoppers purchasing on their mobile at least once a week.

Credit card is the undisputed king, and Singaporeans tend to have multiple cards, with high card penetration driving much of the online shopping experience.

This is why Singapore is considered the gateway to Southeast Asia and, as a mature market with English as the main language, it offers an extremely business-friendly environment, and a good launchpad for the rest of the region.

The Singapore dollar is accessible from outside the country for processing and settlement, but it is common for merchants to set up a local account for tax reasons and improved domestic interchange rates.

Indonesia, Malaysia, Thailand and The Philippines: the key opportunities for mobile commerce

  • Indonesia

Preferred payment methods are ATM payments (a cash transfer from one account to the other via an ATM), convenience store payments (in-store4 cash payment after printing the receipt of an online purchase) and online bank transfers. Indonesia is highly regulated and fairly closed to cross-border payments and the local money (Indonesia Rupiah) cannot be repatriated. A local entity is usually required to process payments.

  • Malaysia

Preferred payment methods are cash and online bank transfers. Malaysia has strong financial regulatory controls, but is open to cross-border shopping. This enables international acquirers and retailers to process cross-border payments without international issuing fees and merchants using this method are not impacted when processing Malaysian Ringgit cross-border (the Malaysian Ringgit is a non-tradable currency). It is also worth mentioning that local acquirers help tackle fraud with 3D secure.

  • Thailand

Online bank transfers and cash are also the popular choices in Thailand. However, the distinctive feature of this country is that over half of online shoppers also like purchasing on social media and it would be worth considering this option when targeting this country. Regulations are minimal in Thailand so domestic and cross-border payments can be made easily. Unlike Indonesia or Malaysia, there are no monetary restrictions on funds being settled outside of the country. It is, however, key to include local payments such as in-store payments in your payment options, as it is a very popular payment option.

  • The Philippines

E-wallets, online transfers, over-the-counter transfers (OTCs) and convenience stores are the popular options. Cards can be processed cross-border for free, but local payment methods should also be an option for international merchants. Authorisation rates and conversion rates also tend to be lower in the Philippines.

Southeast Asia is incredibly diverse, with an array of regulations and payment systems. As with any new market, it is vital to get an on-the-ground understanding of how your potential new customers prefer to pay. By supporting local payment methods you will provide a better customer experience and drive conversions. It is crucial therefore, that your payments partner has the expertise and local presence to provide impartial advice, and is able to support the wide range of local methods.

 

 

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Myles blogs from his role as UK Country Manager at Adyen about all things omni-channel payments, and more besides.

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