International expansion is emerging as a key priority for businesses in Asia as they set their sights on growth – and Southeast Asia is among their top targets, according to a 2023 study by UOB.
This is for good reason. With its strategic location, rapidly growing economy, and leading rates of digital penetration, Southeast Asia is simmering with potential. But along with major growth opportunities, the region also comes with its own set of challenges.
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Southeast Asia has one of the most fragmented digital payment landscapes in the world, meaning that online retailers looking to plant their flags in its markets have a complex hurdle to conquer – cross-border payments.
Tackling the payments maze can help growing retailers capture a greater share of the region’s e-commerce market – expected to triple in size to an estimated USD230 billion in gross merchandise volume by 2026.
Underbanked, but mobile savvy
With a large unbanked or underbanked population, Southeast Asia has been at the helm of the global transition towards digital payments, with a proliferation of digital wallets and online payment methods dominating the region.
Each market has its distinct preferences when it comes to e-wallets and other digital payment methods such as PayNow and PayLah! in Singapore, Go Pay and Ovo in Indonesia, and Boost or Touch ‘n Go in Malaysia.
This fragmentation is increasingly recognised by regional authorities, with ASEAN nations recently announcing the development of a unified cross-border payments system across four key markets: Singapore, Indonesia, Malaysia, and Thailand. The system will act as a seamless, cross-border digital wallet allowing users to pay in local currencies using a QR code – a step forward in connecting the fractured regional payments landscape.
However, despite such measures, e-commerce businesses looking to enter these markets must still take account of the myriad digital payments options available to consumers in the region. And when it comes to securing customer loyalty, the importance of payments cannot be understated.
According to a report by Primer, nearly half of consumers are reluctant to shop from sites that do not offer their preferred payment methods.
The ideal payment experience for most consumers also extends beyond just having the option to pay with their preferred method. Secure checkouts are one of the key things they look for while shopping online and is also an essential factor in shaping their decision to revisit a site in the future.
This means businesses with localised payments expertise, and the right technology to create a payment experience that caters to Southeast Asians’ preferred payment methods and considers factors such as security, would gain an edge over the rest.
Technical debt holding businesses back
The issue, however, lies in the technical complexity required to expand and optimise a payment stack that fits an individual market, while also making sure they are bridged effectively to the rest of the commerce experience like delivery and returns.
Integrating new digital payment methods to a website traditionally requires one-off integrations, with payments running layers off ‘rails’ infrastructure that are needed before each payment application can be built.
Adding to the complexity of the payments roadmap is the limited interoperability between the different types of rails.
For businesses hoping to scale rapidly and go to market as soon as possible, the manual integration of new payment methods might not be the most efficient route to growth.
Additionally, as businesses grapple with challenging economic conditions, deploying resources towards the long and costly job of payments can be a struggle. Findings from Primer’s recent report also supports this sentiment, as Singaporean online retailers cite technical debt as the lead underlying cause of their business challenges.
But just as the payments landscape is evolving quickly, so too are platforms that enable businesses to offer a number of payment options without months of developer work.
Private sector emerging to bridge borders
A unified payments infrastructure brings together popular apps, services, and insights to make the way that businesses run and process payments easy for customers. This means that businesses no longer need to spend months building payment integrations from scratch. They can also equip businesses with payment recovery tools, business intelligence across the entire payments lifecycle, and adaptive security features to enhance their protection offering.
Empowering businesses to capitalise on growth opportunities by expediting their building process, such platforms allow them to access a variety of global payment methods and services. As a result, they can accelerate international expansion while creating a more localised experience.
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With the payment landscape constantly evolving, success will belong to businesses that cast their nets wide by giving customers the freedom to choose how they pay, on top of ensuring the security and seamlessness of their platform’s payment process.
It’ll be a complex transition, but a unified payment infrastructure can bridge the gap – equipping businesses with the necessary technology to scale effortlessly, and instantly cater to their target markets.
About the author
Kailash Madan is the head of APAC at unified payments infrastructure, Primer.