About HKTDC | Media Room | Contact HKTDC | Wish List Wish List () | My HKTDC |
繁體 简体
Save As PDF Email this page Print this page
Qzone

ASEAN Low Credit Card Use Drives Race to Win Online Payment Battle

With credit cards a rarity, online-payment companies are desperate to build market share across Southeast Asia.

Photo: Samsung Pay: Bidding to be the answer to Southeast Asia’s online payment conundrum.
Samsung Pay: Bidding to be the answer to Southeast Asia's online payment conundrum.
Photo: Samsung Pay: Bidding to be the answer to Southeast Asia’s online payment conundrum.
Samsung Pay: Bidding to be the answer to Southeast Asia's online payment conundrum.

ASEAN's rapid economic growth – together with its typically young and tech-savvy population and astounding rate of digital adoption – has seen e-commerce revenue across the region growing faster than anywhere else in the world. According to research by Frost & Sullivan, a Texas-headquartered market-research consultancy, Southeast Asia's e-commerce revenues will exceed US$25 billion by 2020. For 2015, the figure recorded was just US$11 billion.

To reach the predicted figure, however, the region will have to clear a number of obstacles, with the low level of credit card penetration seen as by far the biggest. Although many of the major e-commerce players – including Alibaba, eBay and Rocket Internet – have already begun to invest in the region, the lack of online payment facilities is seen as a serious bar to future growth. A 2014 report by UBS, the Swiss financial-services company, showed that credit card penetration in Indonesia and Thailand – two of the prime ASEAN markets – was as low as 6% and 5%, respectively.

The situation is similar for other countries in the bloc. In the Philippines, for instance, only three million to seven million Filipinos – out of a total population of almost 100 million people – are credit card holders. The problem is exacerbated by the fact that even the country's relatively few credit card holders are reluctant to use them to make online purchases, preferring to pay by cash-on-delivery (COD).

In fact, COD remains the preferred form of payment for online purchases in most Southeast Asian countries, a sharp contrast to the situation in developed nations where credit card payments account for the vast majority of such purchases. With credit card growth slow and COD presenting a number of logistical and cost challenges, several alternative payment methods – including prepaid cards and e-wallets – are now gaining traction in Southeast Asia, particularly among those making purchases via mobile devices.

In light of this development, some in the region believe that the lack of credit card holders may ultimately prove a boon to the growth of the e-commerce sector. A particular advocate of this view is Timothy Lee, Strategy Vice-President of SingPost eCommerce, a subsidiary of the Singapore Post. He says: "A continued reliance on credit card payments alone could prove detrimental to sustained growth in the sector. The low adoption of credit cards as an online payment method, however, as well as the slowness of established financial institutions to adjust to market, has now drawn many of the global payment companies – including PayPal, Payoneer, Samsung Pay and Adyen – into the region's e-commerce sector."

His sentiments were echoed by Warren Hayashi, the Asia Pacific President of Adyen, the Dutch multichannel payment company. Speaking at the opening ceremony of the company's Singapore office in August of this year, he said: "Asia Pacific is the most active e-commerce market in the world and we see enormous potential in enabling e-commerce and omni-channel businesses in this region".

Founded in 2006 in the Netherlands, Adyen now supports 250 payment methods around the world. The opening of its Singapore office – its third in the region, after Shanghai and Sydney – is seen as a sign of its confidence in Southeast Asia's burgeoning e-commerce sector.

Another system making clear inroads in the region is Samsung Pay, the mobile-payment channel developed by South Korea's Samsung Electronics. It already has plans in place to launch in Thailand and Malaysia before the end of this year as it looks to substantially grow its overall share of the Asian mobile-payment market. As of August this year, Samsung Pay's total transaction value in South Korea alone was US$1.76 billion, a huge achievement given that it only launched a little more than a year ago.

The multinationals aside, a number of local payments firms are also beginning to emerge. PayMaya Philippines – formerly Smart eMoney – was a pioneer of mobile money and payment systems in the Philippines and is now looking to extend its services to other ASEAN countries. The company has also developed Pay Maya, the first prepaid online payment app in the Philippines, which enables users to make online payments without a credit card. This year, the company is said to be on track to achieve a transaction volume of US$4.12 billion.

Payoneer, the New York-headquartered financial-services company, is also said to have high hopes for its Southeast Asia operation, having considerably expanded its Hong Kong office at the end of last year. Addressing its future prospects in the region, Miguel Warren, the company's Country Manager, said: "In the Philippines in particular, where we recently launched our local office, we see a tremendous opportunity for growth.

"We believe cross-border service industries, such as business process outsourcing, software, game development and animation services, are likely to exceed US$25 billion in revenue terms in this year alone."

Geoff de Freitas, Special Correspondent, Cebu

Content provided by Picture: HKTDC Research
Comments (0)
Shows local time in Hong Kong (GMT+8 hours)

HKTDC welcomes your views. Please stay on topic and be respectful of other readers.
Review our Comment Policy

*Add a comment (up to 5,000 characters)