Tyrone Lynch, NTT Communications: "The essence of ecommerce is being border free"

What are the main challenges that ecommerce businesses face when looking to expand into Asia?

Every market in Asia has a different set of rules and regulations, currency restrictions, local card schemes, country specific acquiring models (VANs) and diverse payment cultures. Comparing Asia to Europe - where most markets are well-aligned under the framework set by the Single Euro Payments Area (SEPA), and to the US where it is largely perceived as a single market, the market fragmentation in Asia is a tough challenge that merchants have to overcome.

What further complicates the matter is often the “lack of experience” regarding the local markets. Global merchants need to recognise that what works in the West may not necessarily work in the East. If they do not understand the critical factors such as local regulations, taxation rules, consumer preferences and shopping behavior, they will be misguided when developing their marketing approach as it would not be tailored to the local preferences.

In your opinion, why did eBay and Groupon fail when they entered China’s complex market in 2014? What should Western online businesses learn from their errors?

Mainland China is about to be the world’s biggest online retail market, yet the regulatory and policy landscape remains complicated for businesses to successfully navigate. Entering such a large and unique market also means dealing with hundreds of fragmented small markets. Moreover, the Chinese internet community and online consumer behavior is continuing to evolve faster than expected.

To ensure a successful approach is implemented, it is recommended that international merchants should partner with a payment solution provider with local acquiring connections as well as with market expertise – in both general and specific to the geography. This will provide them with the local preferred platforms and payment methods, the market insights and a more culturally specific strategy.

What are the defining characteristics of the Indian retail ecommerce market and what is the current state of the online payments ecosystem in this country?

In India, there are currency restrictions controlling the Indian Rupees from leaving the country. Furthermore, The Reserve Bank of India (RBI) has also issued mandates for on-shore acquiring of local services in India. A large part of the economy is still cash-based which leaves a substantial proportion of unbanked population who are yet to participate in online commerce. Although the ecommerce market is growing fast, the Indian market is not fully open to international businesses.

What is the business model for the most successful players in India and how is that different from the rest of the world?

It is predicted that India will become the world’s fastest growing ecommerce market, with revenue jumping from USD 2.9 billion in 2013 to over USD 100 billion by 2020, according to Morgan Stanley. Merchants from all over the world are now looking to tap into this fast growing market, but again, same as the mainland China, it is a unique market and very different from the West.

To be successful in Indian ecommerce market, establishing a local entity there will be a strategic move. It is important to better understand the local culture and purchasing behaviours which vary from state to state and to further ensure strong payment and logistics partnerships. In other words, merchants have to know the market well as if they are locals.

Why is it important to scale the business internationally and put in place the right delivery processes to be competitive at a local level?

The essence of ecommerce is that it stays online and is considered to be border free. By doing this, it enables access to large and high-growth global markets making it easier to scale than brick-and-mortar businesses. However, online merchants need to cater for the needs and preferences of local consumers in order to be successful. This involves the right local payment methods, native language support, resonating marketing approach and on-time technical support. If these key factors are not in place, then successful ecommerce cannot take place as it does not suit the local requirements of consumers or meet their expectations for real-time support from brands.

Are there patterns from market development in Europe/US that we can recognise now taking place in Asia? Can you point out differences/similarities?

While Asia is considered a young and developing market, it has the potential to “leapfrog” its maturity in the development cycle in comparison to Western markets. What is clearly visible is a shift towards fast deployment and consumer adoption of sophisticated payment methods including e-wallets, mobile payments and peer-to-peer transactions. Online consumers in many Asian markets have bypassed the desktop usage stage experienced in the West and started off simply from their smart mobile devices.

Any recommendations on best practice approaches for ecommerce businesses in the West when looking to expand into the East?

International businesses should look at working with a trusted partner in Asia with the expertise and focus in the region. At the moment, there are global payment service providers that offer Asian solutions, however they primarily focus on Western markets. The payment solution offered in Asia is basic coverage to satisfy a capability requirement, whereas an optimised and comprehensive local solution is needed to cater for significantly higher transactions and reduce complexity for global merchants.

Additionally, in order for global merchants to mitigate fraudulent payments and reduce risk management and security breaches while operating in Asia, the merchant must understand the specific risks around local payment methods and invest time and money to work with a trusted partner with experience in these markets. By taking this approach, a global merchant can obtain valuable advice on specific risk mitigation methods and strategies to prevent situations of fraud and identity theft.

(Why) Do you consider fraud and security breaches to be top trends to watch in 2015?

As ecommerce volumes grow, it becomes an even more attractive target for fraud. With the increasing complexity and diversity of the payments landscape, the risk of security breaches will also grow. Enterprises must acquire the knowledge and tools to effectively mitigate the risk of fraud. Similarly, they must remain vigilant and maintain a current and robust data security practice. Learning from various recent high-profile events, we should stay on high alert and be aware of how damaging these security breach incidents can be for a brand and its reputation in the market.

About Tyrone Lynch

Mr. Tyrone Lynch joined NTT Com Asia in 2010 to head the new Business Development Department, where he is responsible for spearheading the strategic development of new revenue streams and devising new business models for NTT Com Asia and HKNet in the region. As a corporate entrepreneur with extensive experience in Asia, Mr. Lynch has a proven track record of growing new market-entry organisations for MNCs. Mr. Lynch holds a MBA in International Business from Thunderbird School of Global Management in the United States and is fluent in English, Japanese and conversant in Putonghua.

About NTT Communications

NTT Communications provides consultancy, architecture, security and cloud services to optimise the information and communications technology (ICT) environments of enterprises. These offerings are backed by the company’s worldwide infrastructure reaching 196 countries/regions, and 130 secure data centers. NTT Communications’ solutions leverage the global resources of NTT Group companies including Dimension Data, NTT DOCOMO and NTT DATA.

About NTT Communications Payment Solutions
NTT Communications offers comprehensive payment solutions for all online payment needs, from global payment processing, advanced gateway platform, risk and fraud management, to cost and conversation optimisation and value added payment solutions. NTT Communications offers preferred methods to access the growing Asian and China markets.