Digitisation in Southeast Asia: making cash-intensive economies work for ecommerce

China and India have long dominated Asia Pacific, but head further south and the region is proving to be one of the most dynamic growth zones with digital integration accelerating at rapid speed. Across it’s ten-member nations – Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, Philippines, Singapore, Thailand, and Vietnam – the region has a combined population twice that of North America and larger than the European Union. The swift adoption of digital technology is fast-tracking access for global merchants. In 2015, only USD 5.5 billion in ecommerce sales were recorded, but according to a recent study by Google and Temasek, by 2025 that is expected to explode to USD 88 billion.

The sentiment that cash is king still reigns true across much of the region. However, digital innovation is heavily influencing purchasing behavior. Much of the region is poised to leap directly from cash to digital payments, skipping credit and debit cards altogether. Already, cash digitisation is a powerful force spurred on by widespread technology use, ease of connectivity and increasingly affluent consumers. In many instances, the source of funds is still cash, but the transportation or device used to make the payment is a mobile phone or kiosk.

While there are regional trends that increasingly unify the Southeast Asian market, one of the biggest mistakes made is assuming that a one-size-fits-all approach can be adopted. This is particularly relevant when considering the pace of country development. In Singapore, for example, we see a highly developed market. Indonesia and the Philippines are developing at rapid pace, while in Vietnam development is in very early stages, presenting a new frontier. This plays a major role in the payment landscape in each market – the types of methods used and how consumers are using those methods in their day-to-day purchasing.

Spotlight: Indonesia

Population: 264 million
Average age: 28.3 years
GDP growth: 5.2%
Local currency: Indonesian Rupiah (IDR)
Banking Penetration: 36%
Credit Card Penetration: 2%
VAT/GST: 10%

As Southeast Asia’s largest economy, Indonesia is recognized for its resilient economic growth and low government debt. It has been quick to establish itself as a mobile-first nation, presenting a unique opportunity to engage digital-savvy consumers. Cards are almost non-existent – there is minimal credit card use and debit cards require extra steps to be used online. Bank transfers and digitised cash accounts for the majority of ecommerce transactions. The non-cash movement is ongoing with steps being taken to encourage domestic retail payment instruments and the expansion of electronic programs.

Spotlight: Thailand

Population: 68 million
Average age: 37.7 years
GDP growth: 3.2%
Local currency: Thai Baht (THB)
Banking Penetration: 78%
Credit Card Penetration: 6%
VAT/GST: 7%

The potential to reach Thai consumers is further encouraged by the long hours they spend using mobile internet and social media. Thailand spend more time on the internet (including mobile internet) than any other nation. This sets the stage for further expansion of bank transfers as the most dominant payment method for ecommerce. The number of bank transfers has increased notably, due to higher number of smartphone users and development of mobile banking applications. E-payment and wallet usage is also growing steadily. There are a number of complexities around local consumers using cards for ecommerce, as they can only be used when purchasing from a local merchant.

Spotlight: Vietnam

Population: 96 million
Average age: 30.5 years
GDP growth: 6.2%
Local currency: Vietnamese Dong (VND)
Banking Penetration: 31%
Credit Card Penetration: 2%
VAT/GST: 10%

Vietnam has the fastest growing middle class in Southeast Asia. Ecommerce is still a young market, despite increasing internet connectivity, youthful population and low service cost. This is due to lack of trust in ecommerce, large unbanked population, inadequate cybersecurity and lack of delivery services. Cash is still the most popular payment method. However, the government is striving for the country to be cashless by 2020. The State Bank of Vietnam (SBV) also continues to modernise the payment system, create and facilitate favorable condition to encourage non-cash payment.

For more information on expanding ecommerce into Southeast Asia, visit Emergent Payments. 

About Rossini Zumwalt

Rossini has extensive experience in setting up strategy and managing operations for ecommerce payments and risk, both as a merchant and solution provider. She served as a Senior Director at Symantec and, prior to that, as Head of Global Treasury. She also held several leadership roles for the Merchant Risk Council.

About Emergent Payments

Emergent Payments offers a total global and local payments solution for high-growth markets. They serve as a payment facilitator for digital merchants in Asia Pacific, Latin America, Africa and the Middle East. With a single integration, clients access the most preferred local payment methods and a suite of advanced technical features, including smart FX and intelligent routing.