How ready is Southeast Asia for online payments?

Co-authored by Peter Nguyen. Both Hoang and Peter are analysts at Solidiance, the Asia-focused growth strategy and B2B marketing consultancy firm of which sectoral expertise focuses on technology/ICT, industrial application, healthcare, and green technology.

Updated: Graphs were edited to correct some errors.

Rapid economic expansion, a young population, and low-cost smartphones and tablets are creating tech-savvy generations across Southeast Asia.

Major e-commerce players such as Groupon, eBay, Rocket Internet, and LivingSocial have ventured into Southeast Asia, making significant investments into these markets. With increasing penetration of e-commerce into Southeast Asia, global payment companies such as PayPal are investing in the region.

But as they do, stiff competition is being demonstrated from a number of local players such as MOL (Malaysia) and 2C2P (Thailand). MOL is now one of the biggest payment companies in Southeast Asia, with 60 million annual transactions, and yearly revenues over $300 million. 2C2P is a Thailand-based e-payment company with a smaller scale but already having expanded offices and operations to over seven other markets in the region.

While the industry’s potential is obvious, technology investors and global payment providers should be wary of rushing into these markets without understanding the cultural and regulatory differences of each country, which affect how merchants and consumers behave.

For example, Philippines has a stronger acceptance of mobile payments while Malaysians prefer internet payment.

A tailored strategy then, which considers the unique stages of each market’s development, factoring in technology, infrastructure, consumer preferences, and regulatory environment, is far superior to a regionalized blueprint approach.

Internet, mobile network and banking

Three key underlying infrastructure drivers needed to facilitate online payment are ease of internet access, mobile usage, and banking penetration.

Ease of Internet access

Internet access is instrumental to boosting online payment. In total, the six largest economies in Southeast Asia are home to an online population in excess of 160 million, representing internet penetration of 28 percent. Singapore leads the region with an internet penetration of 75 percent, while Indonesia has the lowest internet penetration at 22 percent.

Consumer readiness

Regulatory environment

Singapore

Malaysia

Philippines

Vietnam and Thailand

Indonesia