E-payment boom in Southeast Asia could be worth at least $1.5 trillion
By Celine Chen
SINGAPORE, NNA - While cash is still king in Southeast Asia, online payment providers could capture a booming market worth at least $1.5 trillion in Southeast Asia, according to a recent report
Third-party payment firms are well-positioned to grab large chunks of cash and card payments, in addition to retail transfers, in the Asean-6 economies.
The pandemic lockdowns and social-distancing measures have accelerated digitalization and e-payments across Indonesia, Singapore, Malaysia, Thailand, the Philippines and Vietnam last year.
The report by JP Morgan analysts also surmised that the relatively low cost in Asean would make payments profitable at a gross margin level. Giving an example, they noted that Vietnamese banks charge fees of as little as 0.2 percent to 0.4 percent of e-wallet top-up value.
With cash accounting for an estimated 70 percent to 80 percent of retail transactions in Asean, online payments can see significant growth as more people opt for e-payment even without a bank account or a credit card.
Kenichi Shimomura, head of Asia Japan desk of Roland Berger, noted that while there are still large numbers of unbanked people in Southeast Asia with the exception of Singapore, Malaysia and Thailand, consumers in the region are increasingly using non-bank e-payment methods.
He believes ride-hailing giants such as Singapore's Grab and Indonesia's Gojek will emerge as leading players in the region as they are establishing diverse digital ecosystems with super apps centered on e-payment and offering cross-selling online and offline like what Alipay and WeChat Pay have done so successfully in China
This can enhance customer loyalty to their ecosystem, as generally, consumers tend not to have multiple e-payment solutions, Shimomura told NNA. By dominating offline payments too, Grab and Gojek can expand their digital ecosystem significantly, he said.
For global bank DBS, the upsurge in e-payments last year was indeed significant.
The total value of the Singapore bank's electronic PayNow transactions made by its DBS/POSB customers in Singapore had more than doubled in 2020.
The bank, which is Singapore's biggest, told NNA that the exponential surge in the use of its DBS PayLah! app came from all age groups paying for food at hawker stalls in food centres across Singapore.
Anthony Seow, head of payments and platforms, DBS Bank, said, "This was especially so in the second half of 2020, when the number of transactions increased four times compared to the first half of the year."
He was also heartened to see more seniors using the app.
"In fact, one in five customers who used DBS PayLah! to pay for their hawker meals is aged 50 and above. We expect this trend to continue well into 2021 as more people turn to digital platforms to conduct payments and banking," said Seow.
Launched in 2017, DBS PayLah! has become Singapore’s leading payments-lifestyle app, and also, most widely accepted mobile wallet.
Seow said the bank is on track to double its current user base of more than 1.8 million to 3.5 million by 2023.
Giving an instance of rapid adoption, new-user sign-ups in October 2020 shot up by 40 percent more than a year ago. At the same time, the total value of transactions has also gone up by 40 percent, testifying to a "much stickier daily usage", Seow added.
While the e-payment market has become hotly competitive with the entry of many players, collaborations among them have helped quicken the pace of adoption.
DBS has teamed up with other players including new-comers and integrated its PayLah! app into multiple major payment rails in Singapore such as PayNow QR, NETS QR, FavePay QR and Shopback Go, serving more than 180,000 acceptance points islandwide.
The bank saw a whopping 132 percent increase in the value of ‘scan to pay’ P2B (peer-to-business) transactions in October 2020, up from a year ago. This is a strong indication that PayLah! is now the most widely accepted payment method in Singapore today, said Seow.
He also noted another trend: Increasing numbers are using PayLah! to settle bigger bills such as for medical services and even tuition
Launched in Singapore, Malaysia and Indonesia in 2017, FavePay, which specializes in rewards vouchers, has acknowledged its collaboration with digitally advanced DBS as one of the reasons for its success in Singapore. As their partnership allows PayLah! users to scan FavePay QR codes, both e-wallets have managed to acquire new users more quickly.
FavePay has also joined forces with ride-hailing giant Grab to push the growth of their e-payment solutions in Southeast Asia. Grab, which launched its GrabPay e-wallet in 2017 to support eateries, hawker stalls and restaurants, has since expanded its financial services.
Consumers are also enjoying more conveniences now as providers and businesses adopt better technologies and expand access to more services and payment companies.
At the world-renowned Raffles Hotel in Singapore, online and offline payments have been brought under a unified platform built by Adyen whose flexible solution accepts multiple payment providers. Previously, the hotel's systems were disparate and offered limited options.
Hotel manager Chadi Chemaly said since last July, Raffles has been offering seamless, faster and hassle-free experiences to staying guests as well as other customers, from suite reservations to contact-less check-ins and payments at restaurants and the hotel boutique.
Offline, hotel staff at all points of sale use a handy Verifone device that allows payment by all card methods and digital wallets. Warren Hayashi, president for Asia-Pacific at Adyen, said the easy-to-use device, which supports 4G and WiFi connectivity, can be used at any location of the hotel to settle any bill to suit the guest’s convenience.
Users of GrabPay, Liquid Pay and Singtel Dash are also enjoying added conveniences. They can now top up their e-wallet directly from their bank accounts and transfer funds between these e-wallets through the instant fund transfer service PayNow.
Before the service was extended to them in February, users had to top up their funds using debit or credit cards. It is the first time financial institutions that are not banks have joined nine banks to offer the PayNow service.
The move also helped to rationalize the fragmented e-payment market by enabling businesses to accept payments through PayNow from users of both e-wallets and banking apps such as DBS PayLah! and OCBC Pay Anyone.
While payments command the bulk of online financial services, the JP Morgan report also noted that the e-payment segment is "intensely competitive and fragmented", as banks, insurers, telcos, e-commerce companies and other platforms are all in the fray for revenue.
The rapid growth in e-payment in Asean has also undoubtedly increased risks, said Myles Bertrand, Asia-Pacific managing director of Mambu, a company that hosts software and provides client support for financial institutions.
Noting that the industry is not yet well-regulated in the region, he said providers should use more secure cloud technologies for data protection and fraud minimization.
The ongoing reliance on cash still poses a huge obstacle to financial inclusion in Southeast Asia where nearly three-quarters of the population have limited access to financial services or are completely unbanked, said Bertand.
In Vietnam, for instance, the state bank will issue a payment intermediary license to a non-bank only if it can ensure absolutely safe services.
According to the Landscape 2020 report, revenue from the e-payment market in Vietnam grew 14.2 percent to $8.9 billion in 2020, while the number of users went up by more than 12 percent to reach 36.2 million.
However, e-payment penetration is still low and the government's target is 30 percent by 2025.
Digital entertainment group Appota, which operates Appota Pay, noted that conglomerates with broad ecosystems of products and services are the key drivers of the development of e-wallets in Vietnam.
Moca is the payment service provider for all of Grab's services such as ride-hailing and financial services like lending and insurance. Nextpay, a subsidiary of NextTech Group, has businesses in loan and mortgage, e-commerce, insurance, logistics and ride-hailing, while ViettelPay has partnered with MyGo, a short and long-haul transportation platform under the Viettel Group.
AppotaPay's major advantage is the Appota Group's huge ecosystem which covers over 55 million users and more than 5,000 B2B customers. The majority goes for the company's published games, followed by those using its entertainment-content mobile apps and enterprise management platform.
Lien Nguyen, corporate development manager of Appota, said, "The online payment industry in Vietnam will grow significantly in the upcoming time. Covid-19, despite all of its negative impact largely on traditional businesses, has emerged as an unexpected factor that's accelerated online payment activities in Vietnam."
"Consumers, especially young millennials, are changing their habits at an even faster pace than before, adopting and embracing new online technologies and services, with a new mentality that allows them to trust e-payment providers to keep their money and process their transactions online," she added.