Payments

The Growth of E-commerce in Southeast Asia

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Something big is happening with e-commerce in Southeast Asia. Driven by massive growth in the digital payments sector, the consumer trends taking shape in this region are creating exciting opportunities for online retailers looking to expand their reach.

Meeting the challenges of a new market isn’t always easy, but merchants who rise to the occasion can increase their sales and diversify their revenue sources, which has a side benefit of insulating them from the ever-present threat of loss from fraud and chargebacks. What do merchants need to know in order to make the most of the new e-commerce opportunities sprouting up in Southeast Asia?

New call-to-actionThe whole world may be interconnected through online technology and e-commerce, but that doesn’t mean every region or country is realizing its potential at the same rate.

Right now, Southeast Asia is experiencing a flourishing of e-commerce and digital payment activity thanks to shifting consumer attitudes and new technologies.

According to a 2021 report prepared by IDC Financial Insights and sponsored by the Singapore-based payment platform 2C2P, there were 222 million e-commerce users in Southeast Asia in 2020. By 2025, that number is expected to reach 411 million, an 85% growth rate.

Mobile banking is also expected to nearly double, going from 175 million in 2020 to a projected 345 million in 2025. As for digital wallets, they’re looking at the biggest jump of all. Starting from 154 million in 2020, they are projected to hit 404 million users in 2025, an increase of 162%. These statistics are closely interconnected. Consumers can access e-commerce sites from anywhere in the world, but to become customers they need a convenient, reliable, and secure way to pay for goods.

In countries where credit cards are not already in widespread use, alternative electronic payment methods are a necessary precondition for e-commerce to thrive. By embracing the alternative payment platforms gaining popularity in regions like Southeast Asia, merchants can seize the moment, tap into new markets, and connect with an even larger global audience.

Which Countries Make Up the Southeast Asian Market?

In terms of commerce, the Southeast Asian market, often abbreviated as SEA, consists of six countries: 

  • Indonesia
  • Malaysia
  • The Philippines
  • Singapore
  • Thailand
  • Vietnam

While neighboring countries may be experiencing similar economic and commercial trends, these countries provided the data for IDC’s report and represent the largest and most lucrative markets for e-commerce merchants to set their sights on.

What Is Driving the Growth of E-commerce in Southeast Asia?

SEA’s digital economy is projected to exceed $276 billion in gross merchandise value by 2025, putting it on a level with major markets like South Korea and Japan.

This boom is being fueled first and foremost by the growth in e-commerce, with supporting factors including the expanded sharing economy and the growth of online travel and other regional digital services. Spending on digital services alone is expected to double in the five-year period from 2020 to 2025.

Much of this growth can be attributed to new technologies, products, and government initiatives aimed at making the digital economy more accessible to SEA consumers, but in a familiar refrain, we must also acknowledge the influence of the COVID-19 pandemic.

The shutdowns, quarantines, and other mitigation efforts got consumers to see e-commerce not as an option but as a necessity, establishing and reinforcing digital shopping habits that continue even after pandemic restrictions are lifted.

How Can Merchants Take Advantages of Opportunities in Southeast Asian Markets?

Your high-quality products, brilliant marketing, and insightful customer research can create interest and demand for your goods in new and emerging markets, but to fully realize your sales potential, you need to offer payment options that meet the needs of the audience you’re trying to convert.

Global trends like mobile wallets and Buy Now, Pay Later are certainly contributing a lot to the growth of e-commerce in SEA, but older payment methods like credit cards and cash-on-delivery are still in use.

Manage Chargeback In-House Or OutshoreLocal preferences always need to be taken into account—credit cards still account for up to 70% of gross transaction volume in Singapore, for example, but represent only 18% in the Philippines and Vietnam, where mobile wallets and domestic payment services make up a much larger volume.

Merchants also need to be aware of trends that might not already be on their radar. Social selling, a major e-commerce trend in China, is also popular in SEA. Even if it doesn’t make sense to engage in these practices yourself, it’s important to be aware of the influence they can have on the attitudes and expectations of the customers you’re trying to reach.

While we can point to clear trends affecting the whole of SEA, the region is still highly diverse in terms of shopping habits and payment preferences. Having a clearly-defined payments strategy can provide merchants with a framework for deciding which payment options to focus on based on the markets and audience segments you’re prioritizing.

What Are the Risks and Benefits of Selling Internationally?

There’s no question that keeping a tight focus on your own domestic market is easier than selling internationally. Aside from the fundamental requirements of accepting international payments and dealing with currency conversions, merchants may also have to deal with unfamiliar security threats. Of course, many merchants gladly take on these challenges, because the reward is the sales and revenue growth that can come from successfully marketing yourself to a global audience.

Another benefit of diversifying your audience and payment methods is that it can lower your reliance on credit card transactions, which reduces your exposure to chargebacks.

Alternative payment platforms usually aren’t subject to the rules that govern the chargeback process, in which merchants tend to operate at a disadvantage. By basing a greater percentage of your sales on direct payment services or platforms with greater built-in security (like mobile wallets), you’ll be able to spend proportionally less time dealing with credit card fraud and chargebacks.

Conclusion

If you’ve got great products to sell, there may be a huge audience of potential customers waiting for you in SEA. To take advantage of the revenue opportunities afforded by this growing market, you’ll need to take the time to do your research, understand the new customers you hope to win over, and come up with a payment strategy that accommodates the preferences of your audience while meeting your own needs for security and cost-effectiveness.


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