China has rapidly developed into the world’s long-standing leader in mobile payments. Foreigners visiting China are always surprised by the prevalence of convenient mobile payments. In recent years, Alibaba and Tencent has accelerated their overseas development, especially in Southeast Asia.
People in Southeast Asia may have realized that Alipay and WeChat payment are becoming more widely available. In Singapore, the advertisement slogan “experience Singapore, let’s Alipay” and all kinds of promotional ads exist everywhere. In addition to tourists, Alipay is also trying to attract local users.
A few days ago, Ant Financial and Indonesian Emtek Group launched DANA, the “Indonesian Alipay”. DANA will provide financial services for BBM, the second largest chat tool in Indonesia. Earlier, WeChat expanded its mobile payment business in Malaysia. In addition to these two giants, the Southeast Asian market has other players, such as Bluepay. Bluepay has strong momentum in Thailand, and is managed by a former Huawei team.
Why do mobile payment giants prefer Southeast Asia?
Southeast Asia has a large and fast growing population of 650 million people, accounting for 8.6 percent of the world’s total population. More than 70 percent are young people, and a young-oriented market is relatively more accepting of new technologies, such as TikTok and mobile payments.
The potential of the internet and the payment scene
Southeast Asia is the world’s third-largest area in terms of internet users. Its number of online users exceed the entire population of the U.S. According to the Southeast Asia Network Economic Report published in 2017 by Google and Temasek, the Southeast Asia internet economy market size will reach $200 billion annually by 2025. E-commerce and ride hailing have the highest growth rates and are prime areas of opportunity for the development of mobile payments.
Southeast Asia is also one of the fastest growing regions in global mobile communications. Smartphones have been saturated in China for the past two years, but not in most parts of Southeast Asia. Smartphone sales has had strong growth over the past few years, laying a solid foundation for the spread of mobile payments.
Geographical and cultural similarities
Southeast Asia has been a hot spot for Chinese tourists, and the growing Chinese purchasing power has created an excellent condition for overseas mobile payments. Southeast Asia has the world’s largest group of 30 million Chinese people outside of China. Although many younger generations cannot speak Chinese, the similarities in geography and culture and the low cost of information communication undoubtedly bring great convenience to Chinese companies looking to develop in Southeast Asia.
With unique conditions, can Alipay and WeChat payment develop smoothly without obstacles? Of course not.
There is no single dominant player.
In the past two years, various players have emerged in the Southeast Asian mobile payment market trying to replicate the success of the Chinese market. Take Singapore for example: In addition to Alipay and WeChat payments targeting Chinese tourists, ride sharing software Grab last year formally launched Grabpay payment function. Singaporean local banks launched PayLah! Third-party platforms launched numerous payment tools, such as Fave Pay, Fomo Pay, and CC Pay. The New Telecom released Dash and United Overseas Bank released Mighty.
Although many mobile payment platforms and numerous incentive measures launched, such as PayLah! and GrabPay, none dares to say that they were successful. According to a PayPal survey, 90 percent of Singaporeans said that cash payments are still their top choice.
Why is that?
User habits are difficult to change
The success of mobile payments in China is closely related to its unique market situation. Alipay relied on the rapid development of e-commerce. The initial foreign trade and the rise of Taobao both created opportunities for new forms of payment. WeChat is the most commonly used social tool for Chinese people, enjoying high amounts of daily active users and strong user stickiness. Assisted by WeChat Red Envelopes, WeChat payment became prevalent.
The Southeast Asian market does not have a chat tool like WeChat, nor does it have an e-commerce platform like Taobao. Even online shoppers are more inclined to use cash on delivery.
Can incentive measures change user habits? Local companies in Southeast Asia are more concerned about how to stabilize the current business than innovating and cultivating user habits. Incentives for burning money may also touch the bottom line of local interest groups. The head of Indonesia’s biggest local mobile phone maker once said, “Your money may come easily, but our money is earned cent by cent.” Every penny spent requires a clear result, otherwise the money may be wasted.
Policy and license application process
In Southeast Asia, applying for a license is a very slow and painful process.
China’s central bank had granted preferential policies to third parties to promote the development of mobile payments in China. However, policies in Southeast Asia are different in each country and need to be adjusted to local conditions. In Southeast Asia, Alipay and WeChat are mainly used by Chinese tourists, and has little to do with the local trade and financial system.
WeChat has applied for the relevant license in Malaysia. Although it was claimed to be a breakthrough, results remain to be seen. After rounds of trials, Alipay finally chose to partner with local companies that can obtain the license. These local companies either are chaebols (large business conglomerates) or have suitable backgrounds. Many local companies have spent decades unsuccessfully applying for a license. Lazada waited for two years before receiving its mobile payments license. Grab, a Southeast Asian transportation unicorn, was prevented from operating the electronic wallet business last year in Indonesia due to lack of license. Relying on its partnership with OVO, Grab later resumed its operations.
So, can they succeed?
The challenge is great, but the market also has great potential. Without a dominant player in the Southeast Asian market, there are many opportunities for SMEs. As long as they can enter the market and choose the most suitable way, they have a chance for a share of the market. The following are several suggestions:
Adapt to local conditions by partnering.
There are many countries in Southeast Asia, each with different economic situations and policies. What is suitable for China may not be suitable for Singapore, and what is suitable for Singapore may not be suitable for Indonesia. Before developing overseas, the company needs to analyze the pros and cons of each country and relevant regulatory policies, and choose a good breakthrough and suitable model.
Acquisitions, joint ventures and the introduction of assets overseas are common ways of entering the market. Ant Financial is a typical example: Mergers and joint ventures solved their licensing issues, talent searches and other challenges in the Southeast Asian mobile payment market.
Play a core advantage and find a niche market
WeChat’s breakthrough into the mobile payment market in Southeast Asia was targeting Chinese tourists. Some companies have gone even farther. For instance, Bluepay started its business with game payments. At first, it only had SMS payment and game card payment. Over past three years, Bluepay partnered with local banks and operators to maintain its momentum. Some companies specializing in cross-border e-commerce payment also achieved good results. Recognizing the value and advantages of the company, and determining critical market segments are the keys to success in Southeast Asia.
Venture deep into the market
This may be the simplest piece of advice: Many companies have obtained inaccurate information through domestic channels. Inaccurate information will greatly harm decisions and judgments, so it is better immerse into the target market.
Companies that aim to develop in Southeast Asia must go there to examine local consumption and payment habits, understand the local policy, and talk with local partners. This may help companies avoid unnecessary obstacles.