China investments boosting Asean e-commerce: Page 2 of 2


Lack of familiarity with e-payment remains


China investments boosting Asean e-commerce: Page 2 of 2


Another area highlighted by Credit Suisse in its report was the lack of familiarity with e-payment, which is another key constraint preventing Asean e-commerce from flourishing.

“For example, ‘Cash-on-Delivery’ methods that are risky for merchants and costly for consumers still account for 65%-80% of ecommerce transaction in Indonesia and Thailand respectively. The constraint on payments is particularly challenging in the Philippines, Vietnam, and Indonesia where 60%-70% of citizens are still unbanked.”

However, there are two potential catalysts Credit Suisse sees that could help boost e-payment adoption in the Asean region. One is that the entry of Chinese e-commerce giants into Asean could bring in the wealth of experience that they have in successfully transforming customer culture and adoption of e-payments.

“These digital players often use their services including online games, ecommerce market place, and ride hailing to ‘cross-sell’ consumers on their payment platforms. In addition, Chinese tech companies also provide financial ammunition to already rapidly growing local players, enabling them to expand at a faster pace. For example, Tencent, and Meituan-Dianping’s investments into Go-Jek – already a key e-money player in Indonesia – give it the ability to scale up further.”

The second catalyst is the fact that some Asean governments have recently made a big push to promote e-payment adoption. For example. Singapore and Thailand have introduced services allowing inter-bank transfers between individuals using just mobile numbers or individual ID card numbers (PayNow in Singapore and PromptPay in Thailand). In Thailand’s case, the scheme reduces bank transfer fees.

“Both PayNow and Promptpay will be expanded beyond individuals to businesses, with plans to also link both platforms together to facilitate cross-border transfers. TH and SG are each developing their own QR code standards, with plans to also implement a National Digital Identity system.”

Asean e-commerce is taking off

According to Credit Suisse, the entry of Chinese tech giants as well as other foreign players should stimulate rapidly growing e-tailing markets in the Asean region.

“We think e-tailing growth could outpace offline retailing six to 10 times over the next few years vs six times in the past two years,” the research firm said, noting also that even economies with low single-digit private consumption growth trends such as Singapore and Thailand could see double-digit expansion in the e-tailing segment.

Credit Suisse also thinks that Indonesia has the greatest market potential over the next five to 10 years given its large and rapidly growing middle class and young consumer market.

“However, over the next one to two years Indonesia’s growth in ecommerce will be partly capped by logistics constraints, especially related to hard infrastructure connectivity. This is a bottleneck that cannot be resolved easily even with advanced technology and know-how from foreign players,” it added.

“On the contrary, Thailand is a less obvious choice for ecommerce growth in the long run, but we see a good chance that it could experience a surge in ecommerce activities over the next two years. Although Thailand does not possess a strong structural consumption story partly due to its aging population, many ingredients are coming together to enable its ecommerce to take off in the near term,” the research firm opined.

Transforming retail, disrupting the financial sector


China investments boosting Asean e-commerce: Page 2 of 2


Credit Suisse expects the rise in e-commerce to potentially benefit the brand owners, mixed effects for convenience stores and negative for department stores.

“International experience suggests ecommerce helps disintermediate retail distributors, while connecting brand owners to customers. The negative impact on retail distributors could be larger than most observers anticipate if e-commerce players use e-tailing as a hunting ground for customer data to enter financial services,” it added.

According to Credit Suisse, lessons from China suggest the disruption will likely extend to the financial sector as tech players also venture into the fintech space using data accumulated from e-commerce.

“We think many ecommerce giants would use e-tailing as starting point to accumulate consumer data and move into financial services including saving and loan products, following the playbooks of Alibaba and Tencent in China.

“For example, in Thailand, the partnership between CP Group’s Ascend Group and Ant Financial could potentially bring together an extensive 7-11 branch network, rich local customer data from True group, and Ant Financial’s credit scoring technology.

“As another example, SEA Ltd could integrate Airpay into its rapidly growing e-commerce platform Shopee, feeding its e-money business with rich data from both e-tailing as well as its gaming business Garena,” the research firm said.

It added that financial institutions focusing on micro loans are likely to be more exposed to competition from these fintech players as the latter focuses on the underbanked population.

“Banks could be more impacted by the reduction of fee income partly because various governments are promoting e-payment adoption.”

Downward pressure on inflation

According to Credit Suisse, the globalisation and greater competition could result in lower inflation. “While difficult to quantify, we think the rise of ecommerce should bring down inflation through cost savings due to more efficient sales channels and increased competition.

“Academic literature suggests that drags on inflation exist even when ecommerce penetration is low due to greater price transparency,” the research firm said.

“We think these dampening effects on inflation could be even larger in the emerging market context. First, the potential costs savings and efficiency gains from using more online sales and distribution channels is likely to be larger in markets with many small and less efficient firms.

“Second, improvement in price transparency could help reduce the need to rely on middlemen who tend to earn fat margins and allow consumers to shop around for the cheapest deals more easily,” the research firm concluded.


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