Digital payment adoption a challenge in SEA: Google-Temasek study
By Edwin Yapp November 21, 2018
- Cross border regulations, interoperability, and standardisation needed
- Internet economy, funding growing, led by a number of regional ‘unicorns’
DESPITE the booming Internet economy growth in Southeast Asia, the usage of digital payments amongst Internet consumers in the region still faces several significant impediments, which need to be ironed out first before usage can be truly pervasive, according to a new joint study by Google Inc and Temasek Holdings.
Speaking to the media to reveal the findings from the annual Google-Temasek e-Conomy Internet study, head for Temasek Holdings Investment Group Rohit Sipahimalani (pic, right), said while the latest research noted that Southeast Asia’s Internet economy has grown by 44% and valued at US$72 billion in 2018, up from US$50 billion in 2017, the actual usage of digital payments is still dismally low.
Citing data obtained from a complementary Google survey conducted in the second quarter of this year, Rohit observed that less than one in two internet users in Southeast Asia has adopted digital payment services, with adoption as low as one in five users in the Philippines and one in four users in Vietnam.
“[What’s more] is that digital payment services account for an even smaller share of the overall transaction value, anecdotally in the low single digits for most Internet economy players.
“That is remarkably low,” he stressed. If you compare this with China, everyone uses either WeChat Pay or Alipay for both online and offline merchants.”
The Google survey isn’t available publically and the six countries polled were Malaysia, Singapore, Thailand, Indonesia, the Philippines and Vietnam, the same six countries that were studied in the Google-Temasek e-Conomy Internet study.
Conclusions from the Google-Temasek e-Conomy study suggest that the low usage of digital payments has also hindered growth of digital goods such as gaming and subscription music as well as video on demand.
Users in Southeast Asia favour free or advertising supported alternatives, despite being open to paying for the services if more convenient digital payment solutions were available, it argued.
The lack of digital payments has also ostensibly affected the realm of e-commerce dealing with physical goods, as they still readily accept cash-on-delivery but as a result face increased cost of dealing with cash and might have to deal with cancelled orders that would incur higher charges by delivery companies.
What must be done?
Rohit argued that the dismal usage of digital payments was due to several key factors, which he stressed must be solved before e-payments can truly take off.
One main reason for this is that Southeast Asia does not currently have a dominant payment ecosystem like the Chinese have in China.
“There is a big issue surrounding merchant acceptance [in this region], which is difficult to overcome,” he argued. “In China, merchant acceptance is high because players such as Alipay and WeChat Pay invest billion of dollars over a period of time to incentivise merchants to accept their payment solutions. They also provide equal number of incentives for the consumer to use electronic and mobile payments.”
Rohit acknowledged that some in the industry are trying to resolve this challenge such as the likes of ride hailing companies, telecommunication firms and banks.
“Ride-hailing companies like GoPay and GrabPay have introduced their mobile wallets,” he noted. “Then you have telcos such as PT Telkomsel in Indonesia trying to address this.
“Global players such as Google, Apple and PayPal are also trying to develop payment solutions for the region. Also, you have regional banks such as DBS introducing apps such as PayLah!
“But the impact is still not big [enough],” he argued.
And the many players trying to solve the challenge has also caused a fragmented payment ecosystem in Southeast Asia, Rohit argued, noting that what is needed is “for large players to make huge investments in order to build the ecosystem.”
He added that for digital payments in Southeast Asia to be successful, there must regulatory changes to allow more interoperability within ecosystem in different countries. Regulation also needs to be amended to address foreign investment ownership issues in some local markets.
“You also need one or two dominant players to develop standards for this to take off,” he stressed. “Partnership between the leading players could help to address this.
“There is a lot of money beginning to go into fintech in Southeast Asia but it’s still early days and it’ll take a few [more] years for it to take off,” he argued, noting that digital payments could then become a lynchpin for other online financial services such as money transfers and remittances, personal lending, investments, and insurance products to grow.
Next page: Fintech investment surges in SEA
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