Customer centric and cross-channel approach to payments will drive growth
e-Commerce is a consistent driver of industry growth. 2018 marked the year of e-commerce in Southeast Asia, highlighted by rising incomes, increased mobile adoption, and improved logistics. According to the latest e-Conomy report by Google and Temasek, the region’s digital economy hit an inflection point in 2018 and will reach $240 billion by 2025, which will exceed earlier projections by $40 billion.
Despite this growth trajectory, Southeast Asia still lags behind the rest of the globe in terms of digital and mobile payments penetration. While the region is popularly lauded as being “the next 600 million”, referring to the scale of the population, at least 60 percent remains unbanked or underbanked.
Recognising this gap, innovative fintech startups across Southeast Asia are leveraging tech to meet the needs of consumers who do not have access to traditional banking services such as access to credit, digital payments, and online transactions.
The mobile and digital payments connection
The proliferation of fintech start-ups creates a ripple effect as there is a supply-and-demand dynamic between payments and e-commerce. The pervasiveness of smartphones and faster mobile data connections has driven the growth of mobile commerce. This, in turn, influenced the development of mobile wallets or contactless payment mechanisms. The increased accessibility to cashless payments influences growth in e-commerce and m-commerce, thus leading to a cycle of growth and innovation.
eMarketer, a market research company that provides insights and trends related to digital marketing, media and commerce, projects that within this year, more than half of smartphone users in the Asia Pacific region will pay for goods and services through their mobile devices. By 2022, 56 per cent of payment volume in this region as well as a staggering 82 per cent in Singapore is expected to be cashless, according to Frost & Sullivan.
The challenge of digital payments
As digital payments grow, so will concerns over the ease of payments and the security of transactions. The challenge therefore lies in empowering both businesses and customers alike with tools that make digital payments as convenient and secure as paying cash.
According to Cybersource, a global payment management platform from Visa, key trends that businesses should consider when going digital include:
- Integrated frictionless payments;
- Omni-channel, unified commerce and automated checkout;
- Virtualised credentials embedded everywhere and anywhere.
Reduced transactional friction increases profitability
The ultimate consequence of having high-friction on an e-commerce store is that people buy less because of the added difficulty of completing the transaction. Research shows that around three quarters of e-commerce buyers abandon their shopping carts when it is too difficult to checkout and this is true across different devices whether on desktop or mobile device.
Transactional friction also includes slow load times and e-commerce pages not optimized for mobile displays. The answer here is to speed up and simplify the shopping and checkout process. Solutions can include reducing page load times through lighter code, server-side improvements, and optimizing on-page copy for better readability even on small displays.
An omni-channel approach to retail improves sales
As part of reducing transactional friction, digital retailers should also consider an omni- or multi-channel approach to sales and checking out. This involves having the ability to service both online and offline customers across both digital and physical channels. For instance, you can allow for online payment, but in-store pickup or collection.
One concern is that an omni-channel retail approach might result in loss of control over where the sale actually happens. For instance, consumers often channel-hop, choosing the most convenient way to buy a product or service. These are platforms not controlled directly by the retailer, such as messaging or social media apps. This means the control of the user experience shifts from the retail business towards the consumer.
For businesses engaging in e-commerce, the key here is to simplify payment mechanisms, which can enhance the user experience, improve loyalty and increase repeat customers. Incorporating solutions such as machine learning, AI, along with social logins and one-click payments can help enhance customer experience, grow revenues and mitigate risks.
Payment credentials are becoming more sophisticated and yet simpler for users
There is a wide disparity of preferred technologies and payment mechanisms across Southeast Asia. For example: Singapore shows a rapid growth in cashless payment technologies. In Malaysia, debit and credit card transactions dominate. Meanwhile, bank transfers and cash are the most popular in Indonesia, although local mobile wallets are starting to gain traction. Cash-on-delivery are still the most popular means of payment in Vietnam and the Philippines.
Such a disparity might make it difficult for e-commerce and m-commerce businesses to address all the nuances of each market in the region. However, this also presents an opportunity, in terms of the need to streamline the payments technology. One trend that Cybersource has identified is how tokens will play a stronger role in securing card data, which is being virtualised. With payments infrastructure moving toward a tokenised approach, credentials become virtualised and can thus be embedded anywhere.
What this means is that a transaction can take place either online or offline, or both within the confines of an e-commerce platform or even across a different platform such as messaging or social media app. User and payment credentials still remain intact due to the tokenised nature of the transaction ensuring a unified user experience across these different channels.
The retail environment is increasingly shifting toward omni-channel, driven by a focus on technology and user experience. Expect consumers to channel-hop across online and physical stores, aided by smartphones, tablets, and social media, whichever is most convenient.
For a digital retail business, the key to success lies in capturing the benefits across all these channels. This means facilitating the deal from any touchpoint, thus completing the sale regardless of where the user makes the purchase. Here, a secure and efficient payment network can streamline and unify the process, ensuring optimal profitability for businesses and better convenience for users.