In mid-June, Edgar, Dunn & Company moderated the first in a series of webinars titled ‘Festival of Online Payments’ on behalf of Empiria Group and PPRO. Each of the webinars focusses on one geographical area and Asia came first.
This was a very suitable choice considering that Asia is not only the continent with the largest e-commerce volume ($770bn) overall, but e-commerce as a share of GDP of 3.3% is also higher than comparable figures for Europe or North America.
E-commerce in Asia is driven by a number of different factors:
- Whilst access to Financial Services across Asia is lower than in other regions, it continues to grow largely driven by new technologies and increased internet penetration (just consider the ‘Aadhar scheme’ in India)
- The Expanding Middle Class especially in countries like China, India or Indonesia
- A young and technology-affine population
Whilst the overall headline figures are undoubtedly impressive, the real fascination stems from the differences that various countries display. Let’s just take a snapshot at three of the five fastest growing e-commerce markets in Asia.
- Vietnam – a developing market in which e-commerce is growing by 37% year-on-year but given that there is a credit card penetration of only 2% it is no surprise that 2/3 of all e-commerce is paid with cash
- Indonesia – a slightly more developed market where levels of banked population, internet as well as smartphone penetration are all within the 30-40% bracket; bank transfers at 40% are the most common online payment instrument
- Singapore – a well developed market with a high share of banked population but also high levels of internet and smartphone penetration. A year-on-year growth in e-commerce volumes of 25% has resulted in an average annual spend of close to $2000 per online user. More than 80% of it is paid via cards.
Different markets at different levels of maturity with very different payment infrastructures for online commerce!
On top of all this, there is the big elephant – or should we say big dragon – in the room: China.
It has a B2C e-commerce sector of about $540bn with a CAGR growth of 60% for the last 4-5 years. It is a market where online payments are dominated by e-wallets (57% of payments are done by e-wallets such as Alipay and wechat). Such numbers are hugely impressive but as we learned from Payment Service Provider Computop during the webinar, working as a payment provider in China is not easy because ‘everything is different’. Firstly, there are more subtle differences for example in managing consumer expectations. Having highly colourful websites is perfectly acceptable and that is equal to letting consumers scroll down websites almost indefinitely. Then there are bigger differences such as a preference for purchasing from marketplaces (like Taobao) instead of individual merchant websites. And then finally, there are the really fundamental differences in providing payment services in China, such as the irrelevance of global players like Visa, Mastercard or Paypal, or the presence of the ‘Great Chinese Firewall’. As we learned, Computop addressed the issue by effectively building a replica of the German payment platform in China ‘behind the wall’.
Listening to the experts it became clear that everybody talks about China and the continuously growing appetite of Chinese consumers to buy and buy online … in China or increasingly outside China. Given all the complexities described above not many European or North American players have established a strong presence and customer relationship to date. In the other corner, we have big payment players such as Alipay and wechat who don’t just own the customer relationship but drive user behaviour as well. These organisations have established a strong presence outside their home market already. One has to wonder whether there will be any opportunity left for non-Chinese payment providers to cater for the growing Chinese consumer base? Has that train left the station already?
Probably not, as non-Chinese merchants will continue to look for support in navigating the complex environment in order to benefit from the e-commerce growth in the region.