Southeast Asia is expected to see a wave of 189 million new e-commerce users by 2025, up 85% from 2020. This significant number will bring fundamental changes for many actors in the region’s digital ecosystem, including payments providers.
The region is also experiencing a major economic transformation that’s impacting customers’ behaviors. This fuels “spectacular growth” in the digital payments sector, according to the latest joint report by 2C2P and the International Data Corporation (IDC). 2C2P is a Singapore-headquartered B2B global payments platform operating across online, mobile, and in-store channels.
In the next four years, e-commerce spending is set to rise by 162% across Southeast Asia to reach a total value of USD 180 billion. Indonesia, Vietnam, and Thailand are forecasted to become the largest e-commerce payments markets in Southeast Asia, with a market valuation of USD 83 billion, USD 29 billion, and USD 24 billion, respectively.
To find out more about this outlook and other transformations taking place in the region’s payments ecosystem, KrASIA recently sat down with Aung Kyaw Moe, founder and group CEO of 2C2P.
The interview has been edited and consolidated for clarity and brevity.
KrASIA (Kr): How is the payments ecosystem going to evolve in a post-pandemic economy?
Aung Kyaw Moe (AKM): With or without a pandemic, governments have been pushing for the development of the payments sector. Although different countries have different timelines, everyone is moving in the same direction. For instance, national real-time payment linkage systems such as Thailand’s PromptPay, Singapore’s PayNow, and Malaysia’s DuitNow have been established, while other countries such as the Philippines, Indonesia, and Vietnam are following suit.
Consumers’ and merchants’ behaviors have changed. Even the place where I regularly have breakfast in Bangkok doesn’t want to take cash anymore, as it prefers QR code-based online payments instead. Wallet operators and tech firms such as Grab, Line, and many others all want to have a piece of that pie.
Kr: Will the payments ecosystem in Southeast Asia follow a similar development path as other systems like in the US, China, or India?
AKM: The US is primarily a card-based market, while China is a digital wallet-based country. As for Europe, it has a single currency, and its legal system is more interconnected than our region. The ASEAN region has ten different legislations, so I don’t think there will be a big winner in the area. It will be difficult for [leading players] to have the lion’s share of the market as different regulators have their own agendas and ecosystems.
Southeast Asia will be leaning towards an India-like model where all digital and conventional banks connect to the Unified Payments Interface (UPI). The region already has similar interoperable payment systems in each country, such as PromptPay, DuitNow, and PayNow. Multiple operators connect to these systems, and different countries are also more interconnected. As such, Southeast Asia may not see a duopoly ecosystem like Alipay and WeChat Pay in China, or Visa and Mastercard in the US.
Kr: How does the real-time payment system link between Thailand and Singapore benefit the cross-border payment market in the region?
AKM: While some national payment linkages make the cross-border payment network more interoperable, there are still some limitations. These cross-border remittance linkages are only at the level of a bank-to-bank transfer, meaning that there is no API for e-commerce transactions yet. Current regional payment links are only applicable to peer-to-peer payment services, while the transfer amount is also capped at up to USD 800 in the case of the Singapore-Thailand linkage. Other important aspects are not properly defined yet, and it would take some time for those networks to develop a standard for everyone to agree on.
Kr: Now, there is no shortage of “buy now, pay later” options in the region. Do you expect BNPL offerings to continue to grow in Southeast Asia?
AKM: In Southeast Asia, this product has been around for about five years already. BNPL will continue to grow, and we will soon see more BNPL products offered by major wallet operators. Yet, in the big picture, BNPL is still at a very early stage considering the total payments value or gross merchandise value. Although the growth rate of BNPL is very high, it will not represent a large portion of the e-commerce traffic going forward.
There is also a debate happening among regulators. Sometimes, we jokingly use the term “pain later” instead of “pay later” because regulators will eventually introduce some new regulations around this product.
Kr: How is 2C2P preparing to welcome Southeast Asia’s forecast of 189 million new e-commerce users by 2025?
AKM: We continue with our ambition to become the go-to payments processor for anyone who wants to sell their products and services in the region. We currently are a profitable company, which gives us more options than ever before. Furthermore, we could become a public company, which would provide us with access to public investors.
As for new projects, we have been working with blockchain technology for about three years already. There will be a small announcement coming up soon regarding this. Blockchain is a fascinating technology, and I believe we will embrace it.