Over the past few years, Southeast Asia has become a hotbed of payments innovation with the Covid-19 pandemic accelerating the shift to all things digital. Nationwide lockdowns, movement controls and safe-distancing measures have reshaped consumer habits and preferences in varied ways and businesses had to adapt rapidly to keep pace.
With Covid-19 likely to become endemic worldwide, these new digital habits are expected to stick, with innovative payment experiences set to power increasingly digital lifestyles across the region, according to payments firm Visa.
Based in Singapore, Mandy Lamb is group country manager, regional Southeast Asia at Visa covering Singapore, Malaysia, Thailand and Brunei. Here she outlines key insights into how the pandemic has altered lives and payment behaviours, in addition to what we can expect in a post-pandemic world.
Visa’s Back to Business Study found that many consumers globally have changed their shopping habits due to Covid-19 — using contactless payments whenever possible (56 per cent), shopping online whenever possible (52 per cent) and using less cash (50 per cent).
Consumer payment attitudes in Southeast Asia
According to Visa’s Consumer Payment Attitudes Study cashless payments continue to gain traction in Southeast Asia. Across the region, 85 per cent of consumers embrace a number of digital payment methods — from cards, contactless cards, mobile payments, e-wallets and QR code payments.
The rising adoption of contactless payments (63 per cent) and card payments (46 per cent) is driving the shift towards cashless, along with the increase in digital payments acceptance by merchants (41 per cent) and the perceived safety of digital payments (40 per cent). As a result, in countries where cashless adoption is underway, consumers expect Covid-19 to have accelerated their country’s transition to a cashless society by at least three to five years. Malaysia, Singapore and the Philippines are at the forefront of this trend.
The payment preferences of Southeast Asian consumers are becoming more diversified as digital payment experiences become more fragmented. Contactless cards remain popular across the region, with usage led by Singapore (75 per cent), Malaysia (65 per cent) and Thailand (41 per cent). Mobile contactless payments are less prevalent but have seen continued growth in markets where they are available — namely Thailand (45 per cent), Singapore (45 per cent), Vietnam (45 per cent) and Malaysia (37 per cent).
With the continued emergence of new payment experiences across the region, digital payments are more accessible than ever, and consumers are likely to continue seeking out more innovative ways to pay.
The study also found that the pandemic has spurred consumers to turn to e-commerce for purchases of essential and non-essential items. In Southeast Asia, 72 per cent of consumers shopped more frequently online via websites or apps during Covid-19, while more than two in five (44 per cent) shopped less frequently in-person at physical outlets.
More than half (56 per cent) shopped more frequently via social media channels. This shift to e-commerce has benefited big online marketplaces, with more than two in five Southeast Asian consumers shopping more frequently at big marketplaces online (44 per cent). At the same time, Southeast Asian consumers are also purchasing more frequently from home-based businesses (40 per cent) and local businesses (29 per cent). As consumers grow accustomed to shopping online via their smartphones and computers, e-commerce is poised for further growth during the pandemic and beyond.
Businesses keeping pace by going digital
In light of changing habits and new opportunities, there is an immediate need for Southeast Asian businesses to adopt digital-first strategies in payments and commerce to keep pace. Some have already made the transition; Visa’s Back to Business Study found that more than nine in 10 Singaporean small and medium-sized businesses had embraced new forms of digital technology by the end of 2020. This included accommodating customers’ preferred payment methods by pivoting to e-commerce platforms and accepting contactless payments.
We have also witnessed a blurring of the lines between traditional face-to-face commerce and e-commerce with Southeast Asian businesses embracing omnichannel platforms for integrated shopping journeys. From app-powered commerce ecosystems to smart checkouts, digital services are being integrated into physical commerce to create a seamless and intuitive experience across various touchpoints, redefining future payments experiences.
Beyond powering consumer transactions and shopping experiences, digital solutions have also revolutionised business-to-business (B2B) payments. The pandemic has exposed fragilities associated with B2B payments — from movement restriction orders preventing businesses from depositing cheques at bank branches to suppliers being unable to meet face-to-face for payments or having concerns handling cash. Southeast Asian businesses are recognising the need for digital B2B payment solutions to reduce friction and drive greater efficiency.
For greater transparency and control over their spending, businesses can adopt data-powered digital payment solutions, such as Visa Commercial Pay, which enables businesses to issue virtual cards on demand via their mobile apps to propel the growth of B2B payments. As contactless penetration rates continue to rise across Southeast Asia, we have also seen rising interest in card products from businesses seeking speed and convenience. There is also an opportunity for contactless-enabled virtual cards, with the region’s growing interest in mobile contactless payments extending into the B2B space. Overall, digital solutions are set to transform B2B payment processes, making them faster, more efficient and more secure.
Southeast Asia’s digital-first future for payments and commerce
In Southeast Asia, digital-first is fast becoming the norm. Across the region, the rapid digitalisation of consumer lifestyles and business operations will continue driving The Fourth Payment Revolution, where emerging technologies are set to drive greater interoperability among payment providers and transform user experiences. The digital experiences that will excel are those that add value to consumers’ daily lives and business operations — innovations driven by necessity.
Our ever-expanding payments ecosystem is therefore well-positioned for continued growth, and Southeast Asia will remain a focal point for payments innovation. Emerging fintechs will continue to disrupt the space with new digital experiences, as traditional financial institutions enhance their digital offerings.
Being a key player in the payments ecosystem, Visa is committed to fuelling the fintech revolution and connecting the dots for payments innovation. We will continue to work closely with our partners to enhance the digital payments experience, while making innovative solutions accessible to all via our global network.
Ultimately, the future of payments and commerce in Southeast Asia will be defined by innovative experiences that are intuitive, seamless and secure — experiences that will power digital lifestyles in the Fourth Payment Revolution and beyond.