LANDS OF INFINITE VARIETY

The Asian Consumer:

It’s not what they buy; It’s how they pay
 The Asian ecommerce market has exploded thanks to a
fusion of digital revolution allied to an expanding middle
class with disposable income. Where China leads the
way, others are already following in its slipstream.
Indonesia, for example, is the world’s fourth most
populous country with 250 million people and is already
exhibiting similar traits.

While the disposable income has had a huge effect on

what people buy, the digital revolution has had a
dramatic impact on how they pay. The key word is
revolution, where the west is undergoing more of an
evolution.

The west has wound a leisurely way from physical to

digital payments; cheques refuse to die completely and
the journey towards the point where debit cards are
expected to overtake cash in the UK for the first time
in 2021 has been slow but steady, even as digital
wallets like Apple Pay and Samsung Pay start
taking hold.

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In South-east Asia the development curve is much
steeper as countries transition from a cash economy
to a digital one cutting many of the corners the west
carefully navigated. It’s less of a leisurely journey and
more of a crazy sprint with everybody going in
different directions and nobody quite sure which route
will cut to the winning post and which will end up as
dead ends.

There’s a key element at play here: in the west can you 90%
fairly safely assume that if someone has a smartphone
they have a bank account and a credit card.

This has created a landscape where Merchants need a

flexible approach to accepting payments, where digital
sometimes has to combine with analogue for an ideal 50% 52% 52%
solution. 42% 43%

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 The behemoth - China
When it comes to ecommerce the numbers in China
never fail to astound.

• Online shopping in China totalled USD 589.61 billion in

20151
• An increase of 33.3% on previous year
• 12.9% of all retail in China comes from ecommerce
• 25% of Chinese population shops online...
• ...which means that despite its size the potential
growth is immense

The behaviour of the Chinese consumer is fascinating

and something PaySec has looked at in more detail
– you can find our China in Your Hands
presentation online at www.paysec.com.

But equally fascinating is the payments landscape. As

Asia moves rapidly from a physical to digital transaction
model, several payment methods are fighting it out for
supremacy. This offers challenges to Merchants wishing
to transact as they need to cover several bases.

To further muddy the waters, the lines between card

payments, digital wallets and mobile payments are
becoming increasingly blurred.

This means any approach to accepting payments needs

to be flexible and broad. The proof of that is obvious
when you examine the varied nature of payments in the
region.

1 Source: China’s online retail sales grow a third to $589 billion in 2015, Internetretailer.com,

January 27,2016)

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Card players - China UnionPay
15%
China UnionPay is the only domestic bank card
organisation in China with an estimated 3.5 billion UnionPay
cards issued. There are more CUP debit cards in
circulation than Visa and MasterCard combined. Visa

52% Mastercard
China UnionPay has over 260 million online and mobile
users and is expanding its reach by strategic alliances Amex
such as recent deals teaming up with both ApplePay JCB
and SamsungPay.
Diners/Disc
30%

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 The power of ten - Tenpay
Tenpay may be lagging some way behind Alipay as
China’s preferred digital wallet solution according to
the 2015 China Internet Watch figures, but while
Alipay’s success is largely based around its linkage to
Alibaba, Tenpay’s slice of the payments market is
increasing at a rapid rae thanks to China’s most
popular mobile messaging, WeChat.

The messaging app is similar to WhatsApp, but with

gaming, advertising and WeChat Pay that facilitates
online, in-store and also peer-to-peer payments. The
latter is incredibly powerful for the consumer and the
small business owner who can now accept digital
payments without card machines.
SHOP
WeChat has around 697 million active users worldwide, NOW
but more importantly 300 million linked payment
accounts. (techcrunch.com, March 2016)

Happy WeChat Pay New Year

It is a tradition at Chinese New Year for elders
to fill small red envelopes with cash for single
people and children. WeChat Pay has utilised its
peer-to-peer payment technology to digitisethe
tradition and in doing so quickly built its user
base. It introduced the concept in 2014 and in
its third year a staggering eight billion
envelopes were sent.

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Tied in - Alipay
Alipay is currently the biggest player in the Chinese
online payments market and has 400 million registered
users. It processes 80 million transactions per day and
has done over 40 billion in total. The Alipay wallet has
190 million annual active users and over 50% of its
transaction are done via mobile.

Alipay is effectively an escrow system, whereby the

consumer has to receive and approve the goods before
the funds are released to the Merchant. As with its
competitors, Alipay consistently looks to broaden its
reach with deals like its recent tie-in with Uber to allow
people to pay for the service using Alipay.

Alipay.com

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 Let the battle continue
Even adding up the numbers of users there are ‘only’
960 million users of the big three payment solutions in
a country of 1.4 billion people. Even if each user was
exclusive to one service, that still leaves 440 million
potential payers in China unprovided so there’s still a
lot of the payments market to fight for.

The battle lines have been drawn in China and the

payments war will continue for some time yet but, the
implications for Merchants looking to enter the
Chinese market are clear. Tying yourself to just one
payment method is inadvisable and a broad payments
strategy is required.

Cash on Delivery
Amidst the digital revolution, cash on delivery is
still very much a thing in China and something
to consider when setting up your payments
strategy. Third party delivery companies can
often help with this very frustrating but often
necessary option.

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A fractured market - the Indonesian
payments market
Indonesia is much younger than China in terms of its digital
revolution and emerging middle class, but it is showing
unmistakeable signs of following in China’s footsteps.

And if you think China’s big three shootout makes life there
complicated, it looks positively straightforward by comparison to
Indonesia’s nascent payments scrap.

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 Go figure - Go-Pay
Go-Jek is a transport service similar to Uber, but for
moped rather than cars (Ojek means motorcycle taxi.)
In a country where mopeds can dodge the terrible
traffic and the costs for running them are so low, the
company quickly expanded its service offering to
delivery, couriers, pick-ups etc.

Payments used to be made with cash, but the company

has now introduced Go-Pay, allowing users to pay for
all its services via a digital wallet

So Go-Pay is a form of digital wallet, but where Apple

Pay and Samsung Pay are linked to a credit or debit
card, Go-Pay offers a variety of top-up methods that
aren’t exactly analogue but do reflect the less
developed payments culture of the region, where if
people do have a card it’s more likely to be an ATM card
than debit or credit.

On the top-up page there are three banks to choose

from – and in a country with many banks you might
think this is very limiting for the consumer. If you have
a BCA, Mandiri or Bank BRI you can do online or mobile
banking to top up, but all three also offer ATM top
ups… so go to one of their ATMs, input your card and
you can choose to top up your Go-Jek account by
typing in the code.

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Digital music, analogue payment -
Spotify Indonesia
Until recently Spotify was unavailable in Indonesia – you
couldn’t even download the app (much to the
consternation of PaySec’s Marketing and
Communication Manager who likes listening to music
when writing pieces like this.)

The service finally launched in March 2016, but where

Spotify users in most countries simply link a card to
their account and sit idly by as the money is taken from
it every month, that wasn’t necessarily going to work in
Indonesia.

And Spotify showed the knowledge of its market with

the following payment options:

• Yes, there’s credit card

• There’s bank transfer
• There’s ATM deposit
• There’s a digital wallet...
• But there’s also cash

Spotify is a tech giant, but it still allows Indonesians to

pop down the shop to pay for its service in cash.

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 Stalking a claim - Matahari Mall
The payments industry has its competition in Indonesia,
but there’s also a landgrab going on for the domestic
ecommerce market. In February 2015, Lippo Group, one
of the country’s biggest conglomerates, launched
MatahariMall. Matahari is a mid-range department
store in Indonesia and the plan was to turn
MatahariMall into the Alibaba of Indonesia. As
representative John Riady said: “Indonesia is the last
remaining, large underpenetrated ecommerce market in
Asia.”

But in an underpenetrated in a country where cash is

traditionally king, payment options were always going
to be an issue. And that’s why we get:

To cover its bases, MatahariMall has 14 payment

methods, including Bayar di Tempat. That means you
order online and then pay in-store. So online shopping
that’s pretty much the same as bricks and mortar
shopping.

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Cover your bases - Your payment
solutions
The conclusion we can draw from these case studies
is that while the market is vast and opportunities are
huge the payments strategy has to be carefully
thought out.

It might not be realistic to go as far as Spotify and

do deals with local bricks and mortar stores to enable
people to pay for services in cash and if you don’t
have physical stores than you won’t be able to
facilitate in-store payments.

But if you want to trade in Asia, be aware of the

broad payments market and plan a strategy that
covers off as many options as possible.

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Delivering solutions
Contact PaySec to discuss your Asia Payments solution. We are
constantly expanding our product suite to cover more solutions
and more territories.

Find out more at www.paysec.com or email sales@paysec.com.