If there is anything to be gleamed with the early 2010s is that emerging technologies can have a significant role in disrupting industries around the world. For instance, while some may attribute the financial crisis of 2008/2009 as the single most important catalyst for the industry-wide change resulting in a general loss of faith by consumers on the financial services industry (and government oversight of it).
It has also helped precipitate the rise of a new generation of millennial-like entrepreneurs that see pockets of opportunities in financial services and have the temerity to disrupt the status quo. But it is just as important to give credence to the convergence of emerging technologies such as biometrics, cloud computing, cognitive computing/artificial intelligence, machine learning/predictive analytics, distributed ledger technologies, quantum computing and robotics as conspiring to facilitate the disruptions we are seeing across the financial services industry today.
Fintech Innovation spoke to Warren Hayashi, Adyen’s president for Asia Pacific, to get his perspective on how e-payments is evolving in Asia amidst developments in technology, evolving socio-economic and political trends in the region, and the disruptions to the payments ecosystem with the rise of Fintechs.
The reality of electronic payments is that it’s fragmented both in terms of processes, regulations and technologies. Is this perception changing?
Warren Hayashi: Traditionally, the electronic payments process is seen as fragmented because of the many players and steps involved. When a shopper purchases an item online and proceeds to make payment, this process involves a variety of parties. The payment will need to pass through a payment gateway, which identifies if the shopper is legit, before it is processed. Businesses used to work with different entities to develop these digital processes – payment gateway, processer and risk management.
This fragmented process increases the risks of failure in a transaction. Businesses are wising up to this fact and changing their perception on electronic payments. Instead of managing various solutions and third-parties, they are looking towards unified end-to-end payment solutions that offer omni-channel possibilities, fraud prevention and tools that optimize authorization rates.
Essentially, businesses look to streamline their payments process to obtain a centralized view of their transactions. This reduces the workload associated with managing different parties across multiple territories, giving businesses the freedom to scale faster and focus on increasing revenue.
Force for change
If you had to look at the most challenging areas to change: what would these be?
Warren Hayashi: The fragmented payment landscape is a challenging area for businesses, especially those who are looking towards global expansion. In Asia, payment preferences differ from market to market. In countries like Singapore and Thailand, credit cards dominate when it comes to online payments. In China, mobile payments in the market including Alipay, WeChat Pay and Tenpay, take precedence.
These specific consumer preferences are hard to change because it has a lot to do with trust. They also should not be ignored because it can lead to loss of revenue and customer loyalty. For businesses working across multiple markets, it might make sense to work with a payment solution provider who has an in-depth understanding of local markets. This overview of market preferences can fine tune the payment methods and processes used. An accurate report of how customers pay can also be generated so businesses can update their payment strategy consistently.
Technology as arbiter of transformation
Is it fair to put so much faith in technology as a way to ease Asia’s emerging markets into the digital payments era (especially given that disparity in regulation, technology adoption, process modernization and culture)?
Warren Hayashi: New innovations in the Fintech space are giving people in developing economies the convenience of entering the digital payments era. It also provides the unbanked an opportunity for financial inclusion. Without ever physically visiting a bank, users can have an online or mobile banking account, commence digital banking and online transactions. For aspiring entrepreneurs, there are also digital solutions that help with credit checking and account balancing.
While technology is helpful in easing Asia’s emerging markets into the digital payments era, trust remains an issue in developing markets where people are more used to paying in cash. In countries like Indonesia, cash remains king and the majority of ecommerce payments are completed offline, either by ATM transfer or at a convenience store. Spotify, for example, is driving conversions in Indonesia by letting customers pay via bank transfer.
To be inclusive to all consumers in emerging markets, businesses should not discount cash-based payment methods as a viable option. Letting people pay in the ways they know and trust – rather than trying to introduce a different system – will provide a better customer experience. It will significantly increase a business’s reach and conversion rate.
There is a lot of interest in emerging technologies like DLT and crypto currencies. As platform and currency, are these ready for commercial use across Asia?
Warren Hayashi: There is certainly a lot of interest in emerging technologies and the current wave of investments in this field seems to be targeting B2B payments rather than consumer payments. It is still early days and we are excited to see where innovation takes us.
What will it take for Southeast Asia to achieve seamless cross-border payments? Is the EU model the right approach (especially given all the political and economic problems that region is experiencing today)?
Warren Hayashi: In the face of disruption, we are seeing similar calls for change in the Fintech sector across Southeast Asia. For instance, the Monetary Authority of Singapore’s introduction of the Fintech Regulatory Sandbox and Hong Kong’s push for a government office to oversee Fintech policy and regulation. These are steps in the right direction as it is still early days for ecommerce in the region. Retailers in Singapore have only generated 3% of their sales from ecommerce and mobile sales, and in Indonesia, Thailand and the Philippines ecommerce accounts for just 2% of all retail sales. This points to huge growth opportunities for retailers looking to expand into the region.
While regulation can help the Fintech sector advance, the major challenge for seamless cross-border payments in Southeast Asia remains the diverse payment preferences in the region. Consumers in the region have a variety of payment methods to choose from and every country has their preferred way to pay, ranging from messaging app purchases to in-store queue-busting kiosks.
The ability to recognize consumer preferences will be even more crucial in 2017, considering the many payment innovations that encourage convenient and seamless transactions. For instance, technology such as tokenization allows repeat customers to make online purchases with a single click, using the stored payment information to complete the purchase.
To encourage cross-border transactions and sustain customer loyalty, businesses should first cater to the different payment preferences in Southeast Asia.
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