Asia Pacific is home to over 4.5 billion people – nearly 60% of the world’s population. It’s a diverse region with seven of the world’s ten most populous countries including China and India.
Although APAC is said to be leading several trends, including ecommerce and mobile payment adoption, it’s also one of the most fragmented regions when it comes to payments.
Understanding APAC's unique payments and cultural landscape will help global businesses take better advantage of the opportunities and enormous potential the region presents.
Markets such as China, Japan, Indonesia, and the Philippines don’t require businesses to set up a local entity to start connecting with local shoppers.
From a payments perspective, this means that, with the right payments partner, bringing your brand to shoppers in these markets may be easier than you think.
Adyen’s local credit card acquiring licenses in countries including Australia, Hong Kong and Singapore help connect businesses directly to major card schemes.
An economic powerhouse in Asia Pacific, Australia enjoyed its 26th recession-free year in 2017. Its booming retail and tourism sectors have attracted worldwide attention, making it a great option as a base in APAC for global companies.
According to DHL ecommerce, Australian shoppers are the second-most likely in the world to buy online from overseas businesses and cross-border ecommerce is expected to grow at an average of 29% per year until 2020. When it comes to payments, over 50% of retail transactions in Australia are made with credit and debit cards.
Similarly, card payments are popular in nearby New Zealand with approximately 1.5 billion electronic card transactions made annually. While cash remains an important method, New Zealand has the lowest proportion of cash to GDP in circulation in the world.
With no requirements to set up a local entity, a card-dominated payment culture, and a population already used to buying from international sites, Australia is a great strategic center for international brands looking for a base in Asia Pacific. Businesses in Australia can leverage Adyen’s direct credit card acquiring license to take advantage of the benefits of local acquiring such as higher card authorization rates. Processing domestically also means you’ll benefit from the Australian Interchange fees cap.
China is the biggest retail ecommerce market in the world, expected to reach US $1.7 trillion by 2020. The country is a driving force behind mobile commerce (mcommerce).
According to data from Euromonitor International, mobile commerce mcommerce out-ranked desktop purchases back in 2015. And, as of 2016, 66% of digital purchases were made on a mobile device. That’s US $450.3 billion in mobile purchases. The top three payment methods are Alipay, UnionPay and WeChat Pay.
It’s not mandatory to set up a local entity to sell to Chinese shoppers. With a payments partner that supports key local payment methods, you can quickly reach over 1 billion shoppers in China. Mobile payments are important as most shoppers from first-tier and second-tier Chinese cities are used to buying on their mobiles and via apps.
With around 50% payments market share, Alipay is the largest local payment method in China. It’s owned by ecommerce conglomerate Alibaba and provides payment services for major Alibaba ecommerce platforms such as Taobao and Tmall, as well as over 400,000 Chinese businesses. It’s simple to set up Alipay, and your shoppers can enjoy a frictionless experience whether they’re shopping online, on mobile or in store.
UnionPay is the largest card scheme in the world by number of cards issued. It’s also the only interbank network in the market (excluding Hong Kong and Macau) linking the ATMs of 14 major banks and many smaller banks throughout Mainland China. Owned by the central bank, it has a monopoly on processing CNY-denominated transactions in China. This makes UnionPay a vital part of the payments mix for Chinese shoppers.
WeChat Pay is China’s fastest growing payment method. It forms part of the WeChat ecosystem, which is a social network, work collaboration tool, and commerce platform rolled into one. WeChat Pay is supported online, on mobile and in store. Transactions take place in the app, either via the retailer’s official WeChat account or via the in-app web browser. This makes it easy for you to provide a seamless shopping and payment experience for WeChat users.
Hong Kong is an important financial center in Asia Pacific – especially because of its proximity to China, the world’s largest economy by purchasing power parity according to IMF.
Often dubbed “the world’s freest economy”, Hong Kong is a leading global financial hub, as well as an attractive and strategic base for international companies. Both Singapore and Hong Kong are close contenders when it comes to being the best place from which to do business in Asia.
Its position as Special Administrative Region of the People’s Republic of China presents many opportunities for businesses as Beijing’s “One Belt, One Road” gains momentum. The policy aims to promote connectivity and cooperation among several countries in Asia and Europe.
Representing over US $14 billion in ecommerce in 2017, its high internet and smartphone adoption rates continually drive its ecommerce boom. Credit cards are the top payment method for ecommerce transactions, and are expected to remain the most popular payment method.
Mobile wallets are gaining traction among Hong Kong consumers. Both Alipay and WeChat Pay have announced their expansion plans outside of mainland China. Contactless and mobile payments are increasingly popular with more and more businesses adding Apple Pay and Google Pay to their payment mix.
Adyen’s acquiring license in Hong Kong offers businesses a direct connection to Visa and Mastercard. Not only can businesses enjoy benefits such as higher card authorization rates, but also deeper data insights. No local entity is required for cross-border transaction. Adyen also offers local payment methods Alipay, UnionPay and WeChat for businesses catering to Chinese shoppers.
India has traditionally been a cash-dominated economy, with cash and cheques accounting for 85% of payments. And, while we expect strong electronic payments growth in India over the next three to five years, cash on delivery (COD) still accounts for 60% of ecommerce payments.
The growth of electronic payment is very much facilitated by the Indian government, from its demonetization announcement in November 2016, to initiatives such as Rupay and UPI. Investments by global companies such as Alibaba, Softbank, Amazon and Google in mobile wallet solutions in the country will also help to push the needle.
3D Secure is mandatory on all domestic debit card transactions in India, where second-factor authentication actually has a positive impact on authorization rates. We recommend applying 3D Secure to all transactions in the Indian market.
With a 200 million population, Indonesia is one of the largest undeveloped market opportunities in Asia. It’s poised for enormous growth, with market size expected to rise to US $11 billion in 2019.
The bright outlook is driven by demographic trends. Less than 40% of the population is online, bank penetration is under a quarter, and the number of debit and credit cards issued is at only 15%. Like many developing economies, the shift online is happening through mobile, with over 90% of online users in Indonesia going online via their phone. But bear in mind: Cash on delivery is still the most popular payment method for retail goods.
Indonesia is a highly regulated market where a local entity is typically required to process locally, and the Indonesian rupiah (IDR) cannot be repatriated. However, Adyen makes it possible for you to offer domestic payment methods in Indonesia with settlement in USD.
Japan is the world’s third-biggest ecommerce market. It’s a cash-dominated market where cash on delivery is a popular payment method. Konbini allows customers to pay for online purchases in 24/7 convenience stores. Local credit card JCB is also popular, as are international credit cards.
Like-for-like cross-border settlement is possible in Japan, so shoppers aren’t impacted by cross border fees, which makes it a smooth experience. With Adyen, you can support Konbini without a local entity.
Like Indonesia, Malaysia is enjoying rapid ecommerce growth, driven largely by mobile. Yet there are some significant differences between the two markets. Malaysian shoppers are comparatively open to cross-border shopping, with 40% of online transactions happening cross-border. And, among Southeast Asian markets, Malaysia is second only to Singapore in terms of credit card penetration and usage.
The growing use of mobile devices may speed Malaysia’s ecommerce growth, as mobile payments can be made from a prepaid wallet instead of a bank account.
Malaysia has strong financial regulatory controls, and the Malaysian Ringgit is a non-tradable currency that can’t be settled outside the country. But the good news is that processing cross-border payments through an international acquirer doesn’t trigger an International Issuing fee for the shopper. So if you take this approach, you’re not impacted when processing Malaysian Ringgit cross-border. Local issuers expect 3D Secure authentication, so we recommend routing all transactions via 3D Secure.
The Philippines is probably one of the most underestimated ecommerce markets in Southeast Asia. As the second most populous country after Indonesia, its ecommerce market can expect an annual growth rate of 101.4% until 2018. This is driven mainly by high mobile penetration. Filipinos are among the most prolific mobile users in the world, and smartphone penetration is now 30% of the population.
A local entity is not required and cards can be processed cross-border without international fees. We recommend that international merchants keep cards cross-border and enable local payment methods as well. Authorization rates tend to be lower in the Philippines than other markets, mainly due to the young generation being less willing to pay for digital content. We see lower conversion rates especially for content like games and music downloads.
A vital financial hub for global businesses, Singapore was recently ranked as the third largest financial center in the world, after London and New York.
Fintech, digital payments and blockchain technology are gaining traction as continuous innovation and tech growth remain key for Singapore’s economic development.
Despite its small size, the city-state’s extremely business-friendly environment and many international ties make Singapore a strategic center for businesses expanding in Asia and globally.
Like both Australia and Hong Kong, ecommerce in Singapore is thriving and 55% of transactions are cross-border. Smartphone adoption is about 90% and mobile commerce continues to grow as shoppers become accustomed to buying on their mobile devices.
In Singapore, credit cards are the top payment methods, followed closely by bank transfers and NETS payments. Contactless and ewallet payments like Apple Pay and Google Pay are also picking up pace.
Adyen’s direct credit card acquiring license in Singapore allows businesses to connect directly to Visa and Mastercard. This means brands can take full advantage of Adyen’s single platform solution to unify their businesses covering payments online, in-app, or in store at the point of sale (POS). Local acquiring also offers great benefits such as higher card authorization rates and richer data insights.
South Korea is the third-largest retail ecommerce market in Asia Pacific after China and Japan. It has the highest credit card penetration in the world, and the average South Korean shopper has five credit cards, compared to two in the US. 80% of the population owns a smartphone and 44% uses it for shopping.
Most local cards are co-branded with Visa and Mastercard. Until April 2016, they required a market-specific authentication process, which only worked in Internet Explorer. While this is no longer the case, it can take longer than expected to migrate off ActiveX authentication services.
Thailand has huge ecommerce growth potential. Online retail transactions currently account for as little as 0.5% of the industry, but it’s growing by an estimated 30-35% annually. With internet penetration estimated at 60% and mobile the primary access device for most new shoppers, mcommerce is key.
Thailand has fewer regulatory restrictions than some Southeast Asian countries, which makes it easier to go domestic or enable cross-border payments.
Take a look through each part of the global payment method guide to learn the local payment language.
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