As an economic powerhouse in Asia Pacific, and one of world’s top 10 ecommerce giants, Australia is enjoying its 26th recession-free year in 2017. Its booming retail and tourism sectors have attracted worldwide attention, making Australia a great option as a base in APAC for global companies.
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 relatively easy market to enter. We recommend setting up a local entity (which is easy to do) to avoid shopper cross-border fees. Processing domestically also means you’ll benefit from the Australian Interchange fees cap.
Many believe that international credit cards are the preferred payment method worldwide and that providing such options is enough to gain Chinese business. But, this is not the case. Chinese shoppers associate foreign card networks with additional fees, one reason why card schemes like UnionPay are popular.
The three major payment methods are Alipay, UnionPay, and WeChat Pay.
With around 50% payments market share, Alipay is the largest alternative 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 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 is 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.
It’s not mandatory to set up a local entity to sell to Chinese shoppers. So, with a payments partner that supports key local payment methods, China is a relatively easy market to enter - in terms of payments.
Credit cards are expected to remain the most popular payment method, although mobile wallets are gaining traction among Hong Kong consumers. Alipay has launched its domestic wallet in Hong Kong, and we expect both Alipay and WeChat Pay to dominant the market in the near future. Apple Pay can be used by holders of Visa, Mastercard and American Express cards issued by participating banks.
It’s easy to accept payments in the domestic currency and settle in the same currency with no impact of currency conversion.
India has traditionally been a cash-dominated economy, with cash and cheque 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 wallets 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 for 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 $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 fourth-biggest ecommerce market. It’s a cash-dominated market where cash on delivery is popular. This is possible with Konbini, which 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 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. This is particularly interesting when you consider that 8% of the population doesn't have 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.
Despite being the smallest country in both size and population, Singapore is considered to be the financial hub of Southeast Asia. In this card-dominated market, shoppers and banks are equally sophisticated. As result wallets and cash-based payment methods, which are popular in the rest of the region, aren't used so widely here. Cards are expected to remain the most popular payment method, with over 7.7 million in circulation.
South Korea is the third-largest retail ecommerce market in Asia Pacific (after China and Japan). The average South Korean shopper holds an average of four credit cards, and around 80% of online transactions are card-based.
Most local cards are co-branded with Visa and Mastercard, and require a market-specific authentication process – which only works in Internet Explorer – in order to be approved. While this authentication process will likely no longer be mandatory in the near future, it will still be widely used for some time, and merchants entering the market should therefore keep it in mind when formulating a payments strategy.
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.
Vietnam has the third largest population in South East Asia, with a population of 95+ million (2019). The current market size is at US $140 billion, and is projected to reach US $220 billion by end of 2020, however over 90% of all commerce transactions are dominated by cash transactions.
The ecommerce landscape has large potential and consumer behavior is slowly shifting due to an increasing internet penetration rate, encouraging legal environment, as well as numerous Fintechs in the region.