The mega-trends shaping the future of online commerce in Asia Pacific
Whether or not you plan to do business in Asia Pacific (APAC) – ignore it at your peril. That's the clear message from the experts we interviewed and the 12,000 consumers surveyed for our new report exploring the digital commerce and payment trends across the region.
They're not wrong. Our research finds innovation everywhere: from the headline-grabbing developments by brands like Alibaba and Tencent in China to the niche solutions emerging in South East Asia that are giving millions access to digital financial services for the first time.
But it's also a region of stark contrast, making it near impossible to speak of APAC as a homogenous entity. Our research clearly shows how every market is different and at varying stages of development. It's what makes the area so vibrant and dynamic, but it's also what makes it so complex to navigate for merchants.
Our exclusive report deep-dives into the region to peel back the layers of complexity and spotlight the path to success for merchants. Here are the key findings from the report that offer a glimpse into the innovation happening across the region and what it means for merchants in APAC and beyond.
Digital commerce is booming
Much has been said about the growing spending power of consumers across APAC. By all estimates, 56% of the world's middle class — defined by households with incomes between $11 and $110 per day — currently reside in the region. That number will reach 65% by 2030.
And these consumers are taking their spending power online in huge numbers. Our survey found that 95% say they shop online regularly. Over a quarter say they do so at least once a week. To put this in perspective, data from eMarketer finds that only 70% of people in the United States say they ever shop online.
These numbers partly reflect the universal pandemic boom in online shopping. Fifty-four percent of our respondents said they are currently spending significantly more money online due to the pandemic. And a little under half are making purchases much more frequently.
But they also reflect longer-term trends. One of the more notable is the penetration of mobile devices across the region. This has proven a catalyst for financial innovation that has given previously underbanked populations in emerging markets access to formalized financial services and digital commerce for the first time. In Indonesia and Thailand, fintech adoption is over 90%.
So in a region where there’s little room for generalities or sweeping statements, what we can say with confidence is that digital commerce will only gain more significance as we move deeper into the decade. For merchants, there is no option but to have a digital presence. There's also a clear need to find partners that can move at the speed required to capture opportunities as they emerge.
Consumers are spending across a variety of channels
The deep penetration of mobile devices is leading consumers to leapfrog traditional ecommerce channels in favor of mcommerce. The trend is especially prevalent across the fast-developing markets in South East Asia where mcommerce penetration is above 65%.
The picture is different when we look at the region's mature markets. Consumers in Japan, New Zealand and Australia haven't quite yet made the leap from traditional ecommerce channels to mcommerce. However, as Pin Payment’s Grant Bisset explains: “If you consider that the mobile is the ancillary computer in a country like Australia, it's quite striking the degree to which consumers have adopted mcommerce.”
Of those consumers using their mobile devices to shop, many do so through an app. In-app shopping is particularly prevalent in those markets where tens of millions of consumers use so-called 'super apps', like WeChat and AliPay in China and Grab and GoJek in South East Asia.
These trends mean merchants can't approach the region with a one-size-fits-all strategy. Neither can they simply lift and shift what may have worked outside of the region and expect to see success in APAC. Instead, merchants must look beyond traditional sales channels and develop strategies to meet customers in the digital spaces they spend their time.
From a payments perspective, this creates additional challenges as it means merchants must find a way to bring their checkout experience to customers wherever they are in the digital world. So when they're ready to make a purchase, they can, without leaving the app they're in, creating a frictionless end-to-end experience.
Digital wallets and embedded payments are omnipresent
APAC presents a complex picture when we consider the different payment methods preferred by consumers. Cards are, by some distance, the primary payment method. Yet when we zoom into the different countries, interesting trends emerge.
For example, we found a high usage of alternative payment methods in those markets where mcommerce and in-app shopping are popular. Many consumers in these markets see no value in adopting cards when they can just move from cash or bank transfers directly to digital wallets.
Yet these markets also sit at the other end of the spectrum, accounting for the highest use of cash on delivery. A trend that is explained by the existence of large unbanked populations.
This diverse and complex picture creates a challenge for merchants who must ensure they deeply understand these trends at a local level. As Ken Chee, CEO at Gamer2Gamer told us: “Picking the right payment partner will lay a solid foundation for any merchant looking to enter the region. It’s crucial they help you to understand the local people first, especially when it comes to payments.”
Cross-border commerce opportunities are abound
As the region's middle class grows, so does the demand for goods and services that consumers can't easily find in their home market. Our data finds that 35% of consumers see this as a major reason that they shop online.
Again, there are differences across the APAC. Indonesia and Thailand remain heavily reliant on cross-border purchases, looking to countries such as China, Japan and Singapore for products unavailable domestically. In contrast, Japan sits as an outlier, with few consumers spending money with brands overseas.
Despite the immense cross-border opportunity for merchants, there are also significant challenges. “Being present in all these markets, we have to think very carefully about where we should prioritize boots on the ground and how we best set up a payments strategy to minimize transaction fees," says Stephen Lo, CFO at CircleDNA.
There's also the FX component to consider. "If you’re in and across APAC, then there’s loads of upside, but you can be exposed to FX differences," adds Lo. "The currency market has been quite volatile in the last year due to the pandemic – so how we best manage that is a big issue for us to address. This is really APAC-specific due to all those currencies — it’s a very unique challenge.”
Payments are core to success in the Asian century
Our research finds a vast, dynamic region alive with innovation and opportunity for merchants to tap into a new and growing consumer base. But we also clearly uncover that success is entirely dependent on a merchant's ability to deeply understand the region and tailor its offering to match the contrasting preferences of consumers across the different markets.
One way to do that is by working with a payment partner that provides access to deep and actionable insights informed by granular data and on-the-ground expertise.
As James Shorrock, Co-Founder and CMO, LANE EIGHT, told us: "It’s so important to have a payment provider who can ensure you derive and leverage data at the point of the payment being made. There’s so much actionable data and in the future, we need it more and more as other avenues for data acquisition dry up or fragment."
Our research also shows that innovation in APAC is only just getting started. The region is simply a ‘hotbed’ of innovation for digital commerce and finance. And as its markets mature, consumer wealth increases, technology develops and regulations evolve, we’ll see much more innovation emerge that will undoubtedly shape the face of payments and commerce globally.