Digital payments overtake card transactions in Southeast Asia

• Southeast Asia’s move to cashless had another shot in the arm during the pandemic, with contactless payment methods preferred
• Now digital payments have outstripped the growth of debit and credit cards
• Growth of digital payments is driven by innovation in digital wallets, QR codes, and RFID tech

Digital payment methods rose to the forefront of the payments pecking order in Southeast Asia in the past year, outstripping the growth of credit and debit cards in the region for the first time ever.

In a year where ‘contactless’ became the de facto preferred payment option, retailers must be wary of the fact that the health crisis has driven a new preference for technology that offers contact-free transactions, lowering the risk of infection in the process.

These methods include touchless interbank transfers, mobile-based payments, and QR code payment methods when it comes to in-person payments. A Visa survey of consumers from 40 countries including Singapore, found that two thirds (66%) of Singaporeans were developing cash-free payment habits during their lockdown, while 78% of the city-state residents said they would prefer using digital payments once the crisis is over.

“The stickiness of digital payments cannot be underestimated, as three-quarters of respondents indicated a preference to continue paying digitally instead of going back to cash, even when the pandemic has subsided,” Chavi Jafa, Visa’s Head of Business Solutions for Asia Pacific, previously told Tech Wire Asia.

Outside of a few mature financial markets like Singapore and South Korea, card-based payments never reached their full potential in Asia. But in just a few years, alongside growth in online banking, a slew of alternative fintech payment systems established themselves in Southeast Asia, oftentimes bypassing banks and traditional financial services entirely.

The growth of these alternative digital payments like e-wallets and microcredit platforms have been so phenomenal in the region that even banks and regional tech giants are either operating digital payments themselves or offering them as a payment option, according to a report from S&P Global Market Intelligence.

These digital payments are expected to dominate the fintech scene in sizable cash-heavy markets like Indonesia and the Philippines, while incumbents stay solid in Singapore, Thailand, and Malaysia. A range of non-bank digital financial services – especially e-wallet providers – either have higher transaction values, more volume or are growing faster than banks in Southeast Asia.

And, although e-wallets are an attractive, less-regulated entry point for tech companies, large players are doubling down on other banking-related financial services, too.

“Grab, Sea Ltd and Ant Group are racing in Southeast Asia to lock online shoppers into their ecosystems, which permeate nearly all activities of personal consumption,” said the S&P Global report, citing the three firms’ recent digital banking license wins in Singapore.

What this means for SEA businesses

For a start, it is getting more and more unusual for a business located in one of Southeast Asia’s urban capitals to not accept digital payments in at least one method, most likely an e-wallet in one of the major regional economies.

The wide penetration of mobile devices in the region means that consumers are increasingly likely to have a mobile-based payment method on their devices, so it tracks that regional retailers accept at least one mobile-based payment system as they would be limiting potential sales from quick and convenient channels that reduce the time (and in many e-wallet cases, the cost) of transactions.

Meanwhile, with the pandemic pushing many businesses online for the first time, there is also a lot of promise via e-commerce channels for fresh revenue growth. Leveraging e-payment options and online banking to complete transactions from online sales will become more of the ‘New Normal’ going forward.

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