Southeast Asia is an energetic and dynamic part of the world that over 650 million people call home, including me. The 11 countries constituting the region have undergone a massive transformation over the past half-century. We've seen giant metropolises rise from the ground, a large middle class emerge, and the region become vital to the global supply chain.

Over the past decade, the region has once again embraced transformation to become a pioneer of fintech and digital commerce. But the region is only getting started. A 2022 McKinsey study finds that the average ecommerce penetration rate (excluding food and beverage) across the region is 20%. If we compare that to China, where 47% of the population uses ecommerce, it shows just how much growth potential exists. 

In this article, I'll explore the region's current ecommerce and payment trends and what merchants should consider when looking to thrive in this dynamic market. 

The growth of digital payments in Southeast Asia 

The payment landscape in Southeast Asia is fascinating; it's a dynamic tapestry, more fragmented than anywhere else in the world. In this region, you'll find mature markets with sky-high card penetration, coexisting alongside markets with large unbanked communities where cash still reigns supreme.

Across this diverse landscape, many alternative payment methods are emerging rapidly, offering consumers convenience and choice like never before. These include digital wallets, QR code payments, and even cryptocurrency integration into everyday transactions.

Moreover, by 2025, it's anticipated that digital payments, in all their diverse forms, will not just thrive but will dominate ecommerce transactions. Countries like the Philippines, Thailand, and Vietnam are leading this digital revolution, predicted to make the most significant shift from cash to digital payments.

But what's driving this monumental shift? We've already touched upon the growth of ecommerce, but there's so much more at play beneath the surface:

• Financial inclusion: Fintech innovators across the region are developing payment solutions with low barriers to entry, making financial services accessible to previously unbanked or underbanked individuals.

• Access to technology: Over 400 million people now have access to the internet, often through smartphones, enabling users to access digital financial services easily.

• Super apps: The rise of SuperApps, like Grab, allows individuals to manage nearly every aspect of their daily lives, from transportation to food delivery and payments, all within a single platform.

• Government initiatives: Government initiatives such as Smart Nation Singapore are aimed at digitizing economies. These efforts are creating an environment conducive to the growth of digital transactions.

• Pandemic lockdowns: With its lockdowns and social distancing measures, the pandemic accelerated the adoption of digital commerce and payments. 

• Crypto-adoption: Southeast Asia has also witnessed a surge in the popularity of cryptocurrencies and digital currencies. This trend is reshaping how people perceive and use money, sparking innovation in payment methods. For example, a report by Chainalysis finds that 17% of Vietnam's population owns cryptocurrency.

• Cross-border payments: The region's evolving payment landscape is not limited by borders. Cross-border payments are becoming more efficient and cost-effective, further fueling regional economic growth.

One thing is clear: The payment landscape in Southeast Asia is evolving at a breathtaking pace. It's a testament to the region's adaptability, innovation, and the way technology transforms how we pay and live. 

Payment trends in Southeast Asia: A country-by-country overview 

Let’s look at some key insights on each of the six largest markets in the Southeast Asia region. 

Spotlight on Indonesia

Pre-pandemic, consumers were reluctant to embrace digital payments, citing security and fraud concerns. The introduction of the comprehensive digital payments system using standardized QR codes in 2019 has facilitated real-time, secure digital payments. This has stimulated massive growth in digital payments in Indonesia.

Spotlight on Malaysia

Touch 'n Go, GrabPay, and Boost are some of Malaysia's most popular digital payment methods. In addition to the rise of e-wallets, Buy Now Pay Later (BNPL) is becoming more popular among Malaysians.

Spotlight on the Philippines

The Philippines has been working towards a more inclusive payment landscape by investing in financial infrastructure and developing innovative payment solutions. At the forefront of this initiative is the country’s goal to make 50% of all retail payment transactions digital by the end of this year.

Spotlight on Singapore

Singapore is the region’s financial hub and center for fintech innovation fuelled by the Government’s push for a cashless, digital society. Digital wallets are expected to overtake credit cards as Singapore’s leading online payment method by 2026. BNPL is also becoming more widespread.

Spotlight on Thailand

In Thailand, several initiatives promote financial inclusion to address the 63% of adults who are either unbanked or underbanked. By implementing modern digital technologies and fostering collaboration between banks and fintechs, the Thai Government is working to deliver financial inclusion at scale. 

Spotlight on Vietnam

Vietnam’s population continues to embrace digital payments, although low banking penetration remains a problem. The fast growth of mobile and cross-border ecommerce dominates the payments market in Vietnam. This is supported by the higher purchasing power and the growth of alternative payment methods, especially BNPL.

The drive toward regional payment harmonization

Southeast Asia is known for its diverse payment landscape, with different payment systems, regulations, and methods in each country. This can be a real challenge for businesses operating in the region. However, things are changing for the better.

In recent years, there have been significant efforts to streamline payment methods, especially when it comes to cross-border transactions. This is great news for the booming ecommerce industry in the region.

Now, folks in Indonesia, Malaysia, Thailand, and Singapore can easily pay for their purchases in local currency using a simple QR code. The Philippines is also set to join this scheme soon. This new approach has made digital payments smoother and will boost cross-border payments, consumer spending, and tourism

What's more, countries like Singapore, India, and Thailand have introduced their own real-time payment systems. These systems are not only cost-effective for merchants but also settle transactions rapidly—often instantly. They're also becoming more compatible with each other, allowing users and businesses to make payments outside their home countries.

Private businesses are jumping into the mix too. For instance, AliPay+ allows consumers to use their preferred payment method across multiple markets.

A merchant’s game plan for success in Southeast Asia

1) Meet evolving customer preferences 

Delivering the right customer experience is vital. Merchants should consider the holistic customer journey and gather data on local consumer preferences and behaviors. By leveraging these insights, they can:

• Understand market penetration of particular payment methods in individual countries. 

• Make informed decisions about which channels of commerce and payment methods to offer in local markets without overwhelming customers.  

• Enhance the design and user experience of your ecommerce website or app to create optimized customer journeys.   

• Carry out A/B tests with selected payment method options to optimize your offering. 

• Use dynamic checkout tools to offer the right payment method for a particular market to improve checkout conversion rates.

To maximize market penetration, having complete visibility of the payment stack will uncover opportunities to boost the bottom line. 

2) Optimize front-end and back-end 

I talk to many companies in the region, and one thing that stands out is their balanced focus on both the front-end and the back-end of their apps or websites. 

Making customer journeys simple and smooth is vital for getting consumers to your checkout. In the back end, you can streamline payment operations, reduce friction, and ensure efficient payment processing to minimize cart abandonment. 

A balanced approach will help you optimize for performance, helping to minimize false declines and reduce fraud and chargebacks. 

Given the diversity of payment methods across the region, merchants are understandably concerned about reducing gateway costs and routing payments through the most cost-efficient method possible. 

3) Lay the foundations to explore the potential of the broader region and beyond

Southeast Asia offers an exciting playground for online businesses set on expanding to new regional markets. A report by Google, Temasek, and Bain & Company predicts that the adoption of digital payments in Southeast Asia will grow from $600 billion in 2021 to exceed $1 trillion by 2025. 

To succeed in this dynamic market, ecommerce businesses must remain agile and understand the local regulations associated with cross-border payments.

How Primer can help

Primer is the unified infrastructure for global payments and commerce. With unrivaled freedom and visibility across the payments and commerce ecosystem, Primer equips merchants with the tools to optimize performance, build at pace, and capture untapped revenue to achieve unstoppable growth.

We give merchants in the Southeast Asia region the ability to:

• Align payment methods and channels to customer preferences and behaviors. 

• Optimize payments and checkout in the back-end and the front-end. 

• Set the foundations to explore new opportunities in the region. 

Our low-code solutions and expert support are helping merchants all over the world to grow their business.  

What’s next? 

With its unique demographics and population characteristics, the Southeast Asia payments landscape will remain at the forefront of payment innovation. 

Staying ahead of the curve in such a dynamic market involves understanding changing consumer trends and preferences and being agile enough to leverage these. 

Such a highly fragmented payments market offers pockets of opportunities for online businesses that take the right approach to uncover these and capitalize on them.  

Take a look at our case studies to see how we empower brands like Zenyum Health to thrive in Southeast Asia