Bui Mai Phuong is an avid online shopper, ordering anything from clothing to personal care products from her smartphone, but she prefers to pay with cash.
She is among hundreds of millions of people whom firms such as Softbank Group Corp-backed Grab and China’s Tencent Holdings Ltd (騰訊) want to win over as they try to tap into Southeast Asia’s burgeoning Internet sector.
More than 70 percent of the region’s more than 600 million people do not use banks — more than the global average of about 30 percent — and e-commerce is projected to hit US$88 billion by 2025.
However, convincing consumers like Phuong, who lives in Hanoi, could be tricky.
“I have never tried using mobile payments, because I don’t know how to use it and it seems a bit complicated to use,” said 36-year-old Phuong, a manager at a construction material supplier in Vietnam.
Mobile payments are ubiquitous in China; a consumer can spend a day without using any cash in Beijing or Shanghai, and even some beggars accept mobile payments.
However, cash remains king in Southeast Asia.
Hard currency, paid on delivery, last year accounted for 44 percent of total e-commerce transactions and is likely to remain the most popular payment option for at least the next three years, International Data Corp (IDC) statistics showed.
“The biggest challenge for users and merchants to adopt cashless is the fact that cash remains ubiquitous, easy to use and inexpensive,” said ride-hailing firm Grab, which has ventured into e-wallets.
The mobile payment marketplace in Southeast Asia remains wide open, with no dominant players.
Indonesian ride-hailing firm Go-Jek’s Go-Pay, Singapore-based Grab’s GrabPay, Japanese Internet firm Line Corp’s Line Pay, Momo e-wallet owner M_Service JSC in Vietnam and Voyager Innovations Inc, which operates Paymaya in the Philippines, have all entered the fray.
Gaming company Razer Inc has also indicated it is eager to play a role.
The cash on delivery model costs e-commerce businesses more than other payment methods, said e-retailer Lazada Group SA, which is backed by Alibaba Group Holding Ltd (阿里巴巴).
For example, sometimes a customer does not have enough cash on hand, or is not home to pay for the delivery. In those cases, the product must be sent back to the seller, adding logistical costs, Lazada said.
Mobile payments address some of those problems.
They can also benefit buyers by keeping payment in escrow and releasing it only on delivery.
However, it can be difficult to persuade users to switch from cash when they earn an average of about US$200 per month in economies like Vietnam and Indonesia, economic data provider CEIC said.
Mobile payment companies are betting that they can transform their platforms into financial supermarkets, offering everything from loans to insurance on top of payment options.
At the moment, usage is spotty. E-wallets are forecast to account for 16 percent of total e-commerce transactions in Southeast Asia by 2021, up from last year’s 9 percent, IDC said.
In countries like Vietnam, where the informal economy has long been a key part of the social fabric, many consumers do not bother to get a bank account.
Some want to stay under the taxman’s radar or, like Quang Thi Si, simply do not see the need for a bank.
Si, a 48-year-old scrap collector near Ho Chi Minh City, said her business is all cash.
“Sometimes I need to send money to my relatives at home, and I often send in cash through my friends,” she said. “I don’t think I will have a bank account in the future, because I don’t think I need it.”
However, Si does have a smartphone.
More than 90 percent of Southeast Asia’s Internet access comes through mobile devices, a Google-Temasek Holdings Pvt Ltd study found.
Even so, in countries like the Philippines, which is known for having some of the slowest Internet speeds in the Asia-Pacific, connectivity is a major hurdle for digital payments to clear.
Such challenges are likely to pose a setback to Ant Financial Services Group (螞蟻金服) and Tencent, which are looking outside China for growth.
Ant, which has 600 million customers and aims to reach 2 billion worldwide in the next decade, has stepped up investment in the region, including a stake in Thai financial technology firm Ascend Money.
However, its services are largely limited to Chinese tourists.
Tencent plans to make its first foray outside China through an e-payment license in Malaysia for local transactions.
The Chinese players are “kind of late to the party,” IDC research manager Michael Yeo (楊昔鵬) said.
“By the time they come in with a local version, if they do, the local players will have a significant advantage,” Yeo said.
“It’s a highly fragmented market. Later on, there will be acquisitions, there will be shutdowns, there will be mergers,” Yeo said. “The market will consolidate.”
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