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1、From Cashto QR CodesUnpacking Southeast Asias Diverse Consumer Payments Culture.ContentsIntroduction.3Southeast Asias evolving consumer payment landscape.4Overview.4Digital wallets.5Government policies,regulations and infrastructure developments.6Domestic QR real-time payments(RTP).7BNPL(Buy-Now,Pay
2、-Later).8Micro-merchants fueling a wave of digital payment adoption.9Five things to know about consumer payment culture in Southeast Asia.11#1.Cash still plays a pivotal role in POS payments.11#2.eCommerce growth continues to drive digital wallet adoption.12#3.Consumer loyalty to digital wallets rem
3、ains low but an ecosystem approach can help addressthis.12#4.Sachet/micro-payments economy spending habits influence features in payment andfinancial services.13#5.Rural vs.urban divide and level of domestic socio-economic development affect consumersmotivation for cashless payments.13The future of
4、Southeast Asias consumer payment culture.16References.172IntroductionAs a wave of digitisation swept over the consumer payment landscape in Southeast Asia,the pace ofevolution has been so rapid that most of the payment data and coverage of fintech service providersfrom just two ago is no longer vali
5、d.Case in point,digital wallets in the region have experienced a wave of consolidation that resulted ineach market having two to three players capturing upwards of 90%of market share(in terms oftransaction value)and mindshare of the local population as they became household names.Attempts to enable
6、easier access to credit have emerged in the form of Buy-Now,Pay-Later(BNPL),which took the region by storm and remains a controversial but highly impactful change.Furthermore,in recent years,regulators across Southeast Asia have made strides towards a cashlesssociety by developing roadmaps to transf
7、orm and digitise the local payment and financial system.Bank Indonesia(BI)laid out its Payment Systems Blueprint in November 2019,and Bangko Sentral ngPilipinas(BSP)launched its Digital Payments Transformation Roadmap(DPTR)in October 2020.Theseefforts have led to the deployment of domestic real-time
8、 payment rails and the adoption of domesticQR code payments,drastically shifting consumer preferences away from cash.The changes mentioned above are just a small snapshot of the shifting dynamics in the region.Therefore,the purpose of this report,“From Cash to QR Codes”,is to analyse the payment cul
9、tures inAsia,pinpointing key shifts in behaviour and identifying the drivers behind these changes.Understanding payment culture is vital.It has positive implications for businesses and industries-including ourselves at Thunes,as we build a global payments infrastructure that is inclusive and local.H
10、owever,continued innovation and re-invention are impossible without deep consumer insights,which this report aims to provide.3Southeast Asias evolving consumer payment landscapeOverviewThe evolution of consumer payments in Southeast Asia brings to light a unique dynamic shaped bythe constraints of t
11、he regions financial ecosystem and opportunities from technological innovation.As the developed world shifted from cash to card payments,most of the population in SoutheastAsia were left out due to lack of access to the formal financial system.Credit card ownership inThailand is estimated to be arou
12、nd 30%.This drops to 11%in Vietnam and 6%in Indonesia.As a result,alternative digital consumer payment methods arose,bypassing the traditional bankingsystem.For example,stored-value digital wallets are the most used wallet type in Southeast Asia,unlike card-linked wallets found in more developed mar
13、kets with higher card penetration.Morerecently,Buy-Now-Pay-Later(BNPL)options for eCommerce purchases have emerged as a viablepayment option for consumers looking to spread out payments for bigger ticket items and,to someextent,act as a way to access credit for those without credit cards.While prefe
14、rence for cash payments at point-of-sale is still relatively high,data from Worldpay showsthat cash payments have almost halved across most markets in Southeast Asia since 2017.Alternative payment methods,including domestic real-time QR payments and stored-value digitalwallets,have become prevalent
15、to replace cash.The COVID-19 pandemic was also a significant factorthat accelerated cashless payments,with many consumers discovering the safety and convenience ofpayment by digital wallet and contactless devices.Other drivers contributing to the shift towardsdigital payments include a rise in smart
16、phone penetration,especially among the younger generation,improved internet connectivity from better infrastructure and eCommerce growth.4Undeniably,Southeast Asia as a region is a leader in the global push towards digital payments.Itsunique country-level payment habits and preferences add diversity
17、 and demonstrate innovation.Digital wallets are often used as an example to illustrate this claim.Digital walletsDigital wallets have been available in Southeast Asia since 2013,but it was only around 2018 thattransaction volumes reached any level of significance.Marketing and promotional campaigns
18、playeda major role in attracting more users with various rewards,including cashback and discountvouchers.Initially,digital wallet providers were predominantly local players that targeted thedomestic market.However,regional players soon appeared,with super-app and eCommerce-linkedwallets like GrabPay
19、 and ShopeePay.While there are many digital wallet providers in Southeast Asia,there are generally two types ofdigital wallets.First,there are wallets that require users to load value onto them before makingpayments,otherwise known as staged or stored-value wallets.Examples include digital walletsla
20、unched by super-app or fintech platforms such as GrabPay,GoPay,GCash,and MoMo.Next,thereare pass-through wallets linked to a credit or debit card that utilise the consumers card details tomake payments.Apple Pay,Google Wallet and PayPal are examples of pass-through wallets inSoutheast Asia.Given tha
21、t card ownership remains low in much of Southeast Asia,pass-throughwallets are less common in the region,having only gained traction in more developed markets suchas Singapore and Malaysia.Digital wallet usage has gradually consolidated into two to three popular wallets in each market.While a couple
22、 of factors have made this happen,the most important one was likely the success ofpromotional campaigns.The most popular wallets had highly localised promotions keenly attuned toconsumer behaviour and purchase preferences.Customer acquisition enabled these wallets to raisemore funds to grow their us
23、er base further.Noticing the unprecedented growth of digital wallets,regional governments took note of the urgency and importance of the digitisation of payments.5Government policies,regulations and infrastructuredevelopmentsOver the last seven years,most central banks and policymakers in Southeast
24、Asia have developed aroadmap to digitalise the financial sector.Digital retail payments and consumer banking services areoften at the top of the agenda.These regional central banks aim to meet three criteria:Real-time,person-to-person,and always available for retail payments.Thus,the first step for
25、many SoutheastAsian countries was to build a real-time interbank payment rail that enabled P2P transfers fromwithin a bank mobile or web application.QR codes were chosen as the preferred interface forinitiating the transactions.This technology holds more information than normal 1D barcodes,can beeas
26、ily read by scanners,and has a significant error threshold,allowing them to work even whendamaged.In many countries in Southeast Asia,the development of domestic QR real-time payment rails hasbeen initiated by the central bank in collaboration with key local financial institutions.For example,Bank N
27、egara Malaysia has majority ownership of PayNet,the operator of DuitNow,and eleven otherlocal financial institutions are joint shareholders.Similarly,Bank Indonesia and Bank of Thailand havebeen instrumental in launching BI-FAST and PromptPay as part of the national roadmap to transitionto a cashles
28、s society.The next step was to enable consumers to pay merchants on a real-time payment rail,making theuser experience seamless to drive further adoption.Here,standardisation and interoperabilitybecame the primary focus as central banks and policymakers realised that handling multiple QRcodes was im
29、practical.Standardisation sets common guidelines on the appearance and features ofthe QR code,such as symbol size,type and amount of data and error correction level.Meanwhile,interoperability made it possible for merchants only to need one QR code to accept a wide range ofdigital wallets and domesti
30、c real-time interbank payments.6Additionally,many Southeast Asian regulators have recognised the potential for real-time paymentinfrastructure for cross-border transactions.Countries such as Indonesia,Malaysia,Singapore andThailand have formed bilateral real-time payment connections to neighbouring
31、marketskey tradingpartners and a source of significant inbound tourism.This cross-border QR payment interoperabilityallows local merchants to accept payments from foreign digital wallets connected to these domesticreal-time payment rails.Southeast Asian regulators are looking beyond their borders to
32、 realise thefull potential of real-time payment infrastructure and enhancing trade flow in the region.Domestic QR real-time payments(RTP)Government initiatives around digital payments are a vital driving force in the development ofdomestic real-time QR payments.These payments are executed through an
33、 interoperable QR codewhich can be scanned using a banks mobile app,with funds directly debited from a users bankaccount in real-time.Unlike a digital wallet,a user does not have to first load sufficient funds in tomake a payment.During the Covid-19 pandemic,many regional governments advocated incre
34、asing contactlesspayment methods.They encouraged micro merchants such as hawkers and roadside vendors totransact with domestic QR payments.This can be observed in the 50%increase in RTP transactionvalue between 2020 and 2021 in Thailand,Singapore and Malaysia,countries with more mature RTPsystems.7F
35、rom a merchants perspective,domestic QR offers several other benefits compared to otherpayment methods.First,the merchant fee for accepting domestic QR,or the merchant discount rate,is highly subsidised in almost all Southeast Asian markets.In many cases,the government haspledged to fully absorb the
36、 cost in the near term to drive adoption.In general,the goal of regulatorshas been to keep the fees for QR transactions as low as or lower than fees for debit card payments.In cases where digital wallet providers charge a transaction fee,domestic QR can offer a lower-costalternative with similar fea
37、tures.Therefore,businesses using domestic QR can avoid the costsassociated with POS terminal rentals to accept card payments,reduce the administrative costs ofhandling cash,and eliminate fees compared to specific digital wallets.Besides fees,domestic QRpayment can make the settlement process more ef
38、ficient with instantaneous funds transfer from theconsumer to the merchants bank account.Interestingly,the benefits of reduced fees and instant settlement have prompted leading eCommercemarketplaces in the region,such as Shopee and Lazada,to offer small discounts to customerschoosing to pay with dom
39、estic QR.Customers in Singapore can receive a 0.5%to 1%discount up to amaximum of SGD3 by using PayNow,with savings from transaction fees passed on to the consumer.eCommerce platforms also get additional benefits as they receive the funds instantly.This reducesreceivables and streamlines the complex
40、 payout process to multiple sellers on the eCommerceplatform.BNPL(Buy-Now,Pay-Later)Gaining access to credit is challenging in Southeast Asia.Almost 50%of the population remainsunbanked,and credit card ownership has traditionally been low.Given that,one can see howBuy-Now,Pay-Later(BNPL)have rapidly
41、 gained popularity.There are generally three types of BNPL operators in Southeast Asia:Pure-play,eCommerce-linkedand Fintech-linked.The main difference between these is where a consumer can use the BNPLsolution and the surrounding ecosystem of services and features available for the user.Pure-playop
42、erators tend to partner with a wider range of physical brick-and-mortar merchants,especiallythose that sell higher-value goods or services,such as home design and furniture shops or beauty8and aesthetics clinics.Conversely,eCommerce-linked operators typically offer BNPL as part of theirmarketplace p
43、latform,where consumers can opt for this payment method across most merchants onthe marketplace for almost any transaction size.Fintech-linked operators,however,offer BNPL aspart of a suite of financial services,usually including a digital wallet.The acceleration of eCommerce spending during the pan
44、demic helped push BNPL to the forefront ofconsumer awareness.So much so that eCommerce and BNPL have become inextricably linked.ManyeCommerce retailers feel pressured to offer some form of BNPL to their customers,leading topartnerships between eCommerce marketplaces.Also,pure-play or Fintech-linked
45、BNPL operatorshave become more common.For instance,Zalora,a popular fashion eCommerce marketplace,allowsusers to choose from multiple BNPL options,including Atome,Shopback PayLater or Grab PayLater.Consumers in Southeast Asia are also drawn to BNPL because of the promotions,rewardprogrammes and quic
46、k approval process,which can happen in as little as 15 minutes.However,thereare still concerns about hidden charges,late payment fees and how using BNPL can make it harder tocontrol spending.Micro-merchants fueling a wave of digital payment adoptionMicro,small and medium-sized enterprises(MSMEs)are
47、the backbone of Southeast Asianeconomies.This is especially true in developing markets such as Indonesia,Vietnam and thePhilippines,where the micro-merchant segment can account for upwards of 98%(according to WEF)of all MSMEs.Also known as warungs in Indonesia,mamak stores in Malaysia,and sari-saris
48、 in thePhilippines,these micro-merchants generally serve tier-two cities and rural villages far from majormetropolitan centres.As such,their customers have very different needs and purchasing habits.Forinstance,these consumers often prefer buying in small quantities to meet short-term needs.Micro-me
49、rchants also tend to have close relationships with their regular customers.Thesebusinesses are hyper-aware of purchase cycles and aim to stock their inventory accordingly.A recent trend has been the digitisation of micro-merchants,the more common types being smallfamily-owned convenience stores(simi
50、lar to bodegas),eateries and cafs.Startups such as WarungPintar(meaning“smart kiosk”)in Indonesia and GrowSari in the Philippines have developedinnovative ways to“supercharge”micro-merchants by offering technology,including water9dispensers,a WiFi connection and phone-charging stations as incentives
51、.Many consumers gatherhere,using the WiFi and buying snacks and drinks.The merchants,in turn,only have to downloadthe fintech app and purchase supplies through it.By encouraging micro-merchants to shift their day-to-day operations to these platforms,acceptingcashless payments made much more sense.Fu
52、rthermore,the resulting digital transactions wererecorded by MSMEs accounting systems,eliminating human errors and reducing the administrativecosts of handling cash.Merchants have been further incentivised to go digital due to othervalue-added services on the app for inventory tracking,billing,invoi
53、cing and accounting.Moreimportantly,micro-merchants are often cashflow-constrained.Startups such as Warung Pintar canfacilitate loans based on an analysis of the merchants transaction history and sales cycles.Micro-merchants who have embarked on this digital transformation remain in the minority,but
54、 thefuture looks promising as more learn about the benefits of going digital.10Five things to know about consumer payment culture inSoutheast AsiaThe diversity of local payment methods and consumer behaviors can create complexity as well asopportunities for companies looking to enter or expand in So
55、utheast Asia.From our research,wehave identified five aspects of consumer payment culture in Southeast Asia that need to beconsidered when exploring opportunities in the region.#1.Cash still plays a pivotal role in POS paymentsCash still plays a pivotal role in most Southeast Asian economies,indicat
56、ing a parallel rather than areplacement trend.Data from the 2022 FIS Global Payments Report reveal that while digital walletadoption has increased,cash is still the most used payment method at Point of Sale(POS).Digitalwallets only account for less than a third of total transaction value.Two outlier
57、 markets for this are Singapore and Malaysia,with an unbanked population of 2%and 8%,respectively,and much higher card ownership.Even in markets with super-app wallet providers such as Indonesia(GoPay),Thailand(TrueMoney)and Vietnam(MoMoPay),the transition away from cash has happened only very gradu
58、ally.This isbecause,in markets where banking penetration is low,merchants face high card acceptance fees.Also,many digital wallet providers charge merchant fees opaquely,which is confusing for smallbusinesses and slowing adoption.Finally,the tradition and habit of handling physical cash isprevalent
59、among MSMEs and difficult to change.However,cash may not reign forever.The rapid growth of digital wallets at POS may lead to a tippingpoint and overtake cash payments.Achieving this requires a coordinated effort from policymakersand wallet providers to incentivise consumers and merchants to transac
60、t with digital wallets.Nonetheless,progress in markets such as Indonesia and Vietnam is promising and can providevaluable lessons to other countries.11#2.eCommercegrowthcontinuestodrivedigitalwalletadoptionIn the early days of eCommerce in Southeast Asia,consumers were not accustomed to paying onlin
61、e.Marketplaces resorted to alternative and more familiar offline payment touch points(such asconvenience stores and ATMs)to help consumers feel more secure.Eventually,eCommercemarketplaces added escrow features and an acknowledgement step to inform customers ofsuccessful payments.This has helped to
62、build trust and boosted consumer utilisation.Payment processes were seamless,and the cashback,points and other rewards were very attractiveto consumers and,in many cases,merchants as well.Furthermore,the usability of digital walletsattracted a wider demographic of users.As such,the market size of di
63、gital wallets in the regionflourished.Many Southeast Asian markets observed a 50%increase in digital wallet transaction valuebetween 2020 and 2021.Today,digital wallets account for around 30%of eCommerce transaction value across Southeast Asia,and that share will only increase.Many digital wallet pr
64、oviders have teamed up with eCommercemarketplaces to offer special discounts for consumers who choose to pay with their partner digitalwallets.Fintech-linked BNPL providers have also contributed to the growth in wallet transactionvalue,with recurring monthly payments deducted from the stored value o
65、n the digital wallet.Moreover,eCommerce in Southeast Asia has primarily been domestic-focused,except for a fewregional players such as Shopee and Lazada.As cross-border eCommerce starts to pick up,digitalwallets will likely play an even more dominant role.#3.Consumer loyalty to digital wallets remai
66、ns low but anecosystem approach can help address thisAcross Southeast Asia,rewards such as cashback and points drive digital wallet usage and reflect thecultural importance of bargain hunting.Consumers who use digital wallets often hop from one toanother based on whichever discount or promotion is r
67、unning.12Wallet providers can lessen their dependence on discounts as incentives by adding financial andother value-added services to their platforms.This can be done through partnerships with financialservices companies and other industries,including healthcare,insurance,travel,hotels,andentertainm
68、ent.These services are often highly localised.For example,MoMo in Vietnam expandedinto movie and flight tickets to differentiate its value proposition.In contrast,Grab offeredhome-based health screenings in Singapore,one of Asias most rapidly ageing societies.Meanwhile,GCash has quickly become essen
69、tial to consumers day-to-day lives in the Philippines byoffering accessible and innovative digital financial services such as wealth-building tools,GFunds andGStocks PH.In any case,this ecosystem approach can help reduce consumers dependence on discounts byproviding convenience and other locally rel
70、evant value-added services.As users spend more timeand transact within the ecosystem,data from customer interactions enables the wallet ecosystemprovider to offer even more personalised rewards,which can further increase customer retentionand loyalty.#4.Sachet/micro-paymentseconomyspendinghabitsinfl
71、uence features in payment and financial servicesThe sachet economy and its related consumer purchasing habits are another feature in SoutheastAsia.A sachet economy refers to the practice where consumers prefer to buy products in smaller,affordable packs than in bulk.This concept can be applied to re
72、tail products and services such asmobile data and talk-time,where consumers desire a pay-as-you-go approach.Sachet markets inSoutheast Asia include Indonesia,the Philippines,Thailand and Vietnam.Digital wallets in sachet markets dont have a minimum amount for top-ups,transfers,spending orfunds that
73、must be stored in the wallet.Micro-transactions are also encouraged in the form ofdiscounts offered for small value items,such as a P30 discount on a P150(US$2.60)cup of coffee orbag of chips.Similarly,many BNPL providers in Southeast Asia enable their service for low-valuepurchases.For example,one
74、can use SPayLater on Shopee Indonesia for an IDR200,000(US$13)pair of shoes.Fintechs that offer retail investing have taken a similar approach.Consumers can buymutual funds or stocks from as low as P50(US$0.88)on the GCash app in the Philippines.Likewise,users of MoMo in Vietnam can buy micro-insura
75、nce for their motorbikes from as low as VND66,000(US$2.70).These features and discounts can be hyper-localised to target consumers in a specific city.The endgoal is to drive more frequent and personalised engagement with consumers.#5.Rural vs.urban divide and level of domestic socio-economicdevelopm
76、enta?ectconsumersmotivationforcashlesspaymentsSafety and convenience seem to be obvious considerations that motivate Southeast Asian consumersto use cashless payments.However,taking a deeper look,we observe that there are nuances thatdifferentiate consumers between urban and rural areas.In urban are
77、as,the drivers for going cashless include the convenience of not carrying cash aroundand the faster and simpler process of card or QR code payments.Identifying suspicious activity as alltransactions are tracked is an additional benefit.Consumers in urban areas tend to be more13financially literate a
78、nd aware of how to maximise rewards from cards or digital wallets as well asutilise personal finance management features.Consumers in rural areas have different pain points when it comes to cash.Access to cash can belimited by the lack of ATMs or bank branches.Also,ATMs may not be replenished regula
79、rly withphysical banknotes.Earning rewards from cashless payments is a weaker motivator for ruralconsumers.They tend to make purchases with less frequency and for smaller amounts,and cannotqualify for special discounts.According to a consumer survey by VISA,Southeast Asian consumers believe that bil
80、l payments(forutilities,tax,and education)are best placed to be digitised.This is not so surprising given thatgovernment-related entities or agencies are often on the receiving end,benefitting from improvedefficiencies,reduced errors and enhanced data collection from cashless payments.Consumers also
81、benefit from the convenience of paying bills through a mobile app or online rather than having to14travel to a physical location to wait in a queue to pay.Bill payment is already available through mostregional super-apps and digital wallets in Southeast Asia.For taxi and ride-sharing,going cashless
82、is more likely in markets with super-apps that haveride-hailing as a core business.Grab,founded in Malaysia and now headquartered in Singapore,is agood example of this.A similar observation can be made in Indonesia,where Gojeks ride-hailingservice is ubiquitous.Aside from these countries,cash paymen
83、ts are still widely used and preferredby many taxi drivers as card payments have high fees.Drivers also worry about settlement time whenaccepting digital wallets.15The future of Southeast Asias consumer paymentcultureInnovation in consumer payments in Southeast Asia has evolved at a pace that has su
84、rpassed theexpectations of many industry observers.Regulators have also been supportive of driving forwardthe digitisation of payments.Overall,the market and infrastructure for digital payments,especiallyonline payments,are maturing and driving long-term positive macroeconomic changes inside theregi
85、on.From our vantage point,Southeast Asias consumer payments culture is on the cusp of significanttransformation.While the past few years have focused on building the foundation for digitisingdomestic consumer payments,moving forward we expect to see an acceleration in the adoption ofdigital payments
86、,especially outside of urban areas.Usage of staged wallets will continue to outpaceother digital payment methods,especially in markets where bank account ownership remains low,such as Indonesia,Vietnam and the Philippines.We expect to see many digital wallet providers adoptan ecosystem approach to c
87、reate one-stop shop super-apps by embedding a range of value-addedservices.This gives us further reason to be optimistic,as it will improve access to financial servicesfor underbanked people in the region.More attention has recently been placed on unlocking the potential of domestic QR real-timepaym
88、ents.Ironically,the most promising use case appears to involve bilateral cross-border paymentsthat enable foreign visitors to pay local merchants using the domestic payment rails.This trend ispicking up pace with regulator-led initiatives such as ASEANs Regional Payment Connectivity(RPC)initiative a
89、nd the proof-of-concept,interoperable Singapore Quick Response Code Scheme(SGQR+)from MAS.We expect that developing cross-border consumer payment solutions will top theagendas of Southeast Asian policymakers as they seek to bolster regional trade.Underpinned byinnovative solutions and supportive gov
90、ernments,the future of consumer payments in SoutheastAsia is more promising than ever.16ReferencesWorldpay-The 2023 Global Payments ReportVisa Consumer Payment Attitudes Study 2023GlobalData:Mobile Wallet Analytics 2023Data from:Bank Negara Malaysia,Bank Indonesia,Bank of Thailand,Bangko Sentral ng Pilipinas,Monetary Authority of Singapore,State Bank of VietnamResearch and interviews from Kapronasia17