Southeast Asia (SEA) is a diverse region, comprising countries with distinct cultures, languages, and economic landscapes. Payment trends vary throughout the region, with credit and debit cards dominating some markets, while others rely heavily on alternative payment methods such as eWallets, bank transfers, and mobile payment apps. 

After the start of the Covid 19 pandemic, cashless payments were welcomed due to accessibility and safety concerns. Digital payments have since grown increasingly prevalent across SEA’s dynamic financial landscape, driven by FinTech innovation that is complemented by increased smartphone penetration, improved internet connectivity, and the growth of eCommerce.

Digital payment methods: what are the main trends?

Southeast Asia sits at the heart of the global shift towards digital payment solutions. The increasing popularity of digital wallets, QR codes, Buy-Now, Pay-Later (BNPL), and other alternative payment methods, has led to a significant decline in cash usage across the region. With low credit card ownership in countries like Thailand (30%), Vietnam (11%), and Indonesia (6%), many consumers across Southeast Asia face exclusion from formal financial systems. The convenience, accessibility, and security of electronic payment alternatives, that do not require access to traditional banking systems, have therefore been groundbreaking for SEA’s vast population.

The rise of BNPL 

With limited credit card ownership and around half of SEA’s population remaining unbanked, Buy-Now, Pay-Later has gained popularity as a payment method that allows consumers to make purchases and defer payment for a later date, typically in installments without gaining interest. This adoption was particularly accelerated by the surge in eCommerce spending during the pandemic. Many shoppers associate BNPL with fast approval rates, security, and various rewards and promotions that make it an attractive option. 

The power of QR payments

Real-time payments via scannable QR codes have gained much traction in recent years. They allow for seamless payments directly debited from a user’s bank account, without the need to load funds beforehand. Domestic QR payments provide a cheaper alternative for businesses, reducing fees and administrative costs (such as POS terminals) and streamlining the settlement process. Fees for accepting domestic QR payments are heavily subsidized for merchants in SEA markets, with efforts to keep fees lower than those for credit or debit card transactions. Cross-border QR payments enable local merchants to accept payments from foreign digital wallets, contributing positively to the flow of trade in Southeast Asia and the region’s participation in the global economy.

The growing influence of digital wallets

Digital wallets generally fall into two categories. Staged or stored-value wallets require funds to be added directly onto them in order to use them to make payments. Some examples of wallets include GrabPay, GCash, and MoMo. Pass-through wallets, on the other hand, are linked to credit or debit cards. These are less common in Southeast Asia due to low card ownership in the region. Apple Pay, PayPal, and Google Wallet are examples of some widely used pass-through wallets.

Although it took a while for shoppers in Southeast Asia to embrace digital payments, marketplaces have slowly managed to build trust with their customers. With the addition of escrow features and payment confirmation messages, for example, consumers now feel more comfortable paying online than ever before. As eCommerce continues to grow, so does digital wallet adoption, currently claiming roughly 30% of SEA’s eCommerce transaction value. 

The coexistence of cash and digital payments

While digital payments have increased exponentially, cash remains the most used payment method at the point of sale in Southeast Asia. The transition away from cash has been gradual due to high card acceptance fees and merchant fees charged by digital wallet providers. Many consumers and businesses are also hesitant to change their tendencies towards the familiarity and ease they associate with cash. However, there are many more factors in favor of digital payments that are slowly winning them over, particularly in urban areas where consumers are typically more financially literate. Digitizing the payment flow alleviates not only the need to carry cash around but also the associated risks of doing so. Alternative payment methods provide an added layer of security, not to mention the speed and simplicity with which transactions can be carried out. This is particularly beneficial for those living in remote locations, with less access to financial institutions, or even regularly maintained ATMs. 

Overcoming challenges and embracing opportunities

While digital payments present many opportunities, they come with their fair share of challenges. One of the primary obstacles is the fragmented nature of the Southeast Asian market, characterized by diverse regulatory frameworks, interoperability issues, and varying levels of digital infrastructure. Navigating these complexities requires establishing accessible payment systems and implementing regulatory frameworks that allow for technological innovation while ensuring consumer protection. 

As the digital payment landscape continues to evolve, there are abundant opportunities for innovation and expansion, from leveraging data analytics to enhance fraud detection and risk management to tapping into the growing demand for cross-border payment solutions. For businesses wanting to break into the SEA market, expand their customer reach, and enhance their payment flow, working with the right payment service provider is crucial. Zota’s extensive experience providing payment solutions in Southeast Asia and other emerging markets worldwide makes us the ideal partner. We support online businesses in accessing a wide range of alternative payment methods to suit their specific needs, seamlessly and securely. This helps them access perfectly matched payment solutions, unlimited by location. 

The future of Southeast Asia’s consumer payment culture

As Southeast Asia’s consumer payment landscape continues to evolve, digital payment methods are expected to play a pivotal role in shaping the region’s economic future. While cash still plays a significant role, there is a growing need for payment solutions that cater to the diverse needs of consumers and businesses across different markets. The development of innovative payment solutions highlights SEA’s commitment to embracing technological advancements and fostering financial inclusion as the region progresses towards widespread digital payment adoption

At Zota, we remain committed to empowering online businesses to expand their business worldwide. Our payment services enable a wide range of alternative payment methods that suit the payment needs of each company and its customers. For more information about our industry-standard payment solutions, don’t hesitate to contact us