The competing ride-hailing companies, Singapore’s Grab and Indonesia’s Go-Jek, are the exemplars of this new business world. They operate regionally, but use localised business models: converting traditional delivery mechanisms to app-based delivery channels and then expanding into other business sectors, especially e-payments.
Cash payments still dominate
The arrival of cheap smartphones over the past few years has resulted in an estimated 90% of internet access in ASEAN occurring on mobile phones. But despite rapid take up of mobiles and world-beating levels of online engagement, South-East Asian consumers still mostly favour making a purchase in cash, after first searching for products online. Social media uptake is also happening faster and more intensely than actual mobile-based shopping. Businesses need to appreciate that for some emerging ASEAN consumers, Facebook is the internet. For example, there were 130 million active Facebook users in Indonesia in 2018, just under half the population. These social-first behaviours make online marketing from a website outmoded.
HSBC’s Asia Head of Innovation – Global Liquidity & Cash Management, Jennifer Doherty says cash on delivery continues to be the preferred payment mechanism in ASEAN. This, she argues, reflects both the long-established habit of paying by cash when you receive your order, and the sheer proliferation of e-payments options, which can be confusing. Compared to more developed markets, ASEAN’s consumers tended to have less confidence in the “last mile” of delivery channels, an area that simply wasn’t a priority for the region’s suppliers. But, Doherty says local companies are now being forced to pay more attention to this part of the supply chain in order to remain competitive with overseas logistics companies, which can sometimes deliver in less than 48 hours. Some e-payments providers in ASEAN now offer escrow systems that withhold payments transfers until the consumer is happy.
With hundreds of e-payments wallets now available across the region, Doherty predicts that there will need to be some consolidation before usage really takes off. “Ease of use in the e-wallet system isn’t there because there are too many of them and they are all closed loops.” She says e-wallets need to evolve so that users can move money between different providers, just as they can between different bank accounts.
The “last mile” is the last frontier
E-commerce, argues Doherty, will grow fastest in those ASEAN countries that can address the last-mile logistics challenge and shift more of their customs rules and taxes into a digitised form to make them easier to navigate.