In the past few years, Southeast Asia has become a leader in the financial revolution. As a region with a dynamic economy, Southeast Asia presents an excellent opportunity for digital payment services, such as e-wallet and internet banking solutions to prosper.
According to a joint report by Bain & Company and Facebook in August, 310 million Southeast Asian consumers are expected to go digital by 2020, representing nearly 70% of the region's population.
On top of this, the COVID-19 pandemic's effects have further accelerated Southeast Asia's digital transformation. Based on recent studies, e-wallet transaction volumes have significantly increased since early 2020.
Last year's reports revealed that 54% of the surveyed businesses and merchants confirmed their willingness to adopt digital wallet payment methods.
Regarding Asia, over one-third of the region's consumers stated that they are ready to replace their traditional banking activities (bank transfers, credit card usage) with e-wallet services. In Singapore, Thailand, China, Malaysia, India, Indonesia, and Vietnam, this shift is already in progress as over 12% of the countries' consumers have adopted non-banking digital wallet solutions.
Bain & Company's study confirmed the same trends, revealing an 8% surge in e-wallet usage as well as a 6% decline in cash transactions between 2019 and 2020 among Southeast Asia's consumers. As a result, digital wallets have become the third most popular payment method, only 1% behind credit and debit cards in a region that predominantly relies on cash.
According to this year's MasterCard Impact Study, Malaysia leads the shift to digital wallets with a 40% usage. The Philippines follows Malaysia in second place with 36%, while Thailand and Singapore feature a 27% and a 26% e-wallet adoption rate, respectively.
At the same time, MasterCard reported falling cash usage in the whole region, with Singapore (67%), the Philippines (64%), and Thailand (59%) ranking as the top Southeast Asian nations leading the shift to contactless transactions.
Smartphone usage is on the rise in Southeast Asia. In 2019, smartphone sales accounted for $23 billion in the region, surging by 4% despite the decline in global demand.
As the world's fastest-growing internet region with a user base projected to reach 480 billion by 2020, over 90% of Southeast Asia's internet users are utilizing smartphones, according to a Google study.
With factors such as improved network reachability, a progressive middle class, and the availability of affordable devices contributing to the smartphone penetration rate, Google estimates the gross transaction value (GTV) of digital wallets to reach $1.2 trillion in Southeast Asia by 2025.
The digital wallet solution STICPAY has recently conducted a survey among 400 Asian e-wallet users, revealing key trends among the region's consumers. Based on the results, the continent's users prefer to choose an e-wallet service that offers fast withdrawals (32.2%), cost-efficient transfer fees (18.4%), prepaid card solutions (12.7%), and the local bank wire as a payment method (11.9%).
Moreover, 9.6% of the respondents believe diverse deposit methods are essential features of digital wallet services, while 8.6% consider safety and security measures as important criteria when choosing between different payment solutions.
On the other hand, the survey's participants ranked cryptocurrency support (5.4%) and multi-currency features (1%) near the bottom of the list.
With the shift to cashless transactions and surging consumer demand for digital services, businesses should adopt e-wallet solutions to avoid missing out on a significant opportunity for growth, especially in the Southeast Asian region.
However, digital wallet adoption doesn't come as easy as it may first seem. For example, first-time users may find it more difficult to use an e-wallet's QR code scanning feature than seasoned consumers who handle their finances predominantly digitally.
For that reason, service providers have to focus on convenience while expanding their ecosystems with new practical features, such as offering users the ability to settle both in-store and online payments via the same digital wallet solution.
Regarding merchants, integrating multiple digital wallet solutions under one platform can help businesses target a wider audience. Also, the integration of user-friendly e-wallet services into the checkout process can eliminate digital friction from the shopping experience of consumers.
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