Mobile Payment Firms Struggle to Dethrone Cash in Southeast Asia

Signs accepting WeChat Pay and AliPay are displayed at a shop in Singapore
Signs accepting WeChat Pay and AliPay are displayed at a shop in Singapore May 22, 2018. Picture taken May 22, 2018. REUTERS/Edgar Su

By Aradhana Aravindan and Khanh Vu

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-backed Grab and China’s Tencent want to win over as they try to tap into Southeast Asia‘s burgeoning internet sector.

More than 70 percent of the region’s 600 million-plus people do not use banks – higher than the global average of about 30 percent – and e-commerce is projected to hit $88 billion by 2025.

But 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 Phuong, 36, a manager at a construction material supplier in Vietnam.



Mobile payments are ubiquitous in China; a consumer can spend a day without using cash at all in Beijing or Shanghai, and even some beggars accept mobile payments. But cash remains king in Southeast Asia.

Hard currency, paid on delivery, accounted for 44 percent of total e-commerce transactions last year and is likely to remain the most popular payment option for at least the next three years, according to data by research firm IDC.

“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.


And the mobile payment marketplace in Southeast Asia remains wide open, with no dominant players

Indonesia’s ride-hailing firm Go-Jek’s Go-Pay, Singapore-based Grab’s GrabPay, Japan’s messaging app Line’s Line Pay, Momo e-wallet owner M_Service in Vietnam and Voyager Innovations, which operates Paymaya in the Philippines, have all entered the fray. The gaming company Razer Inc has also indicated it is eager to play a role.

Cash on delivery costs e-commerce businesses more than other payment methods, said Alibaba Group Holding-backed e-retailer Lazada Group.

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.



But it can be difficult to persuade users to switch from cash when they earn about $200 on average a month in economies like Vietnam and Indonesia, according to economic data provider CEIC.

“To break habits of using cash, Grab is creating more daily use cases for cashless payment – commuting, food delivery, paying at food and retail stalls – to drive more usage of the GrabPay e-wallet,” Grab said in an email.

Mobile payment companies bet they can transform their platforms into financial supermarkets, offering everything from loans to insurance on top of payment options.


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