How ePayment is Shaping Future Business

Asia Pacific was never a stranger to ePayment. But for many years, it had been a consumer e-commerce play. 

COVID-19 made ePayment a business imperative. E-commerce is also no longer the only reason for ePayment. Many consumers under lockdown found they can do just about every transaction online or over the mobile — if the merchants and payees are ready for it.

This shift toward ePayment has massive implications for traditional financial incumbents and even government. At a recent panel discussion called “The Future of Payment” during the Connected Retail Experiences conference (part of the StartmeupHK Festival 2020), leading financial services companies discussed some of these. 

Need for obsession

Marc Entwistle, the principal for digital strategy in APAC financial services at Oliver Wyman, who moderated the conversation, noted that Asia has been at the helm of ePayment innovation. 

“Yes, there is a lot of fragmentation in terms of culture and payment [methods]. But today ePayment cuts through all activities and is a cross-industry play,” observed Entwistle.

Satya Tammareddy, head of sales for SE Asia and Hong Kong at Stripe noted ePayments adoption has accelerated because of COVID-19 measures. “Several years of e-commerce were compressed in a matter of weeks.”

The acceleration is not just an Asian phenomenon either. Tammareddy noted that Visa saw over 30 million online purchases for the first time in March 2020. “So this is going to play out in all emerging markets around the world.”

Tammareddy felt that we are now reaching a “new normal of e-commerce.” She urged retailers to think how they can tap into this sped up adoption. “This means businesses of all sizes should obsess about online transactions.” 

She noted that forward-looking businesses are focusing on real-time card validation, improving processes for refunds, and optimizing their online acceptance rate. “We think the last makes a difference to the bottom line.” 

Immediate challenges

Entwistle noted that one challenge for businesses is ePayment fragmentation. Not just in the availability of ePayment channels, but how different regulations and cultural norms are shaping ePayment behaviors. For example, in China, WeChat Pay and Alipay rule the market. 

Panelists noted that in this fast evolving market, businesses need to follow the development of new regulations and how standards “are commoditized.” 

Another issue is making ePayment options accessible for business “so they do not have to do complex integrations and can instead focus on core offerings,” said Tammareddy. 

“Governments and regulators have a big role to play and make sure the policies allow for this integration.” 

At the same time, businesses need to understand how much payment risks they can assume. 

“In Asia, technology and scalability is here. But if you want to give credit at an inclusive scale, you also need to  scale how you handle defaults,” said Jan Ruzicka, chief external affairs officer and fintech evangelist at Home Credit.

Market matters

Ruzicka noted that while ePayment adoption is speeding up, it is not the same play for all markets. 

In Asia, it is all about adoption. “Around 50% unbanked are in Asia. There is great demand in Africa and Latin America, especially those who have been left behind by traditional players.”

The model changes when you operate in a developed market. For example, he saw a lot of interest in “buy now pay later” schemes. The aim for e-commerce players is then to drive this consumption model. 

Ruzicka believes wallets will become the next driver in Europe and the U.S., “although it is normal in Asia.”

Another area to watch is how ePayments will move to the countryside. Today, much of the ePayment ecosystem is concentrated on densely populated cities. 

Lastly, Ruzicka believes underwriting the risk or services will change. With new data (such as social media data) being used for it, it will shift how ePayment and online credit can be made available for all.

Rethinking habits

For Maggie Yung, the managing director and head of Digital, Payments and Innovation at DBS Bank, the shifts in ePayments and customer behavior led to re-imagining their banking process. 

“But we seem to be burdened with legacy. We really need to ensure a [consistent customer] experience from front to the back end,” said Yung.  

For DBS, it meant moving away from viewing ePayment and online banking as an alternative channel to support the brand.

“We needed to switch to a digital core and make online banking our primary touch point. This is a major mind shift,” said Yung. 

Part of this shift is helping merchants to see what is best for their customers. “We need to facilitate taking up different payment options.” 

Incumbents shift

As big tech companies become the frontrunners of ePayment, often anchoring it to their ecommerce ecosystem, what role will banks then play in future ePayments?

Yung noted that banks like hers can meld virtual and online presence. She observed that when the amount is large, customers rather meet a person (either virtually through a call or face to face). 

“We will always need a certain level of assurance with human assistance. Our business is to build relationships.”

Meanwhile, Ruzicka sees omnichannel becoming huge. He already sees e-commerce players going offline, while new ePayment options such as mobile proximity payment and virtual credit cards catch on. 

“This melting pot will create lots of opportunities for the end customers, [existing] lenders and intermediaries.”

Yung admitted that it will still take a while before the global consumers live cashless. While countries like Sweden and China are already highlighting how such a cashless society can operate, other payment methods won’t fade away. 

She felt that COVID-19 has helped to reposition the role of ePayment. “It is now the first step to engage the customer.”