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How APAC E-Commerce Merchants Can Overcome Challenges Of Delivery, Trust, and Payment Fragmentation

How APAC E-Commerce Merchants Can Overcome Challenges Of Delivery, Trust, And Payment Fragmentation

Since 2015, the Asia-Pacific e-commerce market has seen explosive growth thanks to some of the highest consumer technology adoption rates in global history.

It’s estimated that APAC will drive 62.75% of the world’s $3T billion e-commerce market by the end of 2018. Within that $1.9T market, four-year revenue growth estimates for countries like China, South Korea, Singapore, Malaysia, Indonesia and the Phillipines range from 10% to 20%. The increasing affordability and availability of smartphones and high speed internet are largely responsible, giving unprecedented numbers of customers access to new marketplaces, leading to greater opportunities for e-commerce businesses of all sizes.

But merchants are already experiencing growing pains. The region’s diverse geographic, digital, and financial landscapes present sophisticated challenges that impede growth even as the market expands. Underdeveloped civic infrastructures make it almost impossible to predict delivery times, and logistical breakdowns often lead to failed deliveries. This unfortunately dovetails with customer concerns over payment fraud, making many reluctant to participate in any payment method that has them providing funds up front and trusting that their purchase will be delivered. This lack of trust is what fuels the region’s massive cash-on-delivery (COD) market, filled with customers who have learned never to trust that they will get their purchases in a timely manner or good condition. Even for those customers who are willing to commit, a lack of consolidation in the region’s payment landscape means merchants have to invest in disproportionate overhead to support a diverse collection of local and international payment methods that vary wildly from country to country.

There are, however, solutions to these problems. Local entrepreneurs and futurists are rising to meet the demand for reliable delivery options, while the Rapyd payment platform solves issues of transactional trust and support for fractured payment methodologies. Combined, solutions like these will play a major role in consolidating and optimizing the APAC e-commerce market, allowing local merchants to build profitable businesses. The first step is developing a thorough understanding of the challenges they’re up against.

The Last Mile Challenge

As the APAC e-commerce market continues to grow, material percentages of the population that live in underdeveloped areas are finding themselves caught between the desire to participate in online commerce and a lack of reliable delivery systems. The challenges of effectively distributing resources and commodities within areas of limited civic infrastructure are most widely known as “the last mile challenge”. It refers to the lack of reliable systems needed to transport deliveries from major urban distribution centers to the surrounding underdeveloped rural populations. 41% of APAC customers cite delivery time and associated costs as a deterrent to shopping online. Combine that with the fact that APAC customs procedures take on average 66% longer than those tracked by the Organisation for Economic Co-Operation and Development (OECD), and you can understand why some local e-commerce merchants struggle to gain traction in their own market.

Thankfully, there’s no shortage of ambitious entrepreneurs ready to attack the problem with creative solutions. Many e-commerce merchants are willing to dig into their margins by offering free shipping costs and higher product discounts in exchange for putting up with longer delivery times. Others are building their own delivery networks or forming partnerships with local logistics companies, while a some tech-forward speculators are thinking farther out of the box. American business consulting firm Frost & Sullivan are driving the conversation around a potential $16.79 billion delivery bot economy that could solve last mile issues. Regardless of how innovative their solutions may be, entrepreneurs will first need to confront the lack of trust existing in APAC customer communities.

The Trust Challenge

Within APAC, roughly 85% of consumers report payment facilitation security as their single biggest concern when it comes to shopping online. Much like the skepticism and hesitation seen in the early days of North American e-commerce, net-new technologies are still relatively unknown to customers, making full-fledged engagement a tough sell. We see this cultural dynamic materialize in countries like Indonesia, where 80% of consumers will go online to conduct price comparisons but would rather make cash payments in store. Even with free delivery and discount incentives, the vast majority of consumers simply don’t trust vendors, delivery networks, or payment solutions in their current state. Consequently, cash and over-the-counter payment methods remain the strong incumbent, meaning it will fall to merchants to support those and other forms of local payment. This presents its own unique set of challenges.

The Payment Diversity Challenge

The APAC region is highly fragmented in its division of preferred payment methods, which has some profoundly negative effects for merchants at both the topline and bottom line levels. Unlike the more consolidated North American e-commerce market, APAC currently has four different payment methods that each represent more than 10% of all payments, including cash on delivery, bank transfers, eWallets, debit and credit cards. In the case of COD and in-store payments, this is due largely to a lack of trust for merchants, delivery services, and payment security. Experts anticipate eWallets will capture the majority of payments by 2021, supplanting the existing credit card market. It’s a shift expected to be fuelled by an increased customer desire for greater agency over how, when, and what to pay, as well as a lack of access to credit cards and/or traditional banking. Strong support for these digital payment methods will be mandatory, but drilling down the country-level reveals even further fragmentation that demands additional payment flexibility from merchants.

APAC E-Commerce Payment Methods — Source: Worldpay — Global Payments Report 2017

For example, while they might share a border, preferred e-commerce payment methods in Thailand and Malaysia vary wildly. eWallets command the majority of the market in Thailand with 25%, while accounting for only 5% in Malaysia. Meanwhile,credit cards account for 55% of all transactions in Malaysia and only 22% in Thailand. This diversity of adoption invalidates any assumptions APAC e-commerce merchants can make based on regional breakdowns and forces them to consider the costs and benefits of supporting such a wide and disparate variety of payment methods in order be successful.

E-Commerce Payments in Thailand vs Malaysia — Source: Worldpay — Global Payments Report 2017

The Rapyd payment operating system was designed to solve this exact issue and many others. We’re on a mission to unify and harmonize the world’s disparate payment solutions, empowering e-commerce merchants to realize valuable opportunities in their local markets. Rapyd is a payment operating system with more than 1.5M access points around the world including countries like the Philippines, Indonesia, Thailand and more. We help our APAC clients overcome the challenges associated with their growing e-commerce market by unifying cash on delivery, eWallets, bank transfers, in-store payments, and more into a single cardless platform. With a single API, Rapyd’s operating system also includes turnkey KYC, AML, and CFT compliance right out of the box while allowing users to conduct omnidirectional transactions in more than 70 of the world’s most widely trafficked fiat currencies.

Rapyd is a mobile-first platform that offers a comprehensive suite of modular solutions to help e-commerce merchants expand their total addressable market size and drive revenue. Through a single, intuitive API and SDK integration, Rapyd unlocks immediate access to valuable new market segments all across the world, including the APAC. Visit our website to learn more about how you can get started with Rapyd today.

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