Boost your SEA market sales and minimise abandoned carts with payment localisation. Understand how to be competitive and successful in the APAC market by offering trusted payment options, transacting in local currencies and complying with local regulations.

The Asia Pacific region is home to an incredibly diverse population of over 4.5 billion people - that’s 60% of the world’s population. This number alone indicates the enormous potential for growth in the e-commerce industry, with the majority of the world's population, like China and India, residing in this region. 

Despite being at the forefront of e-commerce growth, the Asia-Pacific region remains one of the most fragmented when it comes to localised payments. This poses challenges for online merchants who must grapple with payment localisation and abandoned carts. 
Online merchants lose 52% of their APAC sales due to cart abandonment - a common problem faced in this region. As it turns out, customers want to use their preferred payment method, and many abandon their carts when they can't. Shockingly, only 13% of merchants selling to APAC customers currently accept domestic wallets.

For e-commerce businesses seeking to expand globally, payment-related issues can present significant obstacles. These challenges can stem from currency differences, security concerns, and varying regulations across different countries. 

 

Let’s Tackle The Four Most Common Payment-Related Challenges Online Merchants Experience:

1. Lack of mature cross-border payment infrastructures 

Traditional banking infrastructures are not equipped for cross-border payments, resulting in technological developments and regulations that complicate or stall cross-border transactions - even for a small amount. It’s painfully slow, inefficient, and expensive. 

While there are alternative modes of payment that are on the rise, they face impediments from local authorities. Some have enacted regulations that favour national over international suppliers of e-payment services. 

According to an International Trade Centre (ITC) survey, 20% of 2,200 micro, small and medium-sized enterprise respondents engaging in e-commerce in 100-plus countries identified the barriers of international e-payments largely attributed to the cost and risk of currency exchange, as well as difficulties in processing wire transfers and accepting foreign credit cards.

18% of respondents identified limited in-country availability of international e-payment solutions, with more frequency in developing countries (20%) than in developed ones (14%). 

2. Diverging regulatory frameworks and administrative red tapes 

Unpacking the details of differing payment regulations in adjoining nations is a full-time job that sellers often don't have the luxury to commit to. Different regulations between markets and limited approved e-payment service providers add complexity and hurt both consumers and businesses. 

To receive payments, businesses may be expected to register local bank accounts in the respective countries. This can prove to be challenging and time-consuming. 

Global banking institutions must adhere to regulations set by the Financial Action Task Force on anti-money laundering and counter the financing of terrorism. To comply with these regulations, banks are required to identify and assess the potential risk of money laundering and terrorist financing associated with each customer. 

Businesses must provide detailed information about their activities, expected account turnover, and sources of funds, among other things. In other words, tons of paperwork. This procedure is long-drawn and unnecessarily cumbersome. 

3. High cost for receiving payment internationally

From an emerging economy perspective, cross-border bank payments among the Association of Southeast Asian Nations (ASEAN) remain highly complicated. 

On top of the lack of basic payments infrastructure systems, these countries face volatile exchange rates, currency conversion costs, polar differences in internet speeds, and the lack of a common messaging standard. These factors contribute to higher costs for e-payment suppliers. 

Also, businesses may face a cap to the amount receivable per transaction. Some Asian countries also imposed a limit on the amount of money received, which becomes highly problematic, especially for luxury/big-ticket items on e-commerce sites. For example, in Indonesia, the maximum principal payout amount per transaction is 99,999,999 Rupiahs (less than USD7000). 

4. Geographical diversity in mobile wallet usage:

With the emergence of online shopping, comes a variety of e-wallets offering in each market. Naturally, each market has its preference. In the Philippines, GPay’s 20 million active users transact with more than 63,000 partner merchants for online and offline transactions. 

Elsewhere, in Thailand, RabbitLINE Pay emerges as a popular choice used in conjunction with the LINE messaging app. Customers can pay for highway tolls, transfer funds to friends and family, and perform a variety of offline and online transactions. Whereas in a more developed nation like Singapore, DBS PayLah! is the dominant e-wallet powered by the largest national bank, DBS Bank. 

Each e-wallet has its own considerations and technological infrastructure. It is impossible for merchants to adopt them all to accommodate payments internationally. The technical considerations for payment platform integration alone would be a deterrent.

However, as e-commerce continues to skyrocket in Southeast Asia, the need for diverse payment and more integrated options has become increasingly apparent. With customers seeking convenience and flexibility, businesses need to offer localised payment methods to capture these different emerging markets.

 

Payment localisation is key to driving business growth and conversion in Asia. Here's why:

1. Trust and familiarity: 

Offering local payment options can increase the trust and familiarity of the customers with the payment process, making them more likely to complete their purchases. 

Customers may be hesitant to complete a purchase if they are not familiar with the payment options available or if they have concerns about the security and legitimacy of the payment process. 

In a recent study, Singapore shoppers increasingly value secure payment options (53%) when it comes to platform features. This suggests that trust remains one of the most important considerations when choosing a platform to complete a purchase.

2. Convenience: 

Providing customers with their preferred payment methods can make the checkout process more convenient and reduce the friction that can lead to abandoned carts. 

Customers may abandon their carts if they encounter payment options that are unfamiliar or inconvenient or if they encounter unexpected fees or charges.

For example, in Indonesia, the variety of payment options available is the top reason (54%) for shopping online.

3. Currency and exchange rate:

Merchants in Asia without localised payment options lose more than 60% of sales due to cart abandonment. 1/3 of merchants report payment frictions causing cart abandonment, including the inability to pay with preferred methods and concerns about unfamiliar payment methods/sites.

When customers see the exact cost of the product, they consider it a quality customer experience and increase overall trust. Offering local payment options can also help customers avoid currency conversion fees or exchange rate fluctuations. 

Customers may abandon their carts if they are presented with unexpected costs or if they are unsure of the final price they will be paying.

Today, merchants are expected to provide peer-to-peer payments beyond traditional banking models that can enable any purchase of various products and services. Here are some strategies to facilitate future growth.

 

3 Strategies to Maximise Sales and Minimise Abandoned Carts

1. Offer a local experience with translation to increase trust and familiarity with customers. 

ASOS is a prime example of successful payment localisation in e-commerce. Despite having no physical store locations, the retailer has achieved 149% growth over the past 5 years through digital sales, with about 60% coming from international buyers. 

Their success can be largely attributed to its localisation efforts, which include translating its website and product information into seven major languages, accepting 10 different payment methods, and automatically selecting the appropriate language, experience, and currency for each visitor.

2. Offer your customers the preferred local payment of choice 

Tammy Phan, the CEO of Luxe Du Jour, a luxury e-commerce site, recognised the importance of localisation in boosting sales in the Asia-Pacific region. With over 25 different payment methods in South Korea alone, Phan knew that integrating local payment options was critical to meeting the needs of Asian clients and increasing sales.

By embedding an Alipay-like payment capability on her website and transacting in the native currencies of buyers and sellers, Phan improved conversion rates by almost 40% to 50%, according to Wei Jiang, President and COO at Citcon. Through these localisation features, Phan showed that she understood and valued her customers’ payment preferences; ultimately leading to increased sales and growth opportunities.

3. Localise the platform to help your customers transact in their native currencies

Visa and Mastercard's low penetration rate in APAC countries like Malaysia and Thailand highlights the importance of payment localization. With over 25 payment methods and mobile wallets like KakaoPay, PayCo, and Naver in South Korea alone, payment processing platforms with API integrations are needed to match the fragmented and inconsistent payment landscape in APAC. 

Netflix's localization strategy also extends to the Asian market. To cater to the diverse payment preferences in the region, Netflix accepts a range of payment options, including credit cards, debit cards, PayPal, and gift cards. 

In addition, the streaming service uses local currencies to make transactions more convenient for customers in countries such as Japan, South Korea, and India. This seamless and localised experience has contributed to the company's success in the region, where it has steadily grown its subscriber base. 

 

Conclusion

In conclusion, businesses targeting the Asia-Pacific region must prioritise payment localization to succeed in the growing e-commerce market. Online merchants can minimise abandoned carts and increase sales by implementing effective strategies such as multiple payment options, local currency display, and security measures.

At Baozun, we have offices across Greater China and Southeast Asia. We have dedicated local resources and capabilities to assist brands and businesses with personalised solutions and services to navigate the challenges faced in each market.
Reach out to us for a discussion on how you can optimise your technology infrastructures and checkout experience in Asia today.

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