SINGAPORE'S RESPONSE

How will Singapore respond to the E-payment evolution?

We've seen how Chinese companies such as Wechat and Ant financial have succeeded in building a strong foundation in the Fintech industry, overcoming western competitors on their home ground.

In this segment, I shall compare China E-payment Companies, in particular, Alipay, with other foreign companies to find out how they fair outside of China. Let's begin.

EXPANSION INTO SOUTHEAST ASIA

INTENTION TO ENTER SOUTHEAST ASIA

It is no secret that Alibaba seeks to expand Alipay into the South East Asian market. The 1-billion-dollar acquisition of Lazada in 2016 (Abkowitz and Purnell, 2016) is telling of Ant Finance’s eagerness to enter South East Asian E-commerce market. However, one must understand the distinct differences between China and South East Asia and the possible limitations that comes with these differences.

Why South East Asia?

Mckinsey & Company suggests the current market for e-commerce in Southeast Asia is about US $50 billion, but that number could double by 2025 (Pandaily, 2017).

Popular destination for Chinese tourists- In 2017, more than two million Chinese tourists visited Cambodia, Burma, Laos and the Philippines (Pandaily, 2018)

Aims to serve both tourists and local businesses

PROBLEMS

1. Pre-existing E-payment Firms

China has been taken over by the E-payment revolution, and their large success domestically can be attributed to their capitalisation of the digitisation in our smartphone generation. The well rounded user experience that systems such as Alipay provides from their easily accessible smart phone app allows integration into every day usage experiences, from being able to pay one’s bills in the comfort of their homes; at the tap of a button, to having the convenience of going dutch at dinner through a feature built into the app.

Paypal, on the other hand, does not have a well-developed mobile system and does not offer as many benefits, as it functions primarily as a payment processor.

Why hasn't Alipay overtaken Paypal internationally?

While Paypal has had the fortune of partnering with a greater number of western e-commerce websites over more than a decade, Alipay has had minor successes in doing so as their true strength lies in their ability to provide a cashless payment system in day to day transactions. Their partnerships with E-commerce websites may be growing but as they started out targeting home grown firms they have an uphill battle to fight in order to prove their value over Paypal which has become the main stead of payment processing in most countries in South East Asia .

2. Trust Factor

South-East Asian Countries such as Thailand an estimated 33% of ecommerce gross merchandise value goes through small merchants on Facebook, Instagram, Line with Transaction mainly through bank transfer with the user sending the money first and then the merchant shipping the goods after receiving the funds.

What this shows is the stark contrast in business culture.

Alipay was built for the China market with an escrow system in mind to facilitate such transaction due to a trust barrier amongst most citizens that limited the trade in the country. As soon as a trust worthy intermediary such as Alipay entered the scene it thrived immediately, aiding in business transactions across the nation. However, as South-East Asian countries have been doing business transactions directly from party to party, there hasn't been a need for a intermediary, therefore Alipay needs to be localised in order to assimilate to South-East Asian countries. (Ho, 2016)

ANY PROGRESS?

South-East Asia

As of 2018, Alipay has added four new countries to its network – Cambodia, Myanmar, Laos, and the Philippines
WeChat Pay is available in Malaysia of 6th June 2018, allowing users in Malaysia to link their local bank accounts to WeChat Pay and pay for goods and services in ringgit.
Tencent also bought its way into the Thai market, purchasing local company Sanook.com to rebrand as Tencent Thailand.

Singapore

On 22nd Aug 2017, Singapore start-up CC Financial Services, a local start up, signed a partnership with Ant-Financial to acquire merchants to get on the Alipay market.

Objectives:

Chinese Tourists to utilise Alipay even while shopping in Singapore.
Singaporean bank users will soon begin making transactions via Alipay, pulling more customers into their digital ecosystem.

In Singapore, more than half of the stores at Changi Airport already support WeChat Pay

Still no E-wallet for Singaporeans; primarily for Chinese tourists
Possible factor- our small user base cannot compare to Malaysia's user base of 20 million (Lin, 2018)

Taxi companies Comfort Delgro and Prime have begun accepting Alipay as a payment method. (Tham, 2017).

RESPONSE

Collaborations

2nd May 2018: Singtel - Razer partnership (Channel Newsasia, 2018)

Singtel - Singapore Telecommunications
Razer- Gaming Hardware Manufacturing

Collaborate on E-payment

Create a regional network
Connect Dash Mobile to regional affiliates such as AIS (mobile operator in Thailand)

14 November 2017: Connectivity to SEA region via collaborations

PayNow mobile number transfer system linked to Thailand PromptPay (Yahya, 2017)

Addressed at the Singapore Fintech Festival
Part of the SmartNation.sg initiative

Local Businesses

Rise of E-payment startups = saturation
Competition amongst E-wallet firms - Grabpay; CCpay; Paynow

People will not want to have multiple wallets for multiple services, soon a streamlining will having to come into place as firms compete for dominance over providing E-payments to services.

Paynow backed by Monetary Authority of Singapore (MAS) -"operates within the safety and soundness of our banking system"

Consolidating influence

-"Nets invests S$30m to launch unified e-payments platform"
Unified QR code platform for DBS, OCBC and UOB customers
"Collaboration among banks can create network effects that are key to the uptake of mobile payments" (Cheok, 2017).

GOVERNMENT

BE AWARE OF RISKS

People unfamiliar with the nascent tech is held liable for unauthorised transactions

Risks that come with the entrance of Chinese E-payment firms large include the building of monopolies with the power to crush small local firms and crowd out home grown businesses.

Alibaba's maintains that it's intention is to facilitate data exchange from the back while home grown companies such as CCFinancial Services provide the transaction processing.

CYBERSECURITY

ENSURE:

1. System is Stable, intermediaries are monitored

2. Key players are sound

eg. PAYNOW meets the guidelines of the MAS; seek to rectify any for unauthorised or erroneous payment transactions

3. Consumers' interests are safeguarded

Accountability and Protection against mistaken transactions

Works Cited

Abkowitz, A., & Purnell , N. (2016 , 04 13). Alibaba to Invest $1 Billion in E-Commerce Startup Lazada. Retrieved 07 09, 2018, from Wallstreet Journal: https://www.wsj.com/articles/alibaba-to-invest-1-billion-in-e-commerce-startup-lazada-1460445117

Channel Newsasia. ( 2018, 05 02 ). Singtel, Razer to partner on e-payments, e-sports initiatives . Retrieved 07 09, 2018, from Channel Newsasia: https://www.channelnewsasia.com/news/singapore/singtel-razer-to-partner-on-e-payments-e-sports-initiatives-10194800

CHEOK, J. ( 2017 , 11 21). Recommended by Nets invests S$30m to launch unified e-payments platform. Retrieved 07 09, 2018, from The Business TImes : https://www.businesstimes.com.sg/banking-finance/nets-invests-s30m-to-launch-unified-e-payments-platform

Ho, H. (2016, 06 22). Jack Ma on Why Alipay Worked in China & Why We Think Southeast Asia May be Different. Retrieved 07 09, 2018 , from EQ COMMERCE IQ: https://ecommerceiq.asia/jack-ma-why-alipay-worked-china-southeast-asia/

Keeton-Olsen, D. (2017, 12 26). How Southeast Asia's Local Digital Money Apps Can Edge Out Alipay And WeChat Wallet. Retrieved 07 09, 2018, from Forbes : https://www.forbes.com/sites/daniellekeetonolsen/2017/12/26/how-southeast-asias-local-digital-money-apps-can-edge-out-alipay-and-wechat-wallet/#1be54c8f5aeb

Lin, J. (2018, 03 15). WeChat Pay is infiltrating Singapore mobile payments with eye on Chinese tourists. Retrieved 07 09, 2018, from Business Insider Singapore : https://www.businessinsider.sg/wechat-pay-is-infiltrating-singapore-mobile-payments-with-eye-on-chinese-tourists/

PANDAILY. (2017, 12 13). Alipay, WeChat Pay Enter Southeast Asia and Local Mobile Payment Market. Retrieved 07 09, 2018, from Pandaily: https://pandaily.com/alipay-wechatpay-enter-southeast-asia-local-mobile-payment-market/

PANDAILY. (2018, 03 16). Chinese mobile payment Alipay penetrates 8 Southeast Asian countries. Retrieved 07 09, 2018, from Pandaily: https://pandaily.com/chinese-mobile-payment-alipay-penetrates-8-southeast-asian-countries/

THAM, I. (2017, 09 22). Alipay to expand cashless payments to Singapore banking users, inks deal with local startup. Retrieved 07 09, 2018 , from sg sme.sg: https://www.sgsme.sg/news/money/alipay-expand-cashless-payments-singapore-banking-users-inks-deal-local-startup

Woo, M. (2018 , 05 16). Carousell latest to throw hat into SE Asia’s fragmented payments ring. Retrieved 07 09, 2018, from Deal street asia: https://www.dealstreetasia.com/stories/carousell-southeast-asia-payments-94895/

Yahya, Y. (2017, 11 14). PayNow to be linked to Thailand's PromptPay, among slew of initiatives announced at Fintech Festival. Retrieved 07 9, 2018, from The Straits Times : https://www.straitstimes.com/business/banking/paynow-to-be-linked-to-thailands-promptpay-among-slew-of-initiatives-announced-at

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