How companies in Southeast Asia can cater to the unbanked market

By Yon Heong Tung for e27

Southeast Asia’s unbanked population currently sits in the hundred millions, companies — both corporates and startups — need to leverage the range of e-payment tech to successfully penetrate these markets.

The season of business and investment opportunities for Southeast Asia is in full swing. The e-commerce potential in Southeast Asia , according to a report by Southeast Asia e-commerce research and news portal ecommerceIQ, is expected to hit US$238 billion in the next two years. Up north, the region’s big brother China has already surpassed the US in its e-commerce market size, despite the latter being a more matured market. It is clear that Asia is the site of the next gold rush.

No doubt, e-commerce players globally are eager to dip their fingers into this juicy pie, but this would be no easy feat.

Because, in addition to fierce competition from innumerable local players, foreign companies have to dive deep into what drives the Asian consumer  — whose spending behaviour differ in each market.

Indeed, complexities and challenges abound, but they are not insurmountable. Here are what prospective companies need to know.

Catering to the unbanked

The statistics show that Asian consumers are voracious e-commerce spenders, but the question is: by what mode are they paying?

Emerging markets in APAC — China, India, Thailand, Malaysia, Vietnam, Philippines and Indonesia — are more dependent on account-related revenues; or simply put, non-credit/debit card/cash transactions.

This stems from the fact that a sizeable demographic in these markets are unbanked; people without credit cards and bank accounts. According to a 2015 report by McKinsey, the unbanked in Indonesia number at 116 million; Vietnam, 49 million; Philippines, 46 million; Thailand, 12 million; and Malaysia, 4 million.

That totals nearly 300 million, which is more than a sizeable figure. So how can e-commerce flourish when people do not even have access to basic payment channels or services such as a bank account?


One of the triggers of this spike in e-commerce growth is the increasing smartphone and internet penetration in emerging markets. The population of smartphone users in APAC is expected to hit 1.14 billion by end 2016. Smartphones are key drivers to e-commerce spending due its ability to make mobile transactions on-the-go. More than 50 per cent of e-commerce transactions in China were performed on a smartphone.

The ubiquity of mobile wallets — which come in both the mobile and desktop variety — is also the major contributor. In China, 45 per cent of users surveyed in Mastercard’s survey said they used mobile wallets; in India, it was 36.7 per cent.

In essence, high-tech disruptions have brought financial inclusion to these hitherto untapped market segments.

One of Southeast Asia’s few unicorns, internet company Garena has been active in serving the needs of the underserved in the region and, most prominently, the unbanked in Southeast Asia through its payment service AirPay, which comes in the form of a physical counter and mobile app.

This payment platform is engineered to serve the needs of the unbanked. It allows users across Southeast Asia to make payments for online games, phone and utility bills using cash or e- wallet. Today, AirPay boasts an annualised gross transaction value of US$510 million.

Security paramount

Mobile wallets and e-payment open up customers to another level of convenience, but it is not without any caveats: any transaction that is web-based is prone to security breaches and hacks.

To shore up its security protocols, AirPay signed a partnership with e-payment management company CyberSource. In this deal, AirPay integrated CyberSource’s fraud management tool, “Decision Manager”.

This allows AirPay to detect frauds faster and with greater automation. How it works is that it screens and matches inbound orders against data and correlation from Visa and CyberSource, supplemented 260 validation and correlation tests so no stone is left unturned.

Another robust security component is the payment tokenisation feature. In a nutshell, it replaces customers’ payment data with a unique identifier, making payments seamless by reducing the steps for checkout with just one click. Merchants thus store no information of the customers’ payment details as they remain only on CyberSource’s secure servers.


It is imperative for companies to scrutinise and understand the needs of the unbanked if they want to capture a good portion of customers in Southeast Asia.

First appeared at e27