Wed, February 10, 2021
Just over a year after the start of the COVID-19 pandemic, it has been impossible to ignore the stratospheric growth of digital payment methods across the world. In Asia-Pacific in particular, we’ve seen Facebook and PayPal join Google, Tencent, and other top tech companies to support Gojek, a popular Southeast Asian super app. Not missing a beat, Gojek’s competitor Grab got busy buying stakes in popular e-wallets such as LinkAja in Indonesia.
It’s safe to say you never get bored when it comes to the region’s fintech scene! But once the dust settles behind this latest wave of M&A activity, what will be the next frontier for digital payments?
When it comes to the battle for social media platforms, Facebook leads the pack with 2.8 billion monthly active users. However, it is closely followed by other popular social media and messaging apps such as WhatsApp and WeChat with 2 billion and 1.2 billion users respectively. With such a large user base, these platforms are perfect for monetization through e-commerce and digital payments.
In 2019, Facebook launched Facebook Pay in the United States, which is gradually being rolled out to Facebook, Messenger, Instagram, and WhatsApp. Currently, users can pay for their purchases on Facebook’s marketplace, make peer-to-peer (P2P) payments, and even donate to fundraisers. That same year, Instagram launched its payment feature, a feature that allows people to buy products they discover on the platform without ever leaving it.
In a world first, the Singapore Tourism Board launched a WeChat Mini Program – a sub-app built into WeChat – targeting Chinese MICE (Meetings, Incentives, Conferences and Exhibition) travelers. Known as MeetSG, the initiative allows Chinese MICE travelers to purchase tickets to entertainment venues such as Gardens by the Bay, Sports Hub and Sentosa with WeChat Pay.
From what we see in the examples above, social commerce isn’t just about making your social feed or app the new Orchard Road or the next market in Pratunam. The real appeal lies in its ability to provide a quick solution for brands of all sizes to fit into the daily lives of their target audiences, with digital payments serving as a conduit for user engagement.
As the Chinese New Year is in full swing, although more physically distant than ever, the humble red package (hong bao) offers a timely case study that could hint at social commerce as the next hotspot for digital payments.
For generations, the distribution of red packages has been a tradition for family members to exchange greetings on festive occasions. In 2014, the Chinese social networking app WeChat pushed the boundaries of the proverbial and the literal by pioneering the use of digital red packets. Their popularity has grown steadily since, with nearly 823 million people in China using the platform to send mail. hong bao to relatives and friends in 2019.
However, the role of digital red packages extends far beyond the meaning of festive cash gifts. Miaopai, a popular Chinese short video social media platform, often introduces campaigns during Chinese New Year where users can earn e-red packs by clicking on them while watching videos. Last year, the Alibaba Group allocated 500 million yuan ($ 77.71 million) in cash to its super app Alipay, and an additional 2 billion yuan to its sister e-commerce platform Taobao. Together, these initiatives should create more incentives to pay online on e-commerce platforms.
The importance of the digital red package means more this year than ever before. It has allowed us to stay close to our loved ones and maintain such loving traditions while keeping a safe physical distance. And while we all hope for a return to a new normal in the coming months, the socialization of commerce and, subsequently, payments, is a change that is here to stay.
We’ve known for some time that as e-commerce goes global, payments become hyperlocal. It is no longer enough for e-commerce to offer the usual option of Visa or Mastercard. Leading international companies are leveraging partnerships to offer a variety of payment methods that reflect consumers’ complex payment preferences. The same challenge applies to social commerce.
Facebook and WeChat are able to develop social commerce platforms exclusively – accepting only Facebook Pay or WeChat Pay – because they can exercise market power. Yet consumer payment preferences remain highly fragmented around the world; The Asia-Pacific is perhaps the most fragmented region of all.
There are over 40 e-payment licenses issued in Malaysia and the Philippines, while Indonesia alone has 41 licensed e-wallet operators. While the lion’s share is focused on a select group of top local payment methods such as GoPay, Dana, Grab, GCash, and MoMo, a narrow focus on payment methods in social commerce could potentially risk excluding a large pool of consumers.
For social commerce, an agnostic approach to digital payments based on strong partnerships is essential. There are signs the industry is moving in this direction, with Douyin, the Chinese version of TikTok hosting three payment options on its platform: Douyin Pay, WeChat Pay, and Alipay. Likewise, while Facebook Pay only supports debit, credit, and PayPal cards, its partnerships with Stripe to process payments leave room for adding more local payment methods in the future.
Just a few years ago, the ability to successfully establish a presence in e-commerce was only available to large multinational brands. With social commerce, anyone can do it; from Marvel Studios, which have successfully leveraged social commerce to achieve a 68% ticket conversion rate in Singapore, Malaysia and the Philippines for the movie “Ant-Man and the Wasp” to your next door neighbor selling homemade coffee concoctions on Instagram, social commerce is here to stay.
Digital payments are the last mile solution for social commerce, but perhaps the most important; it can help individuals and businesses successfully execute their social commerce strategy. It all depends on whether they take a partnership-driven approach that leverages the payment infrastructure and responds to consumer demands or decides to go it alone.
The writer is Global Head of Payment Networks at PPRO (www.ppro.com).