Developing an efficient e-commerce payment network can be daunting. Doing it in a region as fragmented as Asia? Even more so. An online merchant, a fintech start-up and two payment solutions providers weigh in. Xiou Ann Lim reports

While e-commerce transactions in Asia have dramatically increased year-on-year, the rate of shopping-cart abandonment is also rising – resulting in major losses for e-commerce retailers. This is according to CyberSource, an e-commerce credit card payment system company. Why so? The Visa-owned corporation reckons that this is due to friction during the payment lifecycle – which impacts customer experience, especially when consumers expect convenience and speed in this day and age.

"Consumer power has eroded traditional product-based advantages, and organisations are increasingly competing against each other to create better customer experience at every touchpoint," says Chew Ann Wee, senior regional director of Southeast Asia at CyberSource.

Chew is of the opinion that e-commerce merchants need to provide a wholesome end-to-end customer experience – from the moment a customer visits their website to the delivery of the product and beyond. Ultimately, this means that businesses have to provide customers with a variety of options.

"For instance, payment gateway service providers need to provide e-commerce merchants with the solutions to allow their customers to pay the way they prefer – regardless of device or currency," he says.

Chew also believes that they can enhance customer experience and capture more sales in doing so, ultimately boosting the competitive advantage of their e-commerce business.

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Take Zalora for example, Asia’s fastest-growing online fashion retailer that runs localised platforms in nine countries. Offering various payment options from all major credit cards, debit cards, eNETS and PayPal, it even offers cash-on-delivery for new shoppers or those without credit cards.

While this wide range of payment options may not be necessary in other regions around the world, it is essential in Asia where there remain large unbanked populations in emerging markets who still rely on cash. In fact, Gijs op de Weegh – chief operating officer of Payvision, a payment transaction processing services provider – believes that the flourishing e-commerce market in Asia is partly driven by a surge in mobile commerce, due to mobile internet adoption in emerging Asian markets. In turn, he says that this is driving consumers to shop online both domestically and across borders.

Citing China as an example of a leading e-commerce market, Op de Weegh says that the Chinese payments landscape was traditionally cash-based. Yet with explosive tech adoption, increasing mobile penetration and the desire to shop online – especially for overseas products – the online payment preference is shifting.

"Chinese consumers now prefer to pay with credit and debit cards or AliPay – largely through mobile applications," he reveals. Almost 80% of the 18m online cross-border shoppers in China are cross-border mobile shoppers, he adds.

Op de Weegh believes that credit cards continue to glue together the global cross-border e-commerce markets, and that they are still considered the most popular payment method for cross-border e-commerce. He also believes that established and well-penetrated Asian markets such as South Korea, Singapore and Japan are ideal destinations for cross-border business.

"The growth of the marketplace e-retail model in 2015 was a catalyst for a smoother cross-border shopping exchange," Op de Weegh says.

The marketplaces – essentially online shopping malls – allow uniformity and familiarity, adding perceived trustworthiness for hesitant cross-border consumers. They attract high volumes of local traffic, enabling immediate domestic visibility without requiring localised search engine optimisation.

"The marketplaces are the ideal starting point for merchants to gauge overseas market potential without large capital outlay or resource investment," he adds.

Asia’s fragmented geography is emblematic of its payments ecosystem – no one-size-fits-all approach will work across all markets. This effectively puts a dampener on cross-border e-commerce growth if players – merchants and payment service providers alike – are unable to adapt and localise.

Commenting on the challenges that cross-border e-commerce merchants have to overcome, Op de Weegh says: "Consumer rights laws differ considerably from one place to another. Similarly, privacy and data protection laws vary – as well as the requirements for some inter-regional personal data exchanges."

Adapting to the local language and culture can also pose problems when embarking into overseas markets if there are social sensitivities that differ from one country to another, as well as regional payment preferences such as AliPay.
The new global consumer
Apart from that, Op de Weegh says that a global challenge with both cross-border and domestic e-commerce is adapting to a new type of global consumer.

"Mobile commerce is creating a new breed of super-shopper, born out of a need to be continually connected to friends, retailers, services and finances. Consumers in 2015 want an omnichannel experience – they expect to shop anywhere, at any time of day, from any country, device, machine or channel. They expect the same experience from one touch-point to another," he adds.

Chew agrees: "The new breed of digitally savvy consumers is driving the convergence of channels. In response, payment gateway service providers have also embraced the change. They continuously harness innovative ways to help merchants reinvent and deliver a true cross-channel experience, while simplifying back-end operations."

In short, payment gateway solutions develop the payment infrastructure necessary to support fast and convenient transactions.


For cross-border consumers themselves, Op de Weegh believes there can be a lack of trust in shopping from retailers in other countries if currency and language are not correctly localised. However, he also believes that as more merchants are embracing cross-border e-commerce, there is a renewed focus on improving localisation and payment methods.

Meanwhile, e-commerce merchants such as Zalora have to adapt to the nuances of local markets – especially with third-party payment providers, as each country has a number of providers that offer payment services.

"We are very selective about whom we choose to partner with. Each provider has its own strengths and weaknesses, but we always work with the strongest," says Abhishek Vats, regional director of business intelligence and payments at Zalora.

Fraud and cybercrime

When it comes to card issuers, financial institutions, schemes, banks and acquirers, fraud and cybercrime can be very real concerns with cross-border e-commerce. A recent LexisNexis study on online fraud found that large e-commerce companies saw an increase in fraud as a percentage of total revenues between 2013 and 2015, up from 0.80%to 1.39%.

"With digital sales expected to be a much bigger source of revenue for all retailers, there is then a greater risk of online fraud," Chew says.

Op de Weegh agrees. "Online criminals and fraudsters make a concerted effort to communicate with each other and share tactics on circumventing the regulation of the card schemes. As such, cybercrime is still on the rise," he says.
He believes that the financial sector community could benefit from increased communication as well.

"But stakeholders within the payment and acquiring industry work independently – without sharing information and without a common strategy to fight cybercriminals," he adds.

Card chargebacks

So, what are some more common issues that occur at the payment stage?

According to Op de Weegh, card chargebacks – when there is a dispute between the merchant and the cardholder over the validity of the transaction – occur quite frequently.

"The cardholder requests the return of funds through the issuer if the goods were not received, were faulty or that the cardholder lacks knowledge of the transaction," he explains.

He adds that there are more digital vulnerabilities in Asia that cybercriminals can probe – with the high number of financial institutions, consumer patterns and very varied regulatory schemes.

"As such, Asia is twice as likely to be a victim of cybercrime. Credit card fraud in Asia represents over $100bn of deferred and delayed transactions," he discloses.


With the rise of fraud and cybercrime, one may be inclined to think that regulation is the solution.
But this may not always be the case. In fact, it can present its own set of challenges – especially when dealing with fragmented markets in Asia.

"It alters customer experience and imposes burdensome requirements, particularly for smaller players with insufficient financial strength. It can take a toll on competitiveness, as resources invested in compliance are removed from business-related initiatives," Op de Weegh says.

Chris Larsen – CEO and co-founder of Ripple, a venture-backed start-up that offers financial settlement solutions – believes regulators will need to find new ways to implement global, cooperative regulatory frameworks for emerging financial technologies.

"We envision a framework similar to that of the 1997 Bonn Declaration for e-commerce: robust, secure and with built-in consumer protections," he says.

Poor infrastructure

Not only that, Larsen says that Asia has a high diversity of currencies and a fragmented infrastructure, which can lead to a lower likelihood of a payment reaching its final destination on the first attempt in today’s payments ecosystem.
"Merchants, consumers and card issuers all face the same problem – the limiting factor of an outdated 1970s payments infrastructure that results in slower, more expensive payments.

"Today’s payment networks are siloed and are not interoperable with one another," Larsen says.
While consumers are demanding real-time payments, a payment typically takes two to four days to move across borders in today’s correspondent banking system.

"The world needs a way to move value without a central operator, which is where distributed financial technologies like Ripple come in," he adds.


Education and research are key starting points to overcome the challenges associated with cross-border e-commerce.
"Understanding a target market, locally preferred payment methods and consumer idiosyncrasies is absolutely essential in successful cross-border e-commerce expansion," says Op de Weegh.

This has never been more crucial than now, a time when Asian e-commerce is accelerating and American and European businesses are more frequently expanding into the region to capitalise on this growth.
Applying an identical business model, work ethic, marketing plan and payments process directly into Asia will never work for Western businesses without local presence or flavour.

For global cross-border e-commerce analysis, click here