Recently ThePaypers published an exclusive interview with Markus Rinderer, CEO of PAY.ON AG, in its special online newsletter about the Asia/Pacific payment region. The Asian e-commerce market is not a uniform market, but rather a collection of economies currently at different stages of maturity. Therefore fragmentation is to be expected both in-country and at a regional level. Each market in the region is increasingly developing its own characteristics and dynamics. It is generally considered that Asia has the biggest market potential in almost every industry. Highly integrated with the global trading and financial systems, Asia is undoubtedly set to become the largest economic region in the world and this will have significant and positive consequences on the e-commerce market.
Following the core statements of the ThePaypers interview with our CEO.
What is the business model for the most successful players in Asia-Pacific and how is that different from the rest of the world?
Markus: In the APAC region MSPs/payment service providers need to establish a very close relationship to the acquiring banks and their staff to accomplish their work successfully. Additionally, MSPs need to have a local entity in each APAC country in case the MSP wants to process with merchants in different APAC countries. Only Hong Kong and to some extent probably Australia & New Zealand seem to be less demanding regarding this requirement.
For example, China is extremely strictly regulated on how MSP/PSP operations are running their businesses. First, a local processing centre is required. Second, international companies must have a local partner with about 50% company share to start business in China. However the requirements in China are the strictest. The awareness of merchants for a good payment processing infrastructure characterized by high quality/state of the art standards and a high level of automation is much less developed. Often local APAC MSPs tend to build their own IT payment infrastructure.
In other APAC countries it is easier to run a domestic MSP/PSP operation, but local managers and their local staff should be in relevant or exposed positions to build up a local touch and strong trust with local clients and acquiring banks. Beyond this local APAC MSPs seems to be less involved in expanding their processing services into neighbouring APAC countries. They are less used to provide services to non-domestic merchants.
Generally: Successful business models in payment depend on the conditions of the respective countries such as infrastructure, income, access to banking services, legislation, culture, buyers behaviour, and development of the ecommerce market. The great fragmentation of the APAC market is a fragmentation in terms of all of these characteristics what has an impact on payment methods and schemes used in each country. Each country is a separate case and needs a separate business model. For payment service providers, the expansion in APAC means to study each market, player and legislation, it is an expansion of country by country. But, the Asia-Pacific region now holds 41% of the world’s internet population which is an enormous undeveloped potential for market participants from Europe and the USA.
In terms of online payments, mature markets such as the US and EMEA will continue to show very attractive growth rates but the big numbers will clearly come from new markets such as the Latin American and Asian Pacific region. In your opinion, which consequences will this have on international payment service providers?
Markus: European and USA based payment service providers/MSPs are getting more and more interested in processing payments for Asian markets and their hundreds of millions of Asia shoppers. HerePAY.ON can help with its best business connections over its Asian subsidiary as well as with its routing gateway PayPipe to be connected easily, swiftly, and directly to the Asian scheme operators and acquiring banks on the base of only one single API. PayPipe fulfills the requirements of all participants along the financial supply chain. Merchants with strong brands of European and/or US region origin ask for the acceptance of China UnionPay (CUP) cards of Chinese shoppers.
Even some of these merchants plan to benefit even more directly from the economic growth in the APAC zone by strengthening or ramping up their own sales in the domestic markets of the APAC region directly. These merchants, especially with international strong brands expect similar processing standards like they are used to in Europe or the US. International payment service providers have a great chance to follow these merchants into these markets and to undergo a learning curve as well.
In your perspective, can Asian markets leapfrog development stages when they learn from other regions or when big European/US players from outside tap into these markets?
Markus: Asian merchant markets are interested in selling their products and series abroad and need state of the art risk management services which they are quite often not receiving at the same level like European or US based merchants. Some Western Risk Management Providers seem to take advantage of this at this moment. The strong risk management service proposition of European or US based MSPs could be advantageous to convince Asian merchants as long as sufficient local touch such as support of the local language and familiarity with local business practices is presented by the foreign MSPs.
Does fragmentation hinder the progress of online payments in the region? Is it fair to say that from this point of view, Asia-Pacific is a reflection of the European payments culture? Can you point out differences/similarities?
Markus: The Asian/AP market is fragmented in the sense that local payment methods do also exist like in Europe. The relevance of the local payment schemes depends very much on each specific APAC market.
The availability of international debit and credit cards varies strongly from country to country. In Hong Kong, Singapore or South Korea the penetration of credit cards of MasterCard or VISA is quite strong while other regions like the Philippines, Vietnam etc. compared to the size of the population are much behind regarding availability for use. Such patterns have been seen also in Europe. Regarding both aforementioned topics a similarity between Europe and Asia can be identified.
However the ratio of the unbanked population in the Asian region (maybe less in fact in the APAC region besides the Philippines, Vietnam) is significantly compared to Europe. This is also a huge chance for any mobile payment service initiatives.
– In Asia processing cross licensing does not exist for VISA and MasterCard culture for Asian/APAC acquiring banks such as in Europe which is a unique region in this respect.
– The ratio of cross border shoppers within the APAC region is until now lower as in the European zone, in particular compared to the most developed European economies like in UK, Benelux, Germany and Scandinavian countries.
The market fragmentation can be easily overcome in the same way as in Europe where payment gateways serve as an access point to all important payment schemes. As a global processor PAY.ON´s services are an accelerator or rather a distributor for all international payment methods for the whole payment industry. With white label PSP platform PaySourcingand routing gateway PayPipe clients are automatically connected to all available payment schemes worldwide. Actually several hundred payment service providers, acquirers, merchant service providers and financial institutes are using one or more of PAY.ON´s services. Doing so, our several hundred clients in the USA, Europe and around the globe can directly bring our Asia/Pacific connections into use for their merchants to connect them to hundreds of millions of Asian consumers.