Survival of the fittest
Why embracing digital payments is critical to businesses in Asia Pacific
Chavi Jafa
Head of Business Solutions, Asia Pacific, Visa
Chavi Jafa
Head of Business Solutions, Asia Pacific, Visa
Alternative payment methods continue to grow in popularity across the business-to-business (B2B) landscape, as digital channels offer important advantages over traditional, paper-based schemes.
In Southeast Asia online shopping will hit $172 billion by 2025 versus a previous $153 billion estimate.
One notable trend which impacts consumers, small businesses and B2B operations alike, is the acceleration to digital-first commerce. Consumers have quickly adopted new ways to pay that do not involve physical contact, such as tap to pay and eCommerce, and businesses have increasingly put in place the processes and systems that enable these kinds of digital transactions to happen.
A recent report from ResearchandMarkets.com highlighted that the global eCommerce market is expected to grow from $1.8 billion in 2019 to about $2.4 billion in 2020¹. This presents a great opportunity for banks, fintechs and businesses to build on.
Asia Pacific has been among the regions seeing the biggest boom in eCommerce. COVID-19 has accelerated digital consumption across the region as many consumers experienced digital payments for the first time. If we zoom into Southeast Asia, research from Google, Temasek and Bain & Co, forecasts that online shopping will hit $172 billion by 2025 versus a previous $153 billion estimate². This provides an excellent opening for banks and fintechs to showcase the importance of digital payments.
The increased adoption of eCommerce by consumers means that businesses also have to keep up with the fast-changing times. No one is immune to these changes and particularly for small businesses, the pandemic has been a disruptive force to their financial health. Indeed, temporary closures of non-essential businesses and prevailing social distancing guidelines have taken their toll on small businesses. Amidst these challenging times, small businesses have demonstrated their resilience and adapted quickly. According to the Visa Back to Business Survey, more than two-thirds (67%) of small businesses have tried a new approach to keep their business on track since the start of COVID-19. More than a quarter (28%) have started to do targeted advertising on social media, sold products or services online (27%), allowed contactless payments such as mobile or tapping a card (20%) or offered home delivery (20%)³ .
Notwithstanding, small businesses are confronted with fresh challenges as they find themselves unable to perform routine tasks that have kept their business running smoothly.
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Benefits of digital payments are more evident
While the use of traditional payment methods, such as cheques, has provided small businesses with some temporary relief in terms of maintaining liquidity and improving cash flow, cheques and cash are increasingly proving to be inconvenient as temporary closures of non-essential businesses mean vendors and suppliers are unable to make trips to the bank, which could lead to delays in payments.
On the other hand, the benefits of digital payments are increasingly evident as concerns over handling cash grows. As more businesses adopt new ways of working remotely, digital payments could enable local and overseas suppliers to be paid on time, no matter where they are located. Through the pandemic, digital payments and in particular, contactless ones, have established a reputation for the preferred option. Digital payments typically also cut transaction processing time both in B2C and B2B scenarios.
To adapt is to survive
Besides having initiated new ways to pay and be paid, small businesses have also had to re-consider the way they run their operations as the digital revolution has progressed. This is one area in which commercial cards can add real value, beyond the payment itself. Through additional spend management capabilities enabled by rich, often near real-time data, commercial cards can offer greater visibility and enhanced control of business spend; enhancing business efficiency and providing business owners with the tools to help manage and ultimately grow their business.
Debunking myths about business payment cards
Although adoption of commercial cards in the Asia Pacific region is increasing, many small businesses are not aware of the full benefits business payment cards bring to their businesses. Even when these cards are used within the region, they are typically reserved for specific spend categories such as travel-related expenditure (including fuel); office supplies and overnight delivery services. Further to this, many organisations hold to the misconception that their purpose is restricted to being a mere payment option. But contrary to popular belief, business payment cards should be seen as finance management tools capable of providing businesses with better oversight and control over their working capital management. Indeed, there is value in using a business payment card for all day-to-day expenditure including supplier invoice-related purchases such as inventory.
There is value in using a business payment card for all day-to-day expenditure including supplier invoice-related purchases such as inventory.
A business payment card will allow small businesses to streamline their payments process while enjoying curated offers, cashback, and benefits. More importantly, some business card propositions can even extend credit by up to 55 days, to help improve the cash flow of small businesses – a critical consideration for many such enterprises, struggling to balance their books through the pandemic.
Another key concern is related to low supplier acceptance of cards in key supplier invoice categories. However, this is fast changing given the circumstances brought about by COVID-19. We’re witnessing a growth in innovative technology solutions created specifically to expand B2B card acceptance and bridge the gap between small businesses and their suppliers – making payments less of a hassle and more convenient. The technology to do this is increasingly available. But to ensure projects move from concept to real-world implementation, there is a growing need for buyers to work with suppliers to develop a disciplined financial business case, highlighting the commercial value of card acceptance.
The key is streamlining the lifecycle of digital payments and building a complete digital payments ecosystem. Those small businesses that are able to play an active part in the digitization of payments, will inevitably also be more likely to survive and thrive through the pandemic and beyond.
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- The Visa Back to Business Study Holiday Edition Summary, published September 2020.
- Survey commissioned by Visa and conducted among banks and corporates in 20 markets in June 2019 by East & Partners. See related release.
- AFP Electronic Payments Survey Report, published 2019.
- E-commerce Global Market Report 2020-30: COVID-19 Implications and Growth, Researchand Markets.com
- Google, Temasek and Bain, e-Conomy SEA 2020
- The Visa Back to Business study was conducted by Wakefield Research between June 18 and June 29, 2020, among 250 small business owners at companies with 100 employees or fewer in the U.S., Brazil, Canada, Germany, Hong Kong, Ireland, Singapore and UAE. Separately, the consumer portion of the survey was conducted by Wakefield Research between June 12 and June 29, 2020, among 1,000 Adults ages 18+ in the US, and 500 Adults ages 18+ in Brazil, Canada, Germany, Hong Kong, Ireland, Singapore and UAE. The data was weighted to ensure an accurate representation of adults ages 18+ in each market.
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