Leveraging Digital Transformation and Payments to Foster Business Growth in 2022

Introduction

In the many nations that make up Asia Pacific, digital transformation is gathering pace as a multi-faceted phenomenon that reflects the diverse characteristics of the region. Digital transformation (DX) is affecting operations, communication, payment options, customer management, the supply chain, and all aspects of life and commerce.

APAC’s digital evolution and the role of digital payments in fostering business growth was the focus of this episode of Digital Transformation & Leadership, in which Danny Levy of WBR Insights talks to Mohamad Hafidz, Head of Payments & Financial Services at AirAsia and Nagesh Devata, APAC Regional VP & Head of Enterprise at Payoneer.

The Evolution of Digital Transformation in APAC

Over the past two years, digital transformation and digital awareness have come to the forefront of global consciousness. According to a recent study by UnivDatos Market Insights, the Asia-Pacific digital transformation market is expected to grow at a Compound Annual Growth Rate (CAGR) of 13.5% from 2021-2027 to reach US $1,334.3 billion by 2027. Increasing adoption of smartphones, the increasing penetration of online business, and a growing number of government initiatives to digitalise regional economies are contributing factors to this growth.

Recent analysis from Asendia indicates substantial inbound growth in eCommerce in the region, with Asian markets growing at around 20% per year on average. China is the number one eCommerce market worldwide and other countries in South-East Asia are forecast to be number 4 by 2025.

According to Phocuswright's latest travel research report Asia Pacific Travel Market Report 2020-2024, the APAC travel market is anticipated to reach its 2019 size by 2024. A study by Mordor Intelligence projects that Asia-Pacific travel retail market will rise at a Compound Annual Growth Rate (CAGR) of more than 10.1% during the forecast period, 2021-2026.

Meanwhile, The China Freelance Platforms Market report indicates that the freelancing market, which includes platforms such as Fiverr, Upwork, and PeoplePerHour and was valued at USD million in 2020, is projected to reach USD million by 2027, at a CAGR of % during the forecast period 2021-2027.

On-demand access to IT resources, the ability to quickly scale to support changing business priorities, and greater cost efficiency have fuelled an expenditure on public cloud services in APAC of some US $48.4 billion in 2021. The cloud deployment model dominated the market in 2020, generating revenue of US $366.1 billion. It is anticipated to maintain its dominance during the forecast period 2021-2027.

The march toward digitalisation seems inevitable. Countries that were previously seen as reluctant or lacking in digital awareness and the will to innovate are using this momentum as a means to reinvent themselves. Yet even in this atmosphere of digital acceleration, there remain organisations that have yet to take up the DX challenge.

Accelerating the Digital “Slow Lane”

One of the biggest challenges facing organisations of all sizes in this position is not knowing where to start. Another major obstacle is a lack of awareness of the opportunities that a digital focus and a global rather than local emphasis (such as looking to cross-border trade as a revenue stream) can offer.

From a merchant’s perspective, many organisations in the digital transformation “slow lane” have been hung up with pandemic crisis management. They are neglecting to realise that the lull caused by COVID-19 and its after effects actually presents an opportunity for them to regroup, reform, and look a the bigger picture in terms of pursuing new lines of revenue.

With the popular idea of mobile apps for example, merchants must look to a complete and holistic solution that encompasses the core features of the software itself, the business line and back office infrastructure supporting it, a value proposition for the user that is actually what the customer needs, and a payment system the customer can easily use. With so many factors to consider, a strategic approach to transformation and digital initiatives becomes key.

Separating initiatives into manageable components is one way to facilitate this strategic approach to digitalisation. Business strategists, technology providers, and system engineers can focus on optimising each component (payments, Customer Relationship Management, etc.) as an entity in itself. Use of Agile methodologies such as Product Discovery and Design Thinking can identify and optimise products and services that fulfil actual customer needs. They can also provide the tools for seamlessly integrating the various components into a cohesive whole.

How to Leverage Payments to Foster Business Growth

The UnivDatos Market Insights study reveals that the Banking Financial Services & Insurance (BFSI) segment has been the largest adopter of digital technologies in Asia Pacific to date. Though the digital solutions segment dominated the Asia-Pacific transformation market, accounting for more than 77% share in 2020, the service segment is expected to witness the highest growth during the analysed period from 2021-2027.

Financial Technology (FinTech) and digital/electronic payment systems are however achieving penetration in all sectors of the economy, and have a key role to play in fostering business growth.

At AirAsia for example, the aviation industry focus is on moving people and commodities from A to B. This ethos extends to the organisation’s attitude on payments. Moving money from one point to another in the best way possible creates value, both within and outside the organisation. This emphasis on value creation informs the making of strategies for moving money along various lines of business.

In many ways, payment is the life’s blood of any business organisation. To keep money flowing internally and externally, it’s therefore necessary to optimise internal processes, and to form partnerships with other agencies to achieve full coverage for external revenue flows.

At the customer-facing level in today’s economy, physical or cash payment transactions are now largely a thing of the past. Consumers are fixated on hygiene, safety, and convenience, and have a range of options available for achieving these goals. This puts the onus on organisations to make their payment mechanisms adaptable to individual customer needs, seamless, and effectively “invisible”. It can be taken as a given that the customer wants or needs to pay for something. Whether they wish to do so by direct debit, “Buy Now, Pay Later”, or some other mechanism, it is the organisation’s task to facilitate this operation.

Technology has a key role to play here, in making sure that payments do not become a bottleneck to customer experience management and wider business operations. FinTech and payment solutions have the power to make all transactions painless, simple, and intuitive. With the “SuperApp” deployed by AirAsia for example, customers are pre-authenticated. This reduces the need to challenge their credentials for every subsequent purchase. Payment technology platforms also provide the flexibility that organisations require to continuously provide new options which adapt to changing customer requirements.

Payments technology can also provide critical remedies to hiccups and roadblocks that disrupt the checkout and fulfilment processes for consumers. For instance, the Payoneer platform gives particular attention to post-purchase transactions which can be crucial to maintaining customer engagement and loyalty, such as refunds, returns, and the management of chargebacks.

For the business, payments can therefore become an enabler -- provided the execution is of a high enough standard. Ideally, payment should be invisible, frictionless, and as near to instantaneous as possible. With advances in FinTech, this applies equally to both domestic and cross-border commerce. In crafting such payment technology solutions, customer experience is paramount.

For merchants and smaller scale enterprises in particular, traditional finance institutions may not offer the range of options needed for agility and success in today’s markets. With small and medium-sized enterprises (SME) now employing 75% of the world’s workers and constituting 90% of businesses globally (as well as contributing the same percentage to global GDP), the field is ripe for digital payments providers, marketplaces, and others in the FinTech ecosystem to step in and provide solutions more specifically tailored for their needs.

The Outlook for Digital Transformation in 2022

As hopes for negotiating a path beyond COVID-19 continue to fluctuate, tensions are being generated in various markets. These are most notable in fields such as retail, with the outlook for bricks-and-mortar still up in the air as consumers continue to transact their purchases online. The travel industry is also in a state of flux, as limited international excursions are being thrown into doubt by the emergence of the Omicron variant. Unresolved tensions between digital and physical also persist, as organisations strive to overcome existing and future disruptions to the global supply chain.

Whatever the outcome for physical business processes, digital is set to remain high on the list of customer preferences. Consumers will also continue to demand new payment options, which will become increasingly specific to their geographical locations, and the requirements of their regional markets. Advances in data analytics also introduce the possibility of more personalised payment experiences for the customer.

On the customer side, we are witnessing an increasing preference for digital payment options that’s comparable to the historical shift from banking hall transactions to ATM withdrawals. Mobile apps, virtual money, and “one tap” or contactless methods of funds transfer are becoming more commonplace in the eyes of consumers, and will become even more widespread as financial technologies evolve and organisations continue to digitally transform.

Cross-border commerce is set to continue growing, as digitalised businesses perceive the opportunities available to them in a global market. This will lead to increased competition among organisations scrambling for a share of the bigger pie.

More broadly, as banks and traditional finance institutions come to recognise their own limitations within a digital market, 2022 and the years beyond will likely see the formation of more partnerships between Old School finance and FinTech, to fill up these performance gaps. This may be in form of increased investment in FinTech by the banks, who will reap the benefits of access to innovative technology without the burden of having to develop it themselves.

Some Leadership Lessons

• Keep an eye on the overall landscape, while retaining an awareness of the building blocks available to you for solving specific problems or dealing with particular issues. This will assist you in developing the broader strategies, and identifying or deploying the components needed for putting those plans into effect.
• Be flexible, and use the learnings that you have. This is particularly relevant to younger captains of industry, who can draw upon the experience and expertise of their veteran colleagues and partners.
• Be prepared to take risks -- but do so in a thoughtful manner, and with a realistic eye for the potential consequences.
• The path to business success is a marathon, not a sprint. So there is scope to ask questions, test assumptions, and be open to new possibilities along the way.

About Payoneer

From borderless payments to boundless growth, Payoneer promises any business, in any market, the technology, connections and confidence to participate and flourish in the new global economy. Since 2005, Payoneer has been imagining and engineering a truly global ecosystem so the entire world can realize its potential. Powering growth for customers ranging from aspiring entrepreneurs in emerging markets to the world’s leading digital brands like Airbnb, Amazon, Google, Upwork and Walmart, Payoneer offers a universe of opportunities, open to you.