Rise of Alternative Payment Methods in Southeast Asia

January 17, 2022

As we move into the last quarter of 2021 and countries worldwide continue to grapple with the pandemic, it is fair to say that COVID has impacted every industry. When nations closed their borders and mandated people to stay at home, digitization and technology adoption emerged as saviors. People had no option but to adapt to hybrid ecosystems consisting of work from home, online conferences, online classes, and digital communication and entertainment. The fear of virus transmission turned staunch supporters of cash economies into ardent believers of digital wallets and contactless transactions. As businesses went digital, people shopped online and completed financial transactions with a few clicks on their smartphones or computers. Businesses across sectors were forced to adapt and transition to a hybrid way of work and life, offering solutions via dedicated online platforms. However, no sector was as affected as the payments industry—it significantly ramped up capacity to cater to the burgeoning requirements of a slew of new and existing customers.

The pandemic has transformed the entire payments ecosystem—contactless transactions have come to the fore much earlier than previously anticipated. In Southeast Asia, the pandemic and several other factors in the years prior have led to the rise of alternative payment methods that are disrupting the financial landscape in the region.

Heavy Digitization and E-Commerce

Google’s e-Conomy Southeast Asia report suggests that the region’s internet economy will be worth approximately $200 billion by 2025. Further, considering the population’s affinity for the online medium, products and services are being devised with the intention of leveraging Southeast Asia’s ‘internet friendliness.’ With a majority of upwardly mobile and urban youth using alternative payment methods such as digital wallets and payment platforms, Southeast Asia is on the cusp of a financial transformation. According to a BCG report, 49% of urban consumers, who are also commercial bank customers, already use e-wallets in their daily lives. The report also projects that this number could touch 84% by 2025, further accelerated by the social distancing mandates necessitated by the pandemic. 

While digital payments have picked up strongly in other countries, the Southeast Asian ecosystem is still in its developmental phase, offering tremendous opportunities to innovative FinTech and payments startups. As one of the world’s most populous and economically dynamic growth zones, the region is expected to evolve into a heavily digitized economy in the near future. Research by ACI Worldwide and YouGov suggests that people today are as comfortable with real-time digital payments as they used to be with cash payments before the pandemic. Reportedly, 61% of the people surveyed in Indonesia, Malaysia, Thailand, and Singapore now prefer real-time payments. This number is also higher than the preference shown for digital wallets requiring cash or card recharges and credit cards. The report further states that about 30% of Southeast Asian consumers have lowered their use of traditional payments methods in the aftermath of the pandemic, indicating that COVID, indeed, catalyzed the paradigm shift in the region’s payments landscape.

E-commerce has proved to be another catalyst for this transformation. It has been witnessing steady growth and has, in turn, promoted the adoption of alternative payment methods. According to a research study, e-commerce in Southeast Asia has spiked because of the pandemic, with Indonesia exhibiting the biggest appetite for the online marketplace, followed by the Philippines and Malaysia. E-commerce offers customers myriad benefits, ranging from the safety of shopping from their own homes to the convenience of pay on delivery to easy return policies. The report states that Southeast Asia has a higher prevalence of e-commerce than mature economies, with Indonesia depicting the highest e-commerce adoption globally (at 87% as of 2020). Thailand and Malaysia followed close behind, with 84% and 83% of their respective internet users purchasing things online. Southeast Asia has been a late adopter of the internet, and most of the region’s population accesses e-commerce and digital payment methods through increasingly affordable and accessible smartphones. Indonesia also topped the list of the world’s largest mobile e-commerce users, with 79% of the country’s internet users having bought items online using a mobile device.

Low Penetration of Traditional Banking 

Southeast Asia has a large number of unbanked individuals who are more than keen to embark on an alternative payments journey given the lack of banking penetration in the region. According to a report, a majority of the population in Southeast Asia is unbanked, with about 73% or 470 million people unbanked as of 2020. This is an extremely high figure, indicating the low penetration of basic financial services in Southeast Asia compared to other regions. Cambodia is among the countries lagging far behind, with traditional banking services accessible to only 5% of the population. In the backdrop of such a landscape, the presence of digitally powered alternative payment systems is enabling Southeast Asians to enjoy the perks of banking services without having to access traditional structures. The growing payments ecosystem encourages financial inclusion while also accelerating growth and development for the economies.

One of the primary reasons for the lack of traditional banking services in Southeast Asia was the extreme dependence on cash before the pandemic. However, post-COVID, the hybrid landscape is showing a drop in affinity for cash. An ACI and YouGov report states that 61% of consumers in Indonesia, Malaysia, Thailand, and Singapore preferred real-time payments and cash payments equally. 

Popular Alternative Payment Methods 

The Southeast Asian payments landscape underwent a dramatic transformation in 2020. For the first time ever, growth in digital payment methods exceeded growth in credit and debit cards, indicating the rise in popularity of alternative payment methods. Contactless payments became the norm, and retailers began to accept payments from various in-person channels including touchless interbank transfers, mobile-based payments, and QR code payment methods. Experts expect the stickiness factor of alternative payments to persist, with few consumers likely to revert to cash once the pandemic is under control. Even though card payments did not make a significant mark in the Southeast Asian landscape, the lack of adequate banking penetration and widespread digitization has ensured an influx of alternative payment methods aimed at offering seamless and optimal services to the new-age customer. Alternative platforms such as e-wallets and microcredit platforms have grown in number and popularity, giving stiff competition to the more traditional financial players in the region.

Here’s how the payments landscape in some of the larger economies in the region looks like:


Singapore is at the forefront of the alternative payments ecosystem. As per a report, the total transaction value in Singapore’s digital payments segment is expected to touch $11.2 billion in 2021, posting a 22.7% CAGR between 2021 and 2025 and reaching $25.4 billion by 2025. Further, according to a Visa survey, 66% of Singaporean consumers have now formed cashless payment habits, choosing to pay using cards or mobile apps. Major players in the country include CardUp, 2C2P, FOMO Pay, and Liquid Group. 


Malaysia is following close on the heels of Singapore when it comes to adopting alternative payment methods. A report suggests that 40% of the country’s use the technology. The top alternative payment service providers in the country are Boost, Touch ‘n Go, GrabPay, and PayPal. Boost is widely accepted at over 140,000 locations. According to the Global Payments Report by Worldpay and FIS, 14% of all e-commerce payments in Malaysia were made using digital/mobile wallets. 


Indonesia is at the forefront of digital adoption in Southeast Asia. According to reports, Bank Indonesia stated that the value of electronic money transactions reached $13.95 billion in 2020, depicting a 38.62% growth year-on-year. GoPay and OVO are the major contenders among digital wallets with the highest number of active monthly users. Dana and LinkAja have gained traction in recent times. According to the Global Payments Report by Worldpay and FIS, digital/mobile wallet was the most preferred payment method for e-commerce transactions.


With COVID cases seeing dramatic spikes in Cambodia, the country’s central bank and the Microfinance Association have urged people to limit the use of cash. As per a recent report, as of 2020, the adoption rate of digital payments in Cambodia was 40%. Popular alternative payment methods include TrueMoney Cambodia, Ly Hour Paypro, Pi Pay, and SmartLuy. 


Since the pandemic broke out, this Southeast Asian country has recorded strong growth in digital payments and alternative payment channels. As per a recent Reuters report, Thailand’s digital payments in February 2021 surged to double the volume in the year-ago period, with the number of transactions made via the PromptPay platform averaging 22.3 million per day. Major digital payment players are Pay Solutions, Bangkok Payment Solutions, SiamPay, and 2C2P.

“At FIS, we are seeing a marked shift toward the acceptance of alternative payment methods (APMs) in Southeast Asia driven by innovative, frictionless solutions being offered. Regionally, FIS is supporting our clients to enable various APM options, facilitating a true omnichannel experience—be it local real-time payment schemes or domestic debit schemes, including closed-loop channels. For instance, riding on the digital payments trend, we recently enabled an innovative wearable payments product launch in the Japan market. In the near future, we see a substantial opportunity in providing avenues to connect these locally prevalent APMs in the cross-border scenario, helping to take adoption to the next level.”  – Kanv Pandit, Group Managing Director, Asia Pacific, Banking Solutions at FIS

With the catalyzing effect of the pandemic and Southeast Asia’s affinity for digital services, there is no doubt that the underbanked region is primed for an alternative payments revolution. While the pandemic will wind down going ahead, the future is certainly bright for the rising digital payments market in the region.

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