Telling the fortune of digital payments in 2021, CNY style


Just over one year into the COVID-19 pandemic, it has been impossible to ignore the stratospheric growth of digital payment methods across the world. In APAC specifically, we’ve seen Facebook and PayPal join Google, Tencent, and other leading technology firms in backing Gojek, a popular Southeast Asian super app. Not missing a beat, Gojek’s competitor Grab has been keeping busy by purchasing stakes in popular e-wallets such as Indonesia’s LinkAja.

It’s safe to say that there’s never a dull moment when it comes to the region’s Fintech scene! But once the dust has settled behind this latest wave of M&A activity, what will be the next frontier for digital payments?

Social commerce and digital payments

When it comes to the battle of social media platforms, Facebook leads the pack with 2.8 billion monthly active users. However, it is closely followed by other popular social media and messaging apps such as WhatsApp and WeChat with 2 billion and 1.2 billion users, respectively. With such large user bases, these platforms are perfect for monetisation through e-commerce and digital payments.

In 2019, Facebook launched Facebook Pay in the United States, which is being progressively rolled out across Facebook, Messenger, Instagram and WhatsApp. Currently, users are able to pay for purchases on Facebook’s Marketplace, make peer-to-peer (P2P) payments and even donate to fundraisers. In the same year, Instagram launched its checkout function, a feature that allows people to purchase products they discover on the platform without ever leaving it.

Closer to home, in a world first, the Singapore Tourism Board launched a WeChat Mini Program – a sub-application embedded within WeChat – targeting Chinese MICE (Meetings, Incentives, Conferences and Exhibition) travellers. Known as MeetSG, the initiative allows Chinese MICE travellers to purchase tickets to leisure venues such as Gardens by the Bay, Sports Hub and Sentosa with WeChat Pay.

Social commerce isn’t just all about making your social feed or app the new Orchard Road or the next Pratunam Market. The real appeal lies in its ability to offer a quick solution for brands of all sizes to become embedded into the daily lives of their target audiences, with digital payments functioning as the intermediary for user engagement.

CNY – A testing-ground for the socialisation of commerce

With Chinese New Year in full swing, albeit more physically distanced than ever before, the humble red packet (hong bao) offers a timely case study that could hint at social commerce as the next hotspot for digital payments.

For generations, the handing out of red packets has been a tradition for family members to exchange well wishes during festive occasions. In 2014, Chinese social networking app WeChat pushed the proverbial and literal envelope by pioneering the use of digital red packets. Their popularity has surged ever since, with close to 823 million people in China using the platform to send electronic hong bao to relatives and friends in 2019.

However, the role of digital red packets extends far beyond the significance of festive cash gifting. Miaopai, a popular Chinese short video social media platform often introduces campaigns during Chinese New Year where users can win e-red packets by clicking on them while watching videos. Last year, Alibaba Group allocated 500 million yuan in cash handouts on its super app Alipay, and a further 2 billion yuan on its sister e-commerce platform Taobao.

The significance of the digital red packet means more this year than ever before. It’s enabled us to stay close to our loved ones and maintain traditions held so fondly while keeping physical distance. And while we all hope for a return to a new normal in the months ahead, the socialization of commerce and subsequently, payments, is one change that’s here to stay.

New frontier seeking same solutions to old problems

We’ve known for a while now that, as e-commerce becomes increasingly global, payments are becoming hyperlocal. It is no longer enough that e-commerce offers the usual option of Visa or Mastercard. Leading international companies are leveraging partnerships to offer a variety of payment methods that reflects the complex payment preferences of consumers. The same challenge applies to social commerce.

Facebook and WeChat are able to develop social commerce platforms in a proprietary manner – only accepting Facebook Pay or WeChat Pay – because they can exercise market power. Yet, consumer payment preferences remain highly fragmented around the world; APAC perhaps the most fragmented region of all.

There are more than 40 e-payment licenses issued in Malaysia and the Philippines, while Indonesia alone has 41 licensed e-wallet operators. Although the lion’s share is concentrated on a select group of leading local payment methods such as GoPay, Dana, Grab, GCash and MoMo, a narrow focus on payment methods carries the risk of excluding a wide pool of consumers.

For social commerce, an agnostic approach to digital payments built on strong partnerships is essential. There are signs that the industry is moving in this direction, with Douyin, the Chinese version of TikTok hosting three payment options on its platform: Douyin Pay, WeChat Pay and Alipay. Similarly, while Facebook Pay only supports debit, credit cards and PayPal, its partnerships with Stripe to process payments leaves open the possibility of more local payment methods being added in the future.

The power of payments infrastructure for social commerce

Just a few years ago, the ability to successfully establish an e-commerce presence was only within the reach of the large, multinational brands. With social commerce, everyone can do it; from the likes of Marvel Studios which managed to leverage on social commerce to achieve a 68% ticket conversion rate in Singapore, Malaysia and the Philippines for the film ‘Ant-Man and the Wasp’ to your next-door neighbour selling home-brewed coffee concoctions on Instagram, social commerce is here to stay.

Digital payments are the last mile solution for social commerce, but it just might be the most important one; it can help individuals and businesses successfully execute their social commerce strategy. It all depends on whether they adopt a partnerships-first approach that leverages payments infrastructure and meets the demands of consumers or decide to go it alone.