ASEAN SMEs yield big business for PayPal

SMALL, digitally plugged-in businesses give Rahul Shinghal, PayPal's Singapore-based regional managing director, plenty of cause for cheer.

The Nasdaq-listed payments firm has picked out three key business verticals in South-east Asia: travel, freelance workers, and micro, small and medium-sized enterprises.

"We are not able to share specific numbers," said Mr Shinghal, who is also head of merchant operations for the Asia-Pacific.

"But what we can say is that South-east Asia is one of the group's fastest-growing regions and the markets within it are among our highest revenue contributors."

PayPal last year reported US$13.1 billion in annual turnover, with 7.6 billion transactions across 227 million active customer accounts worldwide.

Citing the region's diversity and fragmentation, Mr Shinghal said: "We realised early on that we will need to find commonality (among) these markets to scale up, because one cannot achieve scale in any one of the South-east Asia markets, apart from Indonesia." This led PayPal to pay close attention to small businesses and freelance workers, groups that Mr Shinghal said now make up the bulk of transactions on the firm's platform.

"For many emerging economies in South-east Asia, they are the engines of growth," he said.

"PayPal, being a digital payments provider that can facilitate cross-border transactions, is uniquely positioned to help these SMEs and freelancers gain access and connect to the global digital economy.

"A Lego-builder in the Philippines can now sell his manuals to customers in the US and receive payments via PayPal. South-east Asia has given us a role as the flagbearer for SMEs and freelancers."

YOUTHFUL DEMOGRAPHICS

Mr Shinghal added that youthful demographics bode well for growth: "Enabled by improved technology, more and more South-east Asian millennials will be coming online - to shop, to sell, to connect, to make a living.

"With online consumption expected to increase, this not only has huge potential for e-commerce, but will also be instrumental in the development of the gig economy, especially in South-east Asia's emerging markets."

Calling the region "home to increasingly vibrant entrepreneurial economies, especially in Vietnam and the Philippines", Mr Shinghal said that these countries are key markets for PayPal's focus on freelancers.

"We . . . have or are looking at initiatives and programs that will help elevate the standing of freelancers and empower them in their autonomy so that they can participate and thrive in the global economy," he added.

"The next wave of growth will come from social commerce - and in a large part this will be driven by freelancers, many of whom are online sellers and entrepreneurs. Social media is definitely transforming from just a networking platform to a digital marketplace. . .The more we can make payments disappear into platforms, the more we will be helping our entrepreneurs, our SMEs and our freelancers gain a competitive edge."

In many of the global markets where PayPal operates, it does business through a wholly owned subsidiary housed in the Republic, according to its latest annual report. "Singapore is not just the international headquarters for PayPal, but it is also the hub of our South-east Asia strategy due to its unique position as a microcosm of the wider region," Mr Shinghal explained.

CONDUCIVE ENVIRONMENT

"The Singapore government's Smart Nation drive and the country's strong regulatory framework also create a conducive environment for innovative technologies to thrive, which is key for our business.

"For example, the Monetary Authority of Singapore's initiatives to drive the adoption of e-payments in Singapore and overcome challenges of interoperability between payment systems align with our own initiatives to promote a cashless society."

He added: "As a result of the nation's high connectivity to digital and electronic devices, Singapore is a mature market for e-commerce, which enables us to have a strong consumer franchise here. We partner many leading Singapore merchants, and are privileged to be associated with iconic heritage brands such as Singapore Airlines, as well as next generation tech and e-commerce players like Razer, Grab, Lazada and RedMart. We are also privileged to help many local brands expand beyond Singapore and go global, such as Reebonz and Naiise."

Financial inclusion and payments connectivity are among the priorities of Singapore's ASEAN chairmanship.

Asked about how the roadmap for regional integration could benefit PayPal, Mr Shinghal said: "We are looking forward to the wider adoption of digital payments, which . . . will only be a matter of time, given the increased connectivity in the region and the increased tech-savviness of the younger population, as well as more integrated digital payment systems."