Building the size of a Digital Goods Company in Asia Challenges, Opportunities and insights -
If you're a business in the APAC region and you're planning to expand into other areas There are plenty of common challenges to face and queries to be asked on the best method to go about it.
In this episode of Growth Stage, we interview Jay Jia, Senior Account Executive, to discuss his knowledge on:
- Tips on expanding an online goods business in Asia.
- Current market trends across Asia that can affect expansion and the challenges related to those changes.
- The payment landscape and the impact it has on firms looking to expand their operations in Asia.
If you're unsure of what to do to boost growth of your software or digital product enterprise in Asia, listen or watch right now!
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Podcast Full Interview: Audio
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Video Interview with Podcast: Video
Transcript
Jesse Paliotto (00:04)
Hello everyone and welcome on the Growth Stage, a podcast in which we talk about how digital product companies grow revenues, create valuable products, and boost the profitability of their company. I'm your host today, Jesse Paliotto. I support the digital product community through my role with and we want to share the top of the digital product community to you through this podcast called the Growth Stage podcast.
Today, we'll talk about growing a digital goods business in Asia and some of the issues, the opportunities and lessons. Also, we've got Jay Jia with us and we're going to get Jay's thoughts on expanding a digital goods company in Asia and, in particular, looking at current market trends and some of the issues, and the payment landscape and the payment landscape. If you're a company based in the APAC area that is expanding to other regions, what are maybe some common challenges or questions you might face?
It's great to meet you. Jay I am really happy to have you here today. Looking forward to chatting. Jay, can you just provide us with a brief description of your work?
Jay Jia (01:06)
I appreciate your time, Jesse. Hi everyone, this is Jay and I am the caretaker of APAC region here at . For those that might not be familiar, is a merchant of record platform which combines the most important tools you need to scale a digital goods business. We handle everything from payments to fraud management, to custom help and tax compliance in order to let sellers concentrate on expanding their businesses. Prior to joining, I worked for quite a number of years working in the industry of payments.
With companies such as GrabPay with companies like GrabPay and Stripe to help businesses deal with the complexities of global expansion. And today I'm excited to provide more insight into companies like GrabPay and Stripe to help businesses navigate the complexities of expanding into APAC market, specifically from a digital goods perspective.
Jesse Paliotto (01:48)
That's awesome. It's a pleasure to have enjoyed the opportunity to work together with you in your capacity there and discuss how we can better serve our customers in the Asia area. I'm interested in what trends you witnessing within China as well as the entire Asia Pacific region right now?
Jay Jia (02:10)
We all know that it is true that the APAC region is extremely diverse and each region has its unique characteristics. China is a world economic giant with its innovative e commerce market and its super app ecosystems, such as WeChat and Alipay and Southeast Asia with countries like Indonesia, Vietnam and Thailand is rapidly developing thanks to the growing mobile-first generation and a expanding e-commerce markets it is, well,
India is a second fast-growing market, with an exploding tech sector and a heightened focus on mobile commerce as well. In the case of Japan and Korea, they're mature markets known for their advanced technology use and high expectations for consumers, while Australia and New Zealand serve a stable developed, well-developed market with high levels of digitalization. Recently we've witnessed the cross -border e -commerce market, specifically in China becoming saturated due to intense competition from big platforms such as Temu .com.
However it is true that the Digital Good space, particularly in SaaS and entertainment in general, offers new possibilities that have higher margins as well as huge greenfield potential.
Jesse Paliotto (03:18)
So when we look at the growth of digital products or the companies that sell digital products which are expanding, does it coincide with what you've just mentioned? regions and the growth trends you observe?
Jay Jia (03:29)
Exactly, exactly. The digital goods market within APAC is growing extremely rapid, with a particular focus on two major sectors. One, in terms of utility-based software, and number two, with regard to general entertainment. The utility-based software category includes SaaS firms that operate frequently on business models that are recurring, while general entertainment covers applications like gaming or social media platforms. IP driven content for example, short-form films.
So one of the most interesting developments is the rising popularity of AIGC that means AI generated content, especially in the context of Chinese companies leading the global technological advancement, don't you think? AIGC is creating brand new opportunities in creation of images, text and video production, as well as music as well as audio which are increasing at a rate that is unprecedented. However, this growth actually isn't without challenges, specifically regarding compliance with the content laws.
and be able to ensure a steady payment channel, that is which can be a crucial source of and support. With the ambiguity of rules governing this new set of technologies, stability becomes a really huge challenge and a major concern for AIGC sellers, especially when treading into image and video generative content. This is due to the fact that the tools and technology they use could be abused by end customers for non -compliant content. So without the right controls and checks in place,
AIGC sellers often encounter a risky circumstance where their payments accounts get potentially shut down by their service companies. And that is where having a knowledgeable MOR such as us becomes crucial because we're not only able to provide a stable and reliable payment processing channel however, more importantly we'll provide guidance, support on the latest regulatory frameworks with our commitment to drive towards sustainability and compliant businesses.
Jesse Paliotto (05:22)
Yeah, that's interesting. That's why the AI generated content businesses face, in essence, more risky companies, to speak. So, having a reliable MoR who can represent them in markets can be a means for them to kind of reduce the risk. The way to do this is to tell them that we're working with somebody who's going to be processing payments for us and will handle every interaction as well as payment options for our clients. And so that's a way to mitigate that risk is working with somebody that is reputable, which you're doing.
Jay Jia (05:51)
Exactly, exactly.
Jesse Paliotto (05:53)
Do you have a chance to talk a bit about the payments scene in Asia Pacific area?
Jay Jia (06:00)
For sure. The payment landscape of APAC is as varied as the continent itself. In markets that are mature, such as Singapore and Malaysia, credit and debit cards rule the marketplace in the rest of Southeast Asia, for example E-wallets like GoPay as well as Ovo are surging in the market due to a huge population that is unbanked and under-served. insufficiently banked populace.
Jesse Paliotto (06:06)
Yeah.
Jay Jia (06:24)
Bank transfers that are real-time are also popular in other countries such as Thailand and Malaysia through PromPay or FBX respectively, while Purchase Now, Pay Later BNPL choices are getting more popular with younger buyers. Therefore, each method of payment has been adapted to specific needs in the local market, which is why it's essential for global sellers to adopt multi-channel payments. One of the keys to success in APAC is to be aware of and accommodate these different payment preferences.
Jesse Paliotto (06:50)
Yeah, I know we've talked about this and we've talked about it in the company which.
Serving, as you're aware, one of the, among the value that we offer is that when you go to certain regions, you have to offer the local payment method that the audience wants and prefers to use. The first thing you mentioned really is a hit with me because it's an extremely diverse group of nations, payment methods and currency, and all these types of stuff. So there's a lot to handle there and do it all alone as a small business that's looking to expand. What can you do?
Jay Jia (07:27)
When it comes to selling into APAC, this actually demands an understanding and a deep localization of every market, each with its own set of unique problems. As an example, Japan is famous for its widespread adoption of Konbini payment methods, in which consumers can purchase goods through the web, then walk to a convenience store for payment by cash or cards in person. cash.
And this showcases a unique combination of multichannel payments. On the flip side, in India the recurring payment process is made more complicated due to the e-mandate system, which requires users to sign-in every transaction. This is essential for SaaS companies that value optimization for recurring revenues. In the majority of Southeast Asian's population that is not banked it will require specific strategies, particularly with regard to mobiles first and a local payment method viewpoint.
One excellent example of successful localization is how Grab and Didi which are kind like localized version of Uber are able to outdo Uber by a wide margin in Southeast Asia and China respectively. Both firms adapted their strategies to the local needs, regulations environments, and cultural nuances eventually leading to their dominance in these regions, don't you think? In the case of Grab, for instance. Grab has adapted to local needs in allowing cash-based payments, as well as launching Grab Pay which aimed at those who are not banked in the region, and specific services, such as Grab Bike for Vietnam as well as Grab Tribe.
in Philippines in order to cater to the needs of the market. Additionally, Didi partnered with Chinese tech giants such as Tencent as well as Alibaba using their platforms to reach millions of people within a very short period of time. So in summary, in order to succeed in APAC it is essential for sellers to understand the unique and varied dynamics of each individual market.
Jesse Paliotto (09:15)
It's hilarious coming from marketing perspective, and I'm from an industry background, namely marketing to those who don't recognize me from the show. I work with marketing at our company, and"omni-channel" is a long time used phrase in marketing, where you're interacting with the audience in lots of ways, and then coordinating the interactions to create a cohesive brand and a coherent experience. I love your use of it though for omni -channel payments that people use to pay for services.
physically at a shop and on the smartphone, and they're dealing in cash. There's this kind of multiple channel approach that you have to be able to do so that you can successfully sell into that market or to this group of people. This is extremely insightful. Can I turn it around slightly? If you're a business which is located within the Asia Pacific area, in China or within the Asia Pacific region, and you're trying to expand out of your local market,
Do you have any ideas about challenges or opportunities that a company in that post should be considering?
Jay Jia (10:20)
Hmm, definitely. Therefore, extending to the world from APAC comes with its own set of unique challenges as well, particularly around, for example, compliance. For example taxes, for instance, compliance, data security as well as, on top of this, the management of fraud and fraud management. So, as we know every market is subject to a different tax regulation. In the United States .S. Every state has a different policy and threshold. And imagine the complexity of coordinating transactions with many countries.
Jesse Paliotto (10:32)
Thank You!
Jay Jia (10:49)
needing to determine the amount, pay, and then remit taxes to local tax authorities. And this is a really frequent scenario that we observe because many digital goods sellers, like SaaS businesses, are global from day one and don't limit them to one particular region. Additionally compliance violations can lead to severe penalties ranging from huge fines and penalties to hinder fundraising in the longer term for high growth startups in the event of non-compliance. And similarly,
Jesse Paliotto (11:05)
Mm
Jay Jia (11:18)
Compliance with data protection laws such as GDPR in Europe is difficult as also because it demands businesses to navigate complicated region-specific laws to safeguard personal information. This requires substantial changes to data handling practices and procedures to avoid huge fines and reputational damage. On the other hand the biggest challenge is preventing fraud on credit cards which could take up resources and reduce the revenue.
In 2024, global losses resulted from fraud on credit cards are predicted to continue on an extremely upward trend, with loss of thirty billion dollars in 2022 and expected to grow to 43 billion by 2028. The increase in fraud is largely driven by C &P or card not present transactions, which make up a large portion of fraud cases across the internet and in digital transactions.
Jesse Paliotto (12:02)
Mm
Jay Jia (12:15)
Furthermore, new security threats like identity theft as well as the usage of generative AI to detect deep fake frauds are causing a lot of confusion which makes it harder for businesses to protect their own businesses from sophisticated scams. This is precisely why Fastbring's MoR model shines, as we're able to provide localized processing of payments that helps make it easier to access certain markets.
However, on the top we've invested a lot in the infrastructure to ensure the highest level of compliance such a taxation and data standpoint so that sellers are able to leverage on our already optimized customized rule sets, based on various industries in order to combat fraudulent transactions, cutting down on fraudulent transactions, while still allowing authentic transactions go through and thereby increasing revenue for our sellers.
Jesse Paliotto (13:10)
That's interesting. There's a couple, let me be sure that I'm taking note of capture, because I thought there were two distinct themes to what you just said. The first is that, as companies expand into those markets, ensuring compliance to regulations within these local markets becomes more complex.
And so the need to manage all the demands that I just, especially with digital product companies and what you started to say just a couple of minutes ago about are the trends of growth in the Asia Pacific region include a lot of areas that are growing in sales of their digital products. The sales of digital products are simple to trans the border, as you simply click on the link on the website or in the app. You buy and you could be in Korea, you could be within Japan and you might be in Vietnam. However, the danger that comes directly to the firm is
Are I in compliance with selling in Vietnam? Are I in compliance with any tax requirements to sell in Japan? In order to offset this set issues with compliance was one thing I heard you say. Another was plain fraud. Fraud is rising in all these locations. And so rather than handle that as a company as a direct hit and responsibility to pay for it, let an official merchant like serve as the intermediary...
Both detect and possibly eliminate it, or take action if the fraud is present. Do you think that this captures that well?
Jay Jia (14:35)
Exactly, exactly. As we know, like each market is extremely diverse and you know, every market comes with its own sort of laws for example, from the taxation or data perspective. Many of the payment providers out there are actually, they possess a wealth of knowledge from like a payments optimization viewpoint. But unfortunately from like an compliance perspective the issue is one that sellers have to be learn or be able to overcome.
However, with the type of MOR structure, it's built for the businesses which are growing rapidly and still need to direct their resources and attention to the things that matter the most and that's essentially, product development as well as increasing revenue. Since by joining with an MOR it allows the MOR to aid them in dealing with the complexities with a pre -built robust infrastructure which is already providing solutions the problems.
Jesse Paliotto (15:30)
Do you have a clarification? I believe you mentioned the phrase a few minutes ago, but just can repeat it one more time? Like what exactly can the merchant record actually do on behalf of the seller
Jay Jia (15:38)
Right, for sure. One of the major differences between a merchant of record model versus the payment gateway model slash PSP model is the fact that a merchant of record isn't exactly the same as a payment gateway. rather it is a platform that connects to several payment gateways on the backend. We basically generate MIDs or merchant IDs across different gateways using our own companies. In addition, we are the official seller within the transaction. Right?
In essence, MOR is the official entity that is legally liable to manage refunds, disputes or disputes, compliance with data, and tax compliance. Because as the official seller is actually the owner of the transaction, which is why sellers that adopt MOR technology don't need to handle it. Because the MOR entity will actually basically service the entire end -to the -end part of it.
Jesse Paliotto (16:32)
You talked a lot about payments and the diverse areas. Do you see any issues or opportunities with the fact you're entering different countries that have a diverse currency? What are the best ways to handle this independently without having anyone to similar to them ? How can you solve this problem for them?
Jay Jia (16:46)
Mm
In general, it varies between countries. However, the majority of payment providers, don't offer localized currency settlement Perhaps they're limited to a few of the most popular currencies for example, USD, Euro, example.
One of the main issues to this is that it's not using a localized pricing plan. For instance, there are various ways to accomplish the MWR configuration.
A way to do this is to choose a universal pricing with USD and then have the price convert automatically into the local currency. This is something can be done, for instance, with. Many sellers desire to set a specific price for every market due to the different levels of willingness to pay and also the purchasing ability.
It's also essential in determining a pricing strategy for global businesses. In this instance, there's a one size that fits all. However, it's really dependent on the current stage of business, of the target market, if they're price sensitive or not or what are their top priorities in the present. Do they want to look into every single market from a sales or marketing perspective?
or they just want to scale really quickly because demand is already in place and they're operating more of like a self -serve model. I think, you know, you know, this really depends. It all boils down to the relationship between the seller as well as the payments platform. An experienced payment processor will not just provide process of payment calls as well as provide insight about how to best scale your business, whether in terms of currency or a pricing strategy point of view, or even like the best way to set up the best way to set up...
recurring payments, how to improve conversion rate, the best way to fight fraud as well as all of that.
Jesse Paliotto (18:46)
Yeah, that's very cool. Yeah, and I can see both paths that you could choose to allow someone to convert the base currency into all the local prices. It's automatic. It's kept up at a constant pace. It's extremely useful. It could be a good idea to alter it manually since you know that you need specific pricing for a particular area. Yeah, that totally makes sense. I guess that's a consideration and a chance for you to fine tune your company to truly of be able to serve your clients in the most effective way.
Jay Jia (19:05)
Exactly.
Absolutely not.
Jesse Paliotto (19:17)
Well, before we wrap up, any final ideas, any thoughts that you weren't able to discuss with, Jay, or anything that got triggered that we didn't get to yet prior to wrapping this up this time?
Jay Jia (19:26)
Yeah. I think that one thing I'd like to emphasize, which also ties in specifically to the APAC market, is some of the distinctive challenges around accessibility. One of the biggest problems that is faced by APAC is actually the lack of accessibility to advance payments technologies and solutions. Due to the fact that unlike EMEA and North America, where global payment companies are established in APAC markets, excluding those with a long history, such as Singapore as well as Australia,
Most countries have difficulty connecting to the global network of payment providers. Payers in local payment services, have the potential to be a success in handling local transactions, however they often fail to with international transactions due to limited infrastructure and the lack of partnerships. So for example I worked with an local Malaysian office working under one of the most renowned logistic platforms in the world which was confronting significant issues in the processing of international payments with one of the local leading PSPs.
and they were only attaining a mere 40 % authorization rate, which was crippling their e -commerce operations. To overcome this issue, numerous businesses across Southeast Asia and China, established entities in more business -friendly places like Singapore as well as Hong Kong to facilitate global sales. This approach, however can be a burden and a lot of cost and also diverts resources from product management as well as the revenue generation.
and the most effective way to be honest, for a company that is looking to solve for this complexity is to connect to an MOR. In this manner, APAC businesses can basically cut down on the scalability gap by simply offloading all the complexity to the payment platform.
Jesse Paliotto (21:10)
I'm glad I asked for any additional information, because that's an amazing aspect. One of the challenges a business might face when trying to access, like you said, in Singapore and Australia These companies would get access to the...
full abilities in payment processing and such, but there are other countries where they can't. Are the obstacles mainly technological or do they stem from constraints by government agencies or what's the reason that companies aren't able to use their full capabilities? what is the reason they need to be set up in other country to get access to dependable payment facilities?
Jay Jia (21:37)
Mm
Right.
For sure. So I think the fundamental issue is the one of infrastructure. For instance, in the countries of Singapore, Australia, from the perspective of regulation, and in a legal standpoint the system is quite advanced and the government follows a set rules set in the black and white which business can depend on. But in other countries, like such countries as, for instance, Vietnam,
Laws and regulations could be changing on like a daily basis. So it's actually highly risky and difficult to create an effective payment infrastructures in these countries and that's why, for the majority of global payment companies, they have been taking long to figure out what's the most effective method to enter these markets. So in the meantime, the sort of easy way to hack it for buyers or businesses is to just open businesses in different markets this is the reason why when I lived in the past, and also in my present life,
The majority of my type of referrers are business entity creation agencies where they will give you an all -in -one assistance from the advisory angle, an accounting angle, legal angle, or even helping you to open business accounts or bank accounts, which is extremely challenging in markets like Hong Kong or Singapore. This is sort of an easy fix. And we don't really have any near term opportunity to create a payment infrastructure within the emerging markets.
Jesse Paliotto (22:55)
Mm
Jay Jia (23:07)
because of the turbulence of the markets itself. That's why it is, for at the very least in the next three, five and possibly even 10 years or so, based on the direction of markets having an MRO partner is gonna make a massive difference for sellers.
Jesse Paliotto (23:24)
Was there anything else we weren't privy to? I'm happy I asked it the last time. I'm going to ask it for the second time. What else was on your mind that we weren't able to reach?
Jay Jia (23:24)
Absolutely.
Mm-hmm.
We've all the bases and in a way that, to effectively expand into as well as out within the APAC region, sellers really must have an extensive understanding of the local market dynamics and consumer preferences. Localization is essential when it comes to the choice of methods for payment, marketing strategies, or even in terms of customer service.
And here at we're dedicated to streamlining payments and compliance and allowing our sellers to concentrate on growing. Instead of doing everything yourself we take care of it to you as your retailer of choice. We also let sellers concentrate on things that really matter, like product development and revenue growth.
Jesse Paliotto (24:12)
That's excellent. Thanks for sharing your thoughts today, Jay. I really enjoy talking with you. If you would be interested in knowing more about the things Jay is doing, you can search for him via LinkedIn or WeChat. Thanks for all of you who joined our Growth Stage podcast. Your host is Jesse Paliotto, I support the digital product community as part of my role as a Managing Director at, and are thrilled to bring the very best of the community here on the Growth Stage by podcast to you. Also, have a fantastic evening or day and I'm looking forward to talking and connecting with you in the near future. Thank you for your time.