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If your business is based in the APAC region and you’re focused on expanding into new areas, there are a lot of common challenges to face and questions to ask about the best way to do that.
On this episode of Growth Stage, we interview Jay Jia, FastSpring Senior Account Executive, about his insights into:
- Tips on expanding a digital goods company in Asia.
- Current market trends in Asia that can affect expansion and the challenges associated with those market trends.
- The payments landscape and how it affects businesses trying to grow in Asia.
If you’re not sure how to kickstart growth for your digital products or software business in Asia, listen or watch now!
Jump to video. | Jump to transcript.
Podcast Full Interview: Audio
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Podcast Full Interview: Video
Transcript
Jesse Paliotto (00:04)
Hello everyone and welcome to the Growth Stage, a podcast by FastSpring where we discuss how digital product companies grow revenue, build meaningful products, and increase the value of their business. I’m your host today, Jesse Paliotto. I support the digital product community as part of my role with FastSpring and we love to bring the best of the community to you here on the Growth Stage podcast.
We’re going to talk today about growing a digital goods company in Asia, some of the challenges, opportunities and insights. And we have Jay Jia with us and we’re going to get Jay’s insights on expanding a digital goods company in Asia, particularly like looking at current market trends, some of those associated challenges, the payments landscape there. And then if you’re a company based in the APAC area and expanding into other regions, what are maybe some common challenges or questions you might face?
So Jay, really great to have you here today. Looking forward to chatting. Jay, can you just tell us briefly about FastSpring and what you do there?
Jay Jia (01:06)
Thanks for having me, Jesse. Hi everyone, this is Jay and I take care of the APAC region here at FastSpring. For those that might not be familiar, FastSpring is a merchant of record platform that combines all the essential tools you need to scale a digital goods business. In simple terms, we handle everything from payments to fraud management, to custom support and tax compliance, so that sellers can focus on growing their business. Before joining FastSpring, I spent quite a number of years within the payments industry.
with companies like GrabPay and Stripe helping businesses navigate the complexities of global expansion. And today I’m excited to share more insights with the APAC market, especially from a payments and digital goods perspective.
Jesse Paliotto (01:48)
That’s awesome. I’m very grateful that I’ve had the chance to work with you in kind of your capacity there and work together on how we can serve the market in the Asia area. I’m curious what trends are you seeing in China and sort of the overall Asia Pacific region right now?
Jay Jia (02:10)
So as we know, the APAC region is incredibly diverse with each sub region having its unique characteristics. China remains a global economic powerhouse with it its innovative e commerce market and super app ecosystems like WeChat and Alipay, while Southeast Asia with countries like Indonesia, Vietnam and Thailand is rapidly developing, driven by a young mobile first population and growing e -commerce landscape while, you know,
India is another fast growing market with booming tech sector and a strong focus on mobile commerce as well. For Japan and Korea, they’re mature markets known for their advanced technology adoption and high consumer expectations, while Australia and New Zealand serve a stable, well -developed markets with a strong digital penetration. In the recent years, we’ve seen the cross -border e -commerce market, especially in China, facing saturation due to intense competition from large platforms like Temu .com.
However, the Digital Good space, particularly in SaaS and general entertainment, actually presents new opportunities with higher margins and a huge greenfield potential.
Jesse Paliotto (03:18)
So when we look at the digital product growth or the companies that sell digital products that are growing, does it line up with those that you just said, those regions and the growth trends that you see there?
Jay Jia (03:29)
Exactly, exactly. The digital goods market in APAC is actually expanding extremely rapidly, particularly in two major areas. Number one, in terms of the utility -based software, and number two, in terms of general entertainment. So utility -based software includes SaaS companies that operate very often on recurring business models, while general entertainment covers use cases like gaming, social platforms, and IP -driven content, such as short films.
So one of the most exciting developments is actually the rise of AIGC, which refers to the AI generated content, especially with Chinese companies leading the global innovation, right? This technology is creating new opportunities in text generation, image generation, video, music, and audio generation, and they’re growing at an unprecedented pace. However, this growth actually comes with challenges, particularly around compliance with content regulations.
and to be able to maintain a stable payment channel, that is where FastSpring can provide critical support. With the ambiguity of regulations around such a new set of technologies, stability becomes a really huge challenge for AIGC sellers, especially when treading into image and video generative content. And this is because their tools and technologies might be abused by end customers for non -compliant content. So without the right checks and balances in place,
AIGC sellers can often find themselves in a compromising situation where their payment accounts get potentially shut down by the providers. And that is where working with an experienced MOR like FastSpring becomes extremely vital because we’re not only able to provide a stable and reliable payment processing channel, but more than that, we’re willing to provide guidance, support on the latest regulatory frameworks with our commitment to drive towards sustainable, compliant business models.
Jesse Paliotto (05:22)
Yeah, that’s interesting. So the AI generated content companies are facing, basically they’re a riskier company, so to speak. And so getting a reputable MoR who can represent them in markets is a way for them to kind of counteract that risk is to say, no, we’re working with somebody who’s going to be processing our payments and handling all of our interactions and payment methods with our customers. And so that’s a way they can offset that risk is working with somebody reputable is what you’re saying.
Jay Jia (05:51)
Exactly, exactly.
Jesse Paliotto (05:53)
Can you talk a little bit about the payments landscape in Asia Pacific area?
Jay Jia (06:00)
For sure. The payments landscape in APAC is as diverse as the region itself. In mature markets like Singapore and Malaysia, credit and debit cards dominate the market, while for the rest of Southeast Asia, for example, e -wallets like GoPay and Ovo are surging in popularity, driven by a large unbanked, under -served, under -banked population.
Jesse Paliotto (06:06)
Yeah.
Jay Jia (06:24)
Real -time bank transfers are also common in countries like Thailand and Malaysia with PromPay and FBX respectively, while Buy Now Pay Later, BNPL options are gaining traction amongst younger consumers. So each payment method has evolved to meet local needs, making it essential for global sellers to actually adopt a multi -channel payment strategy. And the key to success in APAC is to understand and cater to these diverse payment preferences.
Jesse Paliotto (06:50)
Yeah, I know we’ve talked about this and we’ve talked about it in the business that.
serving, you know, one of the, one of the FastSpring’s – values that, we can provide is that going into certain regions, you have to offer the local payment methods that the audience wants and prefers to use. But the first thing you said really resonates with me that it’s a very diverse set of countries and payment and currency and all those types of things. So there’s a lot to handle there and do you know, doing that on your own as a company that’s trying to expand. How do you do that?
Jay Jia (07:27)
I think when it comes to selling into APAC, this actually demands deep localization and understanding of each individual market with its own set of unique challenges. For example, Japan is famous for its widespread adoption of konbini payments, where customers actually purchase products online but head down physically to a convenience store to complete payments in person with cards or cash.
And this showcases a unique blend of omnichannel payment experiences. On the flip side, in India, recurring payments are complicated by the e -mandate system requiring customers to authenticate each individual transaction, which is critical awareness for SaaS companies that value optimization in recurring revenue. And similarly, in Southeast Asia’s largely unbanked population, this will also require tailored approaches, especially from a mobile first and a local payment method perspective.
So one prime example of successful localization is how Grab and Didi, who are sort of local versions of Uber, actually outmaneuver Uber in Southeast Asia and China respectively. Both companies adapted their strategies to local preferences, regulatory environments, and cultural nuances, and ultimately leading to their dominance in these markets, right? For example, Grab adapted their local preferences by allowing cash payments and launching Grab Pay, addressing the region’s unbanked population and tailored services like Grab Bike in Vietnam and Grab Tribe.
in Philippines to meet specific market needs. And similarly, Didi partnered with Chinese tech giants like Tencent and Alibaba, leveraging on their platforms to reach millions of users in a short time frame. So in summary, in order to succeed in APAC, sellers really have to understand the unique and diverse dynamics of each individual market.
Jesse Paliotto (09:15)
That’s funny coming from a marketing, I come from a marketing background for those who won’t know me on the show. I work with marketing here at FastSpring and the word omni -channel is sort of a long time used phrase for marketing where you’re encountering your audience in a lot of different ways and coordinating those encounters so that there’s a cohesive brand and a cohesive experience. I love your use of it though for omni -channel payments that people are.
physically in a store, they’re on their phone, they’re dealing with cash. There’s this kind of multiple channel approach that you have to be able to do in order to successfully sell into that market or to that audience. I think that’s very, very insightful. Can I turn it around a little bit? If you are a company that’s currently in Asia Pacific area, in China or in the Asia Pacific region, and you’re trying to expand out of your local market,
Can you talk about any challenges or opportunities that a company in that position should be thinking about?
Jay Jia (10:20)
Mm -hmm, for sure. So, expanding globally from APAC comes with its own set of unique challenges as well, particularly around, for example, compliance, right? In the form of, for example, tax compliance, data compliance, and on top of that, fraud management as well. So, as we know, each market has a different tax regulation. For example, in the U .S., every state has a different policy and threshold. And imagine the complexity of dealing with transactions from hundreds of countries.
Jesse Paliotto (10:32)
Thank
Jay Jia (10:49)
having to calculate, collect, and remit taxes to local tax authorities. And this is a really common use case that we observe because many digital good sellers like SaaS companies, they’re actually global from day one and they don’t restrict themselves to any particular geography. On top of that, non -compliance can lead to severe penalties ranging from massive fines to potentially impact fundraising in the long term for high growth startups due to non -compliance. And similarly,
Jesse Paliotto (11:05)
Mm
Jay Jia (11:18)
Adhering to data compliance such as GDPR in Europe is extremely challenging as well because it requires businesses to navigate complex region -specific regulations to protect personal data. And to this requires significant changes to data handling practices and systems to avoid hefty fines and reputational damage. On the other hand, a major challenge is managing credit card fraud, which can really drain resources and impact revenue.
In 2024, global losses from the credit card fraud are projected to continue on an extremely upward trend, with losses reaching approximately more than 30 billion in 2022 and expected to grow even further, potentially hitting 43 billion by 2028. And this rise in fraud is largely driven by C &P or card not present transactions, which account for a significant proportion of fraud cases across online shopping and digital payments.
Jesse Paliotto (12:02)
Mm
Jay Jia (12:15)
Additionally, emerging threats such as identity fraud and the use of generative AI for deep fake related scams are complicating the landscape, making it increasingly challenging for businesses to protect themselves against these sophisticated fraud techniques. But fortunately, this is exactly where Fastbring’s MoR model shines, because we’re not only able to offer localized payment processing, which helps to open up access to certain markets.
But on top of that, we have invested a lot in the infrastructure to ensure 100 % compliance in both like a data and taxation perspective so that sellers can leverage on our already optimized custom rule sets based on various industries to consistently combat fraud, reducing fraudulent transactions while letting the genuine transactions through, which in turn maximizes revenue for our sellers.
Jesse Paliotto (13:10)
That’s interesting. There’s a couple, let me make sure I kind of capture, because I felt like there was two very thematic pieces to what you just said. One being that as a company expands in these different markets, complying with the regulations in those local markets gets increasingly complex.
And so the need to handle all the requirements that, gosh, I just, especially with digital product companies and what you started to say a few minutes ago that the growth trends in the Asia Pacific region include a lot of areas that are growing in their digital product sales. And digital product sales are easy to do cross border because you just click on the link on the website or in the app and you buy and you could be in Korea, you could be in Japan, you could be in Vietnam. But the risk that comes back to the company is,
Am I compliant with selling in Vietnam? Am I meeting any tax requirements in Japan? And so offsetting that set of sort of compliance risks was one thing I heard you say. And then the other one was just straight up fraud, that fraud is on the rise in these different regions. And so rather than handle that as a company taking sort of the direct hit and responsibility for that, letting a merchant of record like FastSpring be the intermediary to…
both detect fraud and hopefully filter it out or deal with it when it’s present. Does that capture that fairly well?
Jay Jia (14:35)
Exactly, exactly. As we know, like each market is extremely diverse and you know, every single market has their unique kind of regulations, be it from like a data and taxation perspective. And many of the payment providers out there, they’re really, they have a lot of expertise from like a payments optimization perspective. But unfortunately from like a compliance angle, this is something that sellers themselves typically have to born or they have to learn to kind of overcome.
But fortunately with the kind of MOR model, it is built for the businesses that are high growing and yet they want to direct their resources and time towards things that matter the most, which is essentially product development as well as revenue growth. Because by partnering with an MOR, they’ve effectively allowing the MOR to help them offset all these kind of complexities with a pre -built strong infrastructure that’s already solving for these pain points.
Jesse Paliotto (15:30)
Can you clarify, I think you said it a couple of minutes ago, but just can you say it one more time, like what does the merchant record do on behalf of the seller
Jay Jia (15:38)
Right, for sure. So one of the key differences between a merchant of record model versus like a payment gateway slash PSP model is that a merchant of record is not exactly a payment gateway, but instead a merchant of record is a platform that connects to multiple payment gateways in the backend. And we basically create MIDs or merchant IDs across multiple gateways with our own entities. And we act as the official seller within the transaction, right?
So essentially, MOR is the official entity that is legally liable to manage refunds, disputes, data compliance, tax compliance. Because as the official seller, we actually own the transaction itself, which is why sellers that adopt MOR technologies don’t really have to deal with it. Because the MOR entity will actually basically service the entire end -to -end portion of that.
Jesse Paliotto (16:32)
You talked a lot about payment methods and about the different regions. Is there any challenges or opportunities with the fact that going into different countries that have a of different currencies? How do people handle that on their own without somebody like FastSpring? How does FastSpring solve that for them?
Jay Jia (16:46)
Mm
So I think typically, I think this varies from country to country. But firstly, a lot of payment providers, don’t offer localized currency settlement, or maybe perhaps they’re restricted to some of the major currencies out there like USD, Euro, example.
And the biggest issue with that is actually having a localized pricing strategy. So for example, there’s actually different ways they can go about with an MWR setup.
One way is you can choose a universal pricing with USD and have that pricing to automatically be converted into a local currency. This is something that, for example, FastSpring offers. But lot of sellers also want to have a unique pricing for each individual market due to different levels of willingness to pay and also purchasing power.
This is also something that’s really important when it comes to a pricing strategy for a global business. This is a case where there’s a one size fits all, but it really depends on the stage of the business, of the target market, whether they’re more price sensitive or not, and what are the priorities of the seller at the moment. Are they looking to really go deep into each individual market from a sales and marketing perspective?
or they just want to scale really quickly because demand is already there and they’re running more of like a self -serve model. I think, you know, you know, this really depends. And ultimately this boils down to the partnership between the seller as well as the payments platform, because an experienced payments platform will not only be able to provide the call payment processing technology, but also provide insights on how best to scale the business, be it from like a currency perspective, a pricing strategy perspective, or even like how to best set up your…
recurring payments, how to maximize conversion, how to combat fraud, et cetera, and the whole suite along with that.
Jesse Paliotto (18:46)
Yeah, that’s very cool. Yeah, and I can see both paths where you want to just let somebody like FastSpring auto convert the base currency into all the local pricing. It’s automatic. It’s kept up in real time. That’s super helpful. Or where you would want to manually adjust it because you know that you need different pricing in a certain region. Yeah, that totally makes sense. I guess that’s a consideration, but it’s an opportunity for you to fine tune your business to really kind of meet your audience as best as possible.
Jay Jia (19:05)
Exactly.
No, for sure.
Jesse Paliotto (19:17)
Well, before we wrap up, any final thoughts, anything you didn’t get to share, Jay, or anything that got triggered that we didn’t get to yet before I wrap this up here?
Jay Jia (19:26)
Yeah. think one interesting thing that I wanted to highlight, which also ties in specifically to the APAC market, is some of the unique challenges around accessibility. One of the most significant challenges in APAC is actually the lack of accessibility to advance payment technologies and services. Because unlike EMEA in North America, where global payment providers are well established in APAC markets, apart from the mature ones like Singapore and Australia,
most countries struggle with connecting to global payment networks. Local payment service providers, they can excel in processing local payments, but they often fail to with international transactions due to limited infrastructure and partnerships. So for example, I used to work with a local Malaysian office under one of the top global logistic platforms, and they were actually facing significant challenges in processing 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. And to overcome this, many businesses in Southeast Asia and China, they set up entities in more business -friendly locations like Singapore and Hong Kong to facilitate global sales. But however, this approach adds complexities and lot of cost and also diverts resources from the core product management as well as revenue generation.
And the easiest way, honestly, for a business that is looking to solve for this complexity is to connect to an MOR. So in this way, APAC businesses can basically reduce the gap towards scalability by simply offloading all the complexity to the payment platform.
Jesse Paliotto (21:10)
I’m glad I asked if you had anything else, because that’s an amazing point. The obstacle that a company may face in accessing, like you said, in Singapore and Australia, these companies will have access to sort of the…
full abilities in payment processing and such, but in other places they won’t. Are the obstacles mainly technical or are they government restrictions or what is it that keeps companies, why do they have to set up in a different country in order to get access to dependable payment facility?
Jay Jia (21:37)
Mm
Right.
For sure. So I think the fundamental challenge is with infrastructure. So for example, in countries like Singapore, Australia, from a regulation perspective, from a legal perspective, everything is fairly mature and the government basically has a set of rules set in black and white where businesses can trust and rely on. However, in countries in, for example, Vietnam,
laws and regulations, they could be changing on like a daily basis. So it’s actually extremely high risk and extremely challenging to be able to build up, you know, payments infrastructure in those countries, which is why many global payment providers, they have been taking a lot of time to figure out what’s the best way to approach these markets, right? So in the meantime, the sort of easy way to hack it for businesses or sellers is to simply open up entities in other markets, which is why in my past life as well,
A lot of my sort of referral partners are actually business entity creation agencies where they will give you an all -in -one service from advisory, from an accounting angle, legal angle, or even to help you open business accounts or bank accounts, which is extremely challenging in markets like Hong Kong or Singapore. So it’s sort of like a quick fix. And we don’t really see any kind of near -term opportunity to be able to build payment infrastructure in these developing markets.
Jesse Paliotto (22:55)
Mm
Jay Jia (23:07)
due to the volatility of the markets itself. So this is where, at least for the next three, five, or maybe even 10 years possibly, depending on how the markets develop, having access to an MRO partner is gonna be incredibly impactful and powerful for these sellers.
Jesse Paliotto (23:24)
Anything else we didn’t get to? I’m glad I asked last time. I’m going to ask it again. Anything else that was on your mind that we didn’t get to get to?
Jay Jia (23:24)
Absolutely.
Mm -hmm.
No, I think we’ve covered most of the fronts and I guess in summary, in order to successfully expand in and out of the APAC region, sellers really need to have a deep understanding of the local market dynamics and consumer preferences. Localization is key, whether it’s in terms of payment methods, marketing strategies, or even customer service.
And here at FastSpring we’re dedicated to simplifying payments and compliance, enabling our sellers to focus on growth. Instead of doing everything yourself, we do it for you as your merchant of record. And we allow sellers to focus on the things that really matter, like product development and revenue growth.
Jesse Paliotto (24:12)
That’s excellent. Thank you so much for sharing today, Jay. Really love talking. If you would like to learn more about what Jay is up to, you can look him up on LinkedIn or WeChat. Thank you everyone for joining us on the Growth Stage podcast. I’m your host today, Jesse Paliotto, I support the digital product community as part of my role here at FastSpring, and we love bringing the best of the community here on the Growth Stage by FastSpring podcast to you. So have a great day or evening, and I look forward to talking and connecting with you soon. Goodbye everybody.
