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Facebook is testing social commerce payments in Southeast Asia

TechCrunch TechCrunch 9/06/2016 Jon Russell

Facebook is expanding its focus on payments with a new trial in Southeast Asia that allows users to pay for products listed on Facebook Pages with just a few clicks.

The social network is running a trial in Thailand which allows users to make a payment to a Page owner without leaving the social network. Qwik, a product that is powered by Southeast Asia-based fintech company 2C2P, which raised a $7 million Series C last year, allows users to make payment via a credit card, debit card or bank transfer online, according to numerous sources with knowledge of the trial.

Facebook and 2C2P both declined to comment.

The test might sound a little bizarre to anyone in the West, where the dominance of Facebook is under question thanks to the emergence of companies like Snapchat, but in Asia — China aside — the social network is a staple part of the internet for most people. Indeed, Asia Pacific is its largest region with 566 million monthly users, according to Facebook’s latest data.

That social dominance in Asia also extends to commerce, with many small and independent retailers using Facebook Pages to build and engage their audience and, of course, sell products. It’s difficult to track transactions on social, but Page365, a Bangkok-based startup that helps small retailers sell products via social media, previously estimated the industry to be worth over $500 million per year in Thailand alone.

That figure came from 2014, and the social network no longer enables its pages to be crawled to make such estimates, but PWC reports that Thailand is the world’s largest c2c — consumer-to-consumer — commerce market with more than half of the people polled buying items from social networks.

Typically, the process of buying from social — which is mentioned in Mary Meeker’s latest report: slide 106 — goes something like this:

  • Buyer browses Facebook Page and finds an item they like
  • Buyer clicks the ‘Message’ button next to the product to express an interest in it via Facebook chat/Messenger
  • Seller/Page admin chats with buyer to check on stock and confirm order
  • Seller provides bank account details so that buyer can make a bank transfer for payment
  • Buyer leaves their house/office to go to the nearest ATM and wire the funds to the seller’s account, buyer adds a note to the transaction with order details, address for delivery and perhaps a reference number provided by the seller
  • The goods are then prepared for delivery once the buyer’s bank transfer is confirmed by the seller

It’s a hugely cumbersome process that most people in emerging markets are forced undertake, because few have internet banking, the few who do own a credit card can’t use it in this scenario, and cash-on-delivery isn’t preferred by small merchants.

Details aside, the key point is that people are so keen to buy online that they’ll jump through all manner of hoops to do.

The big problem for Facebook, however, is that many of these hoops don’t belong to the social network.

Page365 co-founder and CEO Prathan ‘Pop’ Thananart told us that, among his company’s base of 25,000-plus retail partners, nearly all transactions start on one social network and finish on another.

“One finding that is consistent across all our merchants, aside from customers engaging in chat-and-haggle buying behavior, is where those conversions happen. Merchants report that 80 percent of transactions are carried out across two or more platforms — most notable Facebook and Line,” he said.

That could mean buyers and sellers connect on Facebook but agree the final steps and payment via Line, Thailand’s top chat app with 30 million users in the country. Or, as is increasingly happening, Instagram is the key ‘store front’ for social commerce sellers to find their customers, with deals completed at non-Facebook properties like Shopee, the social commerce app from Singapore-based unicorn Garena.

This trial, which is more like alpha stage than even beta right now, is an early indicator of Facebook’s intent to keep all the processes of the social commerce transaction on its platform.

“While chat or ‘conversational commerce’ is the up-and-coming trend in the West, it’s already a reality in emerging Southeast Asia. In Thailand, for example, 33 percent of the total e-commerce spend is already going through Facebook and Instagram and ending on Line,” Sheji Ho, Group CMO of aCommerce, a startup that provides e-commerce marketing and logistics services for retailers, told TechCrunch.

TechCrunch understands that Facebook is trialling Qwik with an unspecified number of top Facebook Pages in Thailand, some of which have multiple millions of fans. We have been in contact with a number of Facebook users who have successfully used the product this week, but we were unable to replicate the process ourselves.

We have seen screenshots of the transaction process but are not publishing them with this story since Page owners in the trial have signed NDAs and media coverage could impact their relationship with Facebook, which owns the platform that they are reliant on for a large portion of their online sales.

Multiple sources in Thailand’s e-commerce space told us that Facebook is planning to widen the trials to other countries in Southeast Asia over time, but it picked Thailand first because of the large market for social media commerce.

Either way, this trial is the loudest signal to date of Facebook’s interest in Southeast Asia and potentially other parts of Asia and emerging markets. The company has dabbled with social commerce with a feature to let users find local services which is being tested in India and Indonesia, and, while the technology behind Qwik it is hardly revolutionary, entering the payment space is a major move.

It isn’t clear when the trial was started, the users we talked with began to notice it this week, but it plays into Facebook’s other payments initiatives elsewhere in the world. The company has enabled peer-to-peer money transfers in the U.S., and most recently UK. Those plays were almost certainly about raising user engagement rather than making money, and this social commerce trial is not dissimilar in that respect, but with an Asian twist.

Facebook might not be the only social network company stepping into this space in Southeast Asia, however. Line, which operates its own payment service and a shopping app in some parts of the region, is also talking to small retailers with a view to launching its own new service, one source with knowledge of discussions told TechCrunch.

Southeast Asia is one of Line’s most important geographies since Indonesia and Thailand are among its top four countries based on active user numbers. The Japanese company claims 218 million active users worldwide is reported to be planning for an IPO this year.

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