Small and medium-sized enterprises (SMEs) in Southeast Asia are expected to drive the next wave of e-commerce growth. The problem is that many of them are still relying on payment systems they say are too slow, costly or limited for the job.
The region’s e-commerce market is on track to reach US$289.8 billion ($368.7 billion) by 2029, up from US$156.3 billion in 2024, according to a study that payments platform 2C2P by Antom commissioned to the International Data Corp (IDC). That implies annual growth of 13.2%, putting Southeast Asia behind only India globally and ahead of the Middle East, China and Latin America.
For merchants, payment firms and online platforms, checkout is becoming the pressure point. Southeast Asia’s SMEs need to take more payment methods, settle funds faster and manage fraud without giving up too much margin.
SMEs accounted for 57% of Southeast Asia’s e-commerce market in 2024 and are expected to make up 58% by 2029, according to the report. They generate 62% of online sales in Indonesia, which is a US$75.2 billion e-commerce market. The equivalent figures are 59% in the Philippines and 57% in Vietnam.
Checkout becomes the weak link
Yet, the payment systems used by many of these businesses are struggling to keep pace. Of 600 SMEs surveyed across Indonesia, Malaysia, the Philippines, Singapore, Thailand and Vietnam, 63% say their current payment systems need upgrades, additions or outright replacement to keep pace with new payment trends.
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This matters because Southeast Asia’s payment mix is changing quickly. Digital payments are projected to account for 97% of e-commerce transactions by 2029, up from 89% in 2024. Within that total, domestic payment schemes, including real-time transfers and local bank-based systems, are expected to double to US$92 billion and overtake cards as the region’s largest payment category.
Mobile wallets are forecast to reach US$79 billion, while buy now, pay later (BNPL) volumes are projected to nearly triple to US$18.9 billion. Cash-on-delivery and ATM transfers (which were once important in markets with low card penetration) are forecast to fall from 11% of e-commerce payments in 2024 to just 3% by 2029.
The report cited World Bank data showing that 56% of the region remains uncarded, a gap that makes local payment methods central rather than supplementary for merchants trying to reach the broadest possible customer base.
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Banks dominate, but merchants are restless
Banks still dominate SME payments, but many merchants are looking elsewhere. Across the region, 79% of SMEs use a commercial bank as their primary online payment provider. The figure rises to 87% in Indonesia and 89% in Malaysia.
At the same time, 88% of SMEs said they are considering switching to a new payment system or adding other solutions. Their complaints include high fees, slow settlements, limited payment options and poor mobile optimisation. In Indonesia, 96% of SMEs are exploring changes. In Singapore, where merchants appear more reluctant to switch, 75% are still weighing adjustments.
Moving to a new provider can be its own hurdle. Some 61% of SMEs reported at least one problem during sign-up with a payment provider. The most common complaints were complicated onboarding, excessive documentation and difficult system integration.
For fast-growing merchants, those are not just administrative irritants. They can delay sales, slow expansion and make it harder to serve customers who expect checkout to work across apps, wallets, bank transfers and local payment rails.
The pressure points vary by country. Indonesian and Philippine SMEs cited connectivity and infrastructure gaps as the main drag. Businesses in Singapore and Vietnam pointed to data security and fraud concerns. Malaysian and Thai operators flagged high fees and regulatory complexity.
Fraud is already a material cost. Among retail SMEs in the region, 55% reported fraud or chargeback incidents affecting 1% to 5% of transactions. In Singapore, the figure was 67%.
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“Southeast Asia's businesses, and especially SMEs, are at the heart of the region's economic growth, contributing more than 50% of GDP in major markets and employing 64.6% of the workforce, but many are still navigating the complexities of digital transformation,” says Worachat Luxkanalode, group chief executive of 2C2P by Antom.
Cross-border trade raises the stakes
The biggest revenue upside is in cross-border trade. Only 48.5% of SMEs currently sell beyond their home markets, mainly within Asean and the broader Asia Pacific region. Among those that do not yet sell internationally, 75% plan to do so within two years.
IDC estimates that if those plans translate into actual sales, cross-border activity could add US$20.8 billion to Southeast Asia’s e-commerce market by 2029, a 7.1% increase over the base forecast.
The obstacles are familiar but costly. SMEs cited complex returns and refund processes, high cross-border payment fees and limited ability to support the payment methods preferred by overseas customers. Those weaknesses could become more visible as merchants try to sell into markets where consumers expect local wallets, instant transfers or buy now, pay later options at checkout.
The report also shows how payment gaps differ by industry. Retail SMEs are most exposed to fraud and returns, with Indonesia and Malaysia reporting the highest impact at 48% and 44% of businesses, respectively. Food and beverage operators face a different challenge as they try to connect payments across dine-in, delivery, click-and-collect and self-service kiosks. Services SMEs are the furthest behind in digitalisation, with recurring payment integration still underused despite its importance to subscription and membership businesses.
Governments have helped accelerate the move away from cash. Thailand’s PromptPay, Indonesia’s QRIS and Vietnam’s VietQR have made domestic digital payments more widely available. Mobile wallet providers have pushed adoption from the consumer side. Together, they have changed what shoppers expect from online checkout.
For SMEs, the commercial test is becoming more demanding. They need to accept more payment methods, settle funds faster, manage fraud, support cross-border transactions and integrate payments into daily operations without adding too much cost or complexity.
