This short case study examines the practical challenges that regional SMEs face managing fragmented payment methods, regulatory gaps, and cross-border transactions.
Across South-east Asia (SEA), digital payments are playing an increasingly pivotal role in driving economic growth for small- and medium- sized enterprises (SMEs).
However, despite their enthusiasm for digitalization, the payments landscape remains fragmented for SMEs, posing challenges that complicate rather than simplify business operations.
For example, one commonly cited hurdle for SMEs in SEA is the variety of payment methods preferred in different markets.
Alternative payment methods (APMs) such as QR codes, digital wallets, and localized systems have become essential for cost-effective, frictionless transactions. These enable SMEs to serve a broader customer base while keeping operational costs manageable. However, according to Angad Dhindsa, Executive Director / Business Head (Southeast Asia), Razorpay International, “payments are supposed to enable business, not slow it down,” pointing to the region’s diverse digital ecosystem in which where merchants often juggle multiple providers to manage transactions across borders.
Another critical factor is building trust through secure and transparent payment infrastructures. Fraud prevention and reconciliation remain growing concerns. Dhindsa emphasized the practical application of AI: “AI can help reduce human error, and free SMEs to focus on running their business, not chasing missing cents.”
In this aspect, machine learning tools are increasingly used to spot anomalies early, preventing losses and improving financial accuracy.
Finally, regulatory differences and infrastructure gaps across SEA present some invisible barriers that may slow down or complicate cross-border payments. Experts suggest drawing lessons from India’s UPI/fintech ecosystem, which has finally matured to support seamless payments and rapid digital adoption.
Closing the regional payments gaps for SMEs will require continued innovation in infrastructure, paired with pragmatic technology adoption focused on trust, security, and interoperability — factors critical to unlocking SEA’s digital economy potential.
As the lead economist at the World Bank, Dr Leora Klapper, has stated: “Digital financial services lower the cost and increase the security of sending, paying and receiving money,” highlighting the essential role of digital payments in advancing financial inclusion and economic growth.
