Mobile Wallets are Southeast Asia’s Pathway to Financial Inclusion

As Southeast Asia’s economies are becoming increasingly interconnected, there are plenty of opportunities for global firms to make cross-border payments seamless.

Mobile wallet adoption is growing across Southeast Asia, with the Philippines leading the way with a 63% adoption rate. It’s a clear signal of the important role digital payments will play in sustaining the region’s economic growth long term, which includes opening up the traditional financial system to millions of people, offering them access to payment services, savings, and loans.

Despite many advancements, the region still lags behind many of its developed international peers in providing basic financial services that are accessible and easy to use. In countries like the Philippines, Vietnam, and Indonesia, a financial inclusion gap exists, with more than half of the population remaining unbanked or underbanked.

Amidst this mobile wallet growth, WeChat Pay announced its removal of the e-wallet service in Malaysia to focus on Chinese tourists. While this business decision could be seen as a retreat from a highly competitive market, other major players in the cross-border payments industry are announcing exciting partnerships. Pomelo and Thunes partnered with Gcash, for example to incorporate cross-border payments via Gcash’s new credit-based digital wallet, making payments accessible to Pomelo users. Alipay is another example of a payment provider extending its services to Southeast Asia.

With the industry poised for continued growth, a lot of opportunity exists to share the world of digital payments with Southeast Asia countries. From mobile wallets and low-cost cross-border payments to digital banking, global organisations play an important role in regional and global collaborations. 

Digital Payments are Ripe for Regional Growth
What’s behind the rapid adoption of mobile wallets in Southeast Asia? Widespread smartphone use and growing internet connectivity are major drivers, as well as a widespread need for basic financial services. The region also has a growing younger population that needs accessible, secure banking options.

However, many parts of the region still suffer from limited or non-existent traditional banking infrastructure. This leaves large portions of the population unbanked, and in some countries, also un-documented.

Set against this backdrop, mobile wallets have emerged as a major solution. For Southeast Asia’s unbanked, mobile wallets serve as the primary entry point into the financial system for millions, allowing them to easily access accounts to transact, save, and manage money digitally, using devices they already own.

With just a tap on their smartphone, the region’s people can conveniently transact, completely bypassing the need for physical cash or cards. This frictionless user experience is especially vital in countries like Indonesia and the Philippines, where banking services are scarce, but 82.26% of the population use smartphones. With mobile wallets, people now have a user-friendly way to enter and participate in the formal economy without first accessing a traditional finance solution.

As with much of the digital landscape, the COVID-19 pandemic served as an unexpected accelerator in this shift toward digital payments, as cash transactions became less desirable due to health concerns. While mobile wallets were the safer alternative at the time, what might have been seen as a temporary solution is now deeply integrated into the region’s larger cross-border financial system.

Mobile Wallets: Making Payments More Inclusive

Recent studies have found that 49% of Filipinos, 44% of Vietnamese, and 48% of Indonesians remain unbanked. Many rural and underserved communities in the region face significant barriers to accessing traditional banks — cost, distance, and lack of infrastructure are contributing factors.

Mobile wallets offer a way to bridge the financial inclusion gap, providing users with basic financial services directly through their phones.

In countries like Indonesia, mobile wallet providers are partnering with microfinance institutions to offer savings and loan products through their apps. These are services that make capital accessible to individuals and small businesses that traditionally haven’t had the options. In a region where small and medium-sized businesses comprise a large chunk of the economy, access to these financial services is essential for driving short and long term economic growth.

Local Players Partner with Global Firms
Southeast Asia’s mobile wallet market is quite distinct in that it is dominated by local players. The payment platforms we’ve mentioned  are already embedded into the everyday lives of consumers in countries like Indonesia, Philippines, and Malaysia.

Local players accomplished this by building extensive ecosystems around their platforms. Beyond just payments, they offer products for ride-hailing, food delivery, and even healthcare services. This local dominance is a reflection of a deep understanding of regional markets and the population’s specific needs.

But there are other benefits to mobile wallets. Most crucially, they offer users enhanced security compared to cash transactions. Features like encryption, biometric authentication, and tokenization enable mobile wallets to provide a safer alternative for storing and transferring money. In economies where informal cash transactions are still widespread, and the risks of theft or fraud remain high, security is a major concern.

As local companies solidify their dominance in domestic markets, global companies like Tencent and Paymentology have a role to play in facilitating cross-border transactions. As Southeast Asia’s economies are becoming increasingly interconnected, there are plenty of growth opportunities for global firms to make cross-border payments seamless, supercharging growth for the region’s banked and unbanked populations alike for years to come.

Sustaining Southeast Asia’s Economic Growth for the Long Haul
Thanks to mobile wallets, the future of payments and banking in Southeast Asia looks bright. A rapidly expanding digital economy, coupled with the need to close the financial inclusion gap, offers abundant opportunities to contribute to the region’s continued growth and innovation.

While local players are likely to maintain their dominance in domestic markets, new opportunities exist for collaboration and market expansion. In this regional market, global firms like Paymentology can help streamline cross-border payments that are accessible and optimised for the small businesses, rural communities, and individual consumers that need them.