Asia is not only the largest single market in terms of consumer payment value but is also home to the largest share of the world’s unbanked population. Rising smartphone and internet penetration have enabled many to gain access to financial services that were previously limited to mainstream financial institutions. Consumer uptake of mobile payments has been driven by the providers’ ability to value-add by addressing the local markets’ pain points. The value that mobile wallets bring to consumers revolves around the ability to transact with a peace of mind, accessibility to lifestyle services and integrated loyalty platform.
Consumer technology platforms like messaging apps and e-commerce players have been able to offer financial services not with the intention of disrupting the industry, but rather as a means of facilitating their core offering. These players have integrated their wallets seamlessly into their core offering, providing consumers with peace of mind during transactions. Born out of necessity rather than with the intention to expand their product offering, Alipay’s escrow feature addresses the trust gap between Chinese buyers and sellers on Alibaba’s e-commerce platform. Due to a lack of digital alternatives available, Alipay was introduced to improve the ease of online transactions. The popularity of digital wallets in the online space has had spill over effects into the offline environment, with in-store mobile wallet usage becoming increasingly ubiquitous.
The emergence of super apps has blurred the line between lifestyle services and payments. By integrating social, retail, transportation and financial services onto a single platform, it builds stickiness within the super app and encourages cashless behaviour. Indonesia’s Go-Jek has evolved from a ride-hailing service to a super app that includes food delivery, courier services and digital payments. Dubbed Go-Pay, its digital payment platform extends outside of Go-Jek’s services, being widely accepted at online and offline merchants. In an effort to encourage consumers to go cashless, whenever the user pays for a service in cash, the Go-Jek driver will ask if they would like to store the change in their Go-Pay wallet. Both the user and the driver are incentivised to do so, with the driver earning a bonus and the user receiving a discount on their subsequent rides. A rich ecosystem that offers value-added lifestyle services will help to cultivate user engagement and drive mobile wallet uptake.
Whilst China has leapfrogged plastic cards and gone straight from cash to mobile payments, markets with high banking penetration, like Singapore, are still heavily reliant on cash and card. Despite having high internet penetration and digital literacy, digital commerce (especially in the offline environment) has been slow to uptake. As consumers already enjoy the speed, convenience, security and wide acceptance brought about by contactless cards, the appeal of mobile wallets may not be apparent to those who are already performing contactless card purchases.
In markets with a more advanced payments infrastructure, mobile wallets will have to do more than just facilitate a fast, convenient and secure payment. Mobile wallet players will have to value add, which is likely to be derived from an integrated loyalty platform. Leveraging on location-based technologies and big data, mobile wallet providers are now able to personalise rewards in real time based on a user’s location. Furthermore, as the payments landscape becomes increasingly crowded with new entrants, players which are able to marry various loyalty programmes will bring greater value to users. For instance, Grab’s recent partnership with Singapore’s largest mall owner, CapitaLand, aims to build synergies between the two individual loyalty programmes. Grab users have the flexibility to convert their GrabRewards into CapitaLand STAR$, which in turn can be redeemed for CapitaLand shopping vouchers. Players that are able to build an integrated loyalty platform and embed themselves in the customers’ path to purchase journey will provide consumers with a greater incentive to use their mobile wallets.
Rising smartphone and internet penetration have presented new entrants with the opportunity to reach out to consumer segments which have been often overlooked by incumbents. Brands that are able to offer value-added solutions that address the local markets’ pain points will enjoy strong mobile wallet uptake. The value derived from mobile payments can be in the form of a peace of mind transaction, an ecosystem of lifestyle services and an integrated loyalty platform. Whilst mobile payments are poised to enter the mainstream, a regionally unified payments system that facilitates cross-border payments may be the next game-changing disruption over the coming years.
The views expressed in this column are the author's own and do not necessarily reflect this publication's view, and this article is not edited by Asian Banking & Finance. The author was not remunerated for this article.
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Grace is a Senior Analyst – Services & Payments at Euromonitor International. She previously served as Assistant Research Manager at RFi Group where she led a team in quantitative and qualitative analysis of primary and secondary research across 12 Asian markets on Retail, SME and Commercial Banking.