Monday, September 5, 2016

5 Observations about Mobile Payments in Asia

Hardly a week goes by without mobile payments news, whether it be the launch of, YES, yet another “Pay” or a new consumer report mentioning the potential for mega billions of future mobile transactions. I am sharing 5 key perspective that I believe are key to understanding prospects for mobile payments in Asia Pacific;

1. The battle of “Pays’ fought first in the developed Asian markets: The battle of the Pays (Apple, Samsung, etc.) has begun in matured payments markets of Australia, Singapore, Korea and Hong Kong (Japan soon to follow). On the surface it appears that this is where P2B mobile face to face payments have maximum opportunity for success. For e.g. consumers in Australia and Singapore make 30% - 50% of their card payments using contactless. These markets are mobile savvy with heavy smart phone penetration. To me, these markets are a litmus test for the scaling of contactless standards based mobile payments.

2. Its about digital e-commerce wallets in emerging Asia Pacific: It is no secret that e-commerce, especially m-commerce will continue to dominate the payments growth story across emerging markets in Southeast Asia and South Asia. This is amplified by the blurring of lines between digital and brick and mortars commerce. Almost all of these markets have several domestic players raising capital and marketing heavily to build scale. Significant examples include Paytm in India, Paysbuy in Thailand, Momo in Vietnam, G-Cash and SMART in Philippines and Doku in Indonesia, among others. While some have built bigger numbers, none have built major scale and stickiness yet. While some are starting to foray into face to face payments, that category is even more nascent given significant headroom for growth in ecommerce.

3. China is way ahead and social app based payments is the big X factor: There is no dispute that Tencent in China has by far led the most successful mobile payments expansion in the world. They have leveraged their social app for virtually all kinds of mobile remote and face to face payments. The lack of a universally accepted QR code standards however and the low WeChat penetration outside China is their big challenge to expand beyond China’s borders. Other apps such as LINE dominant in Japan and penetrated in Taiwan, Thailand and Kakao dominant in Korea have launched their payments functionality. It is early days, but if Facebook through it’s Messenger or WhatsApp service jumps into the fray in the future, the possibilities are interesting.

4. No single bank has presented a compelling consumer mobile app for payments: Almost all major banks across AP have launched mobile banking apps and are seeing significant usage, primarily for account balance checks and to a lesser extent for funds transfers and bill payments. However, banks are still feeling their way to building a compelling payments app for the POS driving consumer adoption. While Android freed up the banks from relying on the Telcos for provisioning card network payments credentials, they cannot access Apple phones. Moreover, why should consumers use a bank app when they can use a third party app that provisions payments credentials for multiple banks and brands? I am not bullish on bank’s scaling their mobile payments apps significantly, and certainly not regionally, their cards likely relegated inside a third party wallet.

5: Its all about standards:  While it is tempting to speak about shiny things like app design and consumer experience, a key element that will define scaled success is standards ubiquity. This is where global card networks have an established advantage. Admittedly, the NFC standard adoption (PayWave / MasterPass etc.) is nascent in AP and only now growing in the U.S. However, the strongest alternative to NFC payments is the QR code and that is even further behind, though Visa's mVisa standard holds promise in emerging markets where it is being piloted such as India. Whether it is QR codes or a crypto currency scenario, the basic challenge for merchant adoption at millions of locations of a new standard has to be overcome for ultimate success!

I welcome comments about what you agree and disagree with, and look forward to carrying on the conversation.

Shilpak Mahadkar heads Payments for Netflix in Asia Pacific. He has worked on emerging payments and led digital payments initiatives targeting markets across Asia working with Banks, Telcos and Third Parties. All views expressed are the author's in private capacity.