Mobile, hyper-local, huge: the payment opportunity in APAC

M-commerce is a complicated issue in diverse APAC and it’s going to need innovative firms that are properly funded, writes Pamela Whitby

TenCent’s recent announcement that it would be integrating Qualcomm’s biometric fingerprint authentication technology into WeChat’s payment platform tells a story. It’s a story of scale, security, scale and simplification, three important issues for any firm wanting to compete in the mobile commerce space to address.

The outcome of the deal is that WeChat users will soon be able to securely authenticate online mobile transactions using just their fingerprint, rather than a pin code or password. And industry experts agree that say the less information the consumer has to manually enter, the higher the adoption rates are likely to be.

This may be rather useful for those 650 million users in and outside of China that are using WeChat’s payment platform for a range of services - from paying for a restaurant meal, hailing a cab, planning a holiday or sending ‘lucky’ money at New Year and more. According to WeChat, 8 billion red envelope transactions were completed at Chinese New Year its platform, almost double what Paypal did for the whole 2015!  And, says California HQ-ed firm, just 28% of those were via mobile device.

What the Nasdaq-listed Qualcomm and TenCent tie-up cements is this: that the mobile payments opportunity in Asia Pacific is huge and growing. And big local and international players, as well as innovators are vying for their share of the pie.

What has helped, are government-friendly digital policies over the past few years. In China, for example, ‘Internet Plus’ is the official strategy to drive economic growth through the integration of Internet technologies, with a strong focus on mobile. Though still early days for mobile payments, in another major APAC market, Digital India, has been a flagship initiative of Prime Minister Narendra Modi. Though smartphone penetration remains relatively low in India (29% of the population) mobile payment apps are gaining popularity. Juniper research, says the use of such apps in India has risen from over one-in-five active users in 2015 to over one in every two users this year.

The use of mobile payment apps in India has risen from over one-in-five active users in 2015 to over one in every two users this year

Juniper Research

Elsewhere in Southeast Asia, the Malaysian government has committed $240 million of dosh to a Domestic Investment Strategic Fund for the development of new financial products, and Singapore’s finance authority has invested $160 million in the country’s fintech industry. With relatively high smartphone penetration rates in Singapore (82%) and Malaysia (49.2%) mobile payment innovation is a strong focus. 

These policies are already working and helping to drive mobile money transactions across the region. According to a 2014 McKinsey survey, in developed Asian markets, Internet banking is now near universal and smartphone banking has grown more than threefold since 2011. In emerging Asian markets, it’s a similar story with around 25% of consumers using computers and smartphones for their banking needs.

Scale of opportunity

Innovative m-commerce platforms are flourishing. One trend is that low commission fintech startups like Xoom, Remitly and MatchMove, for example, have become popular with migrant workers who traditionally used Western Union to send remittances home. Another has been the rise in cross-border commerce. In Singapore today, for example, 55% of people shop via mobile with a significant percentage of those transactions those being cross-border, according to Forrester.

Nobody then would dispute the scale of the opportunity, but it’s also complicated and who will win the game is far from clear. One major challenge for new entrants, says Max Kraynov, chief executive of metasearch engine JetRadar, is the variety of platforms and payment methods used across the region,

Whereas Western markets might expect 95% credit card penetration, in Asia it’s more like 15%. M-commerce might be growing, but traditional methods like cash on delivery and interbank transfers are still widely used.

“You can’t just enter the region and expect established players to suddenly adopt Western ways of doing payments,” Kraynov says.

In a nod to this point, Anna Trushkina, commercial manager of hotels at Wego says their success in the region has come from taking a hyper-local approach to content. In the APAC payments space this too will define the winners.

Kraynov too acknowledges the importance of localisation, which is also a challenge.

It’s very hard to squeeze in your marketing message on a mobile and ten times harder for an audience that you don’t understand

Max Kraynov, CEO, JetRadar

What travel brands need to recognise, he says, is that people consume content differently in Asia; but while they want to be entertained, they are also keen to transact. That means understanding customer acquisition channels, which vary widely, and delivering a relevant, slick, local user experience.

As an example, Facebook penetration among Internet users is said to be higher in every Southeast Asian country than in the US, according to eMarketer.

“For many in Southeast Asia, Facebook is the internet,” Kraynov says.

This has led many telecoms firms to subsidise the social platform, making it the cheapest way for people to get online and also, potentially, transact – a huge mobile commerce opportunity going forward.

So for transactional firms, including travel brands, be they local, regional or international, there is both challenge and opportunity - to simplify the experience for users, making it easy, safe and cost effective while increasing conversions via mobile device.

There is lot we don’t know yet about how mobile payments will unfold across the APAC region. What we do know, however, is that like everywhere else every good interface, every high conversion product that creates the highest booking value, for lowest number of people requires big investment.

“It’s been like that in Europe and US and it will be no different in Asia,” Kraynov says.

Join us at EyeforTravel’s Asia Pacific Summit to hear more from leading travel brands in region (June 15-16)

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