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Smartphone penetration in the Asia-Pacific (APAC) region is the highest in the world, with mainstream integration of mobile payments into everyday life already under way.
South Korea and Australia, in particular, are making a conscious shift towards becoming cashless societies, thanks to growing adoption of mobile payment systems.
In developing countries, however, cash is still a significant payment method and will be for years to come. Point-of-sale (POS) payments and near-field communications (NFC) are not making much progress – except in China, where POS payments have taken off using QR codes.
Security still tops the list of concerns with mobile payments. For consumers, the susceptibility of the payment method to fraud during day-to-day operations, or if the device is lost or stolen, is a significant concern. Merchants, on the other hand, need to be able to trust that the payment will be cleared and they will be paid accordingly.
For mobile subscribers, privacy remains a key concern. Customers do not like to disclose their personal data, and if they have to do so when signing up for a new service, they need to know their personal data will remain secure.
Also, there is little incentive for customers to adopt mobile payment systems that often seem to showcase technology rather than address a pain point. At the POS, previous payment systems had not been able to improve the customer experience as much as contactless card technology did.
Also, mobile payment technology required multiple registrations, high services fees and significant patience towards the lack of nationwide terminal acceptance.
In China, where smartphone penetration is about 90%, mobile devices have become part of people’s lifestyles. Alipay and WeChat currently dominate the market, enabling customers to split dinner bills, shop online and even pay parking fines and utility bills.
In Southeast Asia, penetration of mobile payments remains in the lower single-digit range. In Indonesia, for example, the market is only 3% penetrated with a banking rate of about 36%. The figure is even lower in Vietnam, where there are no key drivers for growth.
The Thai government’s digital economy strategy, together with the national e-payment masterplan and Thailand’s commitment to implement GSMA’s mobile money interoperability initiative, could result in a significant boost to mobile payments in the country.
After some initial setbacks, mobile payment technology in India is slowly taking off. Until recently, mobile payment users had to go through a long process of sending text messages to their banks and waiting for confirmation before proceeding to pay. Today, companies such as Paytm, Freecharge and MobiKwik have boosted mobile payments, with mobile banking growing rapidly.
Mobile payment is not a market that will grow strongly without key enablers such as connectivity through smartphones, infrastructure, usage behaviour and regulatory/government support. Local preferences weigh heavily on whether a system will take off in the local market.
Across the region, the bright spots in mobile payments are Japan, South Korea, Australia and Singapore, with New Zealand being a potential market for POS payments. In developing markets, POS payments might take a while to gain traction unless there is regulatory intervention.