Driven by mobile-savvy 18-34 year olds and lifestyle changes, faster and more efficient MOPs (methods of payment) are being sought after in both emerging and mature markets. ACI Worldwide published the first of a two-part report titled The Future of Digital Payments on this very subject. Anna Carlson reports
Focused on the Asia Pacific market, the report, published earlier this month, highlighted Asian consumer’s demand for new MOPs.
Mobile devices are forcing the banking and social media industries to consider the ‘next billion’ users. The ‘next billion’ users typically have mobile devices but are accessing the internet for the first time.
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Social media and banking industries need to create streamlined user experiences to retain customers as many of these users may also only have access to the internet via a mobile device.
Of the 2,000 people polled in nine Asia Pacific countries, eight out of ten consumers were already using emerging MOPs, including smartphone wallets, in-app purchases and social payments, and mobile money. With the future of the internet already skewing towards mobile, the future of digital payments is heading there too.
Smartphone Wallets
Smartphone wallets were as cited having the biggest room for growth in emerging MOPs.
When polled, 27% of people said they have used a smartphone wallet for a purchase before, while 74% and 46% of people in emerging and developed markets, respectively, said that they intended on using their smartphone for a purchase in the next six months.
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By GlobalDataSmartphone wallets have a clear advantage in smaller but more frequent transactions, and have been used most for offline shopping and taxi rides. Trends suggest that this MOP could overtake cash for smaller purchases, especially within emerging markets.
With finger print and facial recognition enhancing the security on smartphones, people were willing to give up a little bit of security in exchange for a fast and easy transaction.
With Samsung Pay launching in the US at the end of September, it’s poised to give Apple and Android a run for it’s money as Samsung doesn’t need to be NFC-enabled as with the other two due to its use of magnetic secure transmission (MST) which can emulate the technology of a magstripe card.
Social Payments
With social media already rising in popularity, in-app and social payments are a natural next-step in emerging MOPs.
Three major social payments or in-app purchases have emerged as the most popular in the Asia Pacific market: Facebook, Line and Wechat.
Wechat has over 90 million accounts active in China, while Facebook is limited within China, and Line has enabled P2P services in Japan, Taiwan and Thailand. P2P transfers within these social apps are limited geographically and by participating banks. This could be a very interesting area to watch with cross-market P2P transfers lacking representation.
Twitter has recently launched Stripe, which allows users to purchase goods with just one tweet. Other areas of usage would be to purchase virtual products and use services such as calling taxis or food, or topping up mobile accounts.
Mobile Money
Mobile money has the highest gap between percentage of people who have used it in the past versus people who said they intend to use it in the future, 10% and 49%, respectively.
For emerging markets, this is an important area of development as many people have access to mobile phones, but not necessarily a reliable internet connection.
Mobile money services such as mPesa allow consumers flexibility in payment options without having a bank account.
With a simple text, customers can send money, pay bills or top-up their phone. Country leaders in mobile money usage in the Asia Pacific markets are Vietnam, India, the Philippines, and Indonesia.
When polled, customers have the highest level of trust in mobile money companies versus online payment services and smartphone wallets.
Traditional MOPs
Although emerging MOPs have the potential to overtake traditional MOPs in percentage of usage, there is still a place in the market for cash and card payments.
85% of people polled said they used cash at least once within the last six months for offline transactions.
Emerging MOPs have an advantage in smaller, more frequent transactions (less than $50) but consumers still prefer a safer form of MOPs (cash and cards) for larger, less frequent transactions.
There are also income and financial requirements to obtain a credit card, which could account for some of the move into emerging payment methods.
The future of digital payments within the Asia Pacific market lies in the cell phone. Between smartphone wallets, social payments and mobile money, more payments in the future will come from cell phones. This movement is already occuring with the mainstream mobile payment methods, such as Apple Pay, as well as the technology being utilised in developing markets, such as M-Pesa.
Consumers want faster and more efficient payment methods, and there is certainly a big gap in the market. It just depends on who’s willing to take a risk and fill that gap.
