AHEAD OF THE CURVE: The rise of mobile money in Asia
Home to more than half of the world’s mobile phone subscriptions, the potential for mobile money services in the Asia-Pacific region, especially in its developing countries, is significant. Agnes Stubbs investigates.
Over a decade ago, Globe Telecom introduced GCash in the Philippines, the world’s first mobile money platform. Since then the Asia-Pacific region has seen a steady adoption of mobile money services in its developed and emerging countries.
According to research firm Gartner, the value of mobile payment transactions in Asia-Pacific is expected to reach $165 billion in 2016, overtaking Africa as the largest region for mobile payments.
The success of mobile money can be recognised across the region’s developed and emerging markets in which the industry fulfils markedly contrasting needs.
Leaders in developed Asia-Pacific
In developed countries such as South Korea and Japan – where the market has been aided by strong mobile phone penetration – mobile money is seen as providing a more convenient alternative to traditional banking services.
Both countries are leaders in the adoption of mobile wallet and have created environments that are conducive for the market’s growth, especially with their efforts in near field communication (NFC) services. The technology has emerged as an e-payment standard as it requires little setup by the user.
Frontrunner NTT DoCoMo’s domination in the market began as early as ten years ago when it invested nearly $1 billion to buy a 34% stake in the credit card unit of Sumitomo Mitsui Financial Group, Japan’s third-largest bank. A year later, it launched a mobile wallet service known as Osaifu-Keitai, and introduced its i-mode FeliCa chip and contactless payment services.
Since then the operator has continued to invest in the mobile money space - from the integration of its iD mobile wallet with MasterCard’s Paypass contactless technology through to forming the Japan Mobile NFC Consortium with other operators such as KDDI and Softbank.
In technologically-advanced Singapore where the market is fuelled by a wealthy and mobile-savvy population, incumbent mobile network operator Singtel is banking in on what it believes will “revolutionise the payment ecosystem,” says
In Singapore, Singtel and Standard Chartered Bank launched Dash in 2014. The mobile money service, which, through partnerships with local retail industry leaders, is said to enable customers to make payments from their mobile phones easily, offering over 20,000 acceptance points across Singapore.
Convenience is the name of the game in developed economies like Singapore. “Dash is centred round the lifestyle needs and habits of a mobile internet generation who are used to downloading information and content on the go. With Dash, we are offering them an unprecedented experience by allowing cash to be downloaded into their phones as well,” says Allen Lew, Singtel’s CEO of group digital life.
Entry into the mobile money market is often borne out of a necessity to offer mobile subscribers more choices in an increasingly connected world.
“Singtel’s venture into mobile money originated from a very simple thought. Consumers are now so used to downloading information and content on their mobile phones – news, music, videos – so why not cash? We therefore embarked on a strategic initiative to create Singapore’s first ‘downloadable’ cash – cash that customers can simply load onto their mobile phones to pay friends and businesses,” says Gan Siok Hoon, vice president of mcommerce at Singtel.
The operator has developed a suite of mobile money services integrating what it views are “three key components” in the market – mobile banking, mobile payments and mobile shopping. “By bringing together players in the banking, telecommunications and retail sectors, our customers are now able to leave home without their wallets and conveniently shop, eat and commute with just their mobile phones,” says Gan.
Mobile payments will revolutionise the payment ecosystem, and operators should be quick to monetise the opportunities, says Gan. Presently Singtel is working on expanding its merchant network and integrating it with transit operators to increase further usage.
Gan adds: “In addition, we will provide even greater value to our customers and merchants through timely and targeted contextual offers, as well as new features that will further enhance the end-to-end mobile commerce experience.”
Fulfilling the need in emerging markets
Where mobile money offers a convenient and cash-free option in developed countries, its impact is more aptly visible in emerging markets where large underbanked and unbanked populations exist. .
With the help of operators, mobile money has brought the unbanked and those living in remote areas without access to banks into the financial system.
In Indonesia, for example, mobile money is filling this gap by offering financial services over mobile phones, from simple person-to-person transfers to more complex banking services. The country has a banking penetration of approximately 40% in a population of over 250 million.
In 2013, the country’s top three mobile operators announced a ground-breaking move to enable interoperability between their mobile wallet services, effectively opening up the landscape. The initiative enables users of Indosat’s Dompetku, Telkomsel’s T-Cash and XL Tunia service to send and receive money across the networks.
Indosat, a subsidiary of Ooredoo, has been a dominating force with Dompetku Mobile Money platform, the country’s largest mobile money network.
Alexander Rusli, CEO at Indosat, says that the strong uptake of its Dompetku Mobile Wallet and Mobile Money Service signals a clear and growing need for the service in the region’s emerging markets. The money service, which sees approximately 1.7 million transactions a month, enables customers to make bill payments, withdraw money and make purchases in partner retail stores – both online and physical stores – as well as remit money using their mobile phones.
“We believe that mobile finance provides an alternative to a risky, complex cash-based evidence, offering Indonesia’s underserved communities’ new opportunities and new choices that they did not have before,” says Rusli.
Last year Indosat signed an agreement with WorldRemit to offer Dompetku customers the ability to send money from abroad to their friends and family in Indonesia. In addition the company claims to be the first to bring carrier billing on the Google Play store to Indonesia in December last year.
The move is an effort to provide its customers with a wider range of services. “This is an interesting development for mobile payment solutions and one which enables customers to access a world of content services that they had not previously been able to access – as it had required a credit card, and credit card penetration figures in Indonesia currently sit at around 3-4%,” he adds.
Rusli expects to see more customers using their mobile phone credit to pay for digital content, e-commerce purchases as well as increasingly utilising it to create businesses and services in rural and remote areas.
The operator is planning to further expand the Dompetku programme to offer insurance, virtual credit cards, companion plastic cards, e-commerce and mobile payment processing, he reveals.
In addition it aims to strengthen its INSPERA microfinance offering to bring the service to more female entrepreneurs in rural communities. Ooredoo, he adds, is looking to expand the service to its latest market, Myanmar.
“The opportunity for mobile financial services in Myanmar is vast,” Rusli notes. “A mere 5% of its population have a bank account. That means a key focus for Ooredoo as it rolls out its services across the country is to deliver mobile money solutions which enable customers to use their mobile phones to access a comprehensive suite of mobile financial services.”
Presently only 6% of Myanmar’s population has access to a bank account, which represents growing opportunities for operators to provide services aimed at enabling the unbanked access to basic financial transactions.
Last November Telenor Myanmar teamed up with financial institution Yoma Bank to provide mobile banking services.
In an interview with The Myanmar Times, Telenor Myanmar CEO Petter Furberg said that banks in Myanmar face high fixed infrastructure costs that limit their branches, and so their priority is to attract the most valuable customers first.
That, he says, presents an opportunity for carriers to meet the needs of the market. “They will always start at the top of the pyramid and go downward. We are starting at the bottom of the pyramid and working upward and serving a segment that will not be served by the banks in general because the cost will be too high,” Furberg told the paper.
The next step
Rapid changes in emerging markets, combined with the underdevelopment of existing fixed line networks, will present significant challenges to further growth of the mobile money market.
Another fundamental challenge facing operators in the region’s emerging markets, says John Abraham, senior analyst at Analysys Mason, is that a majority of customers uses prepaid cards. “What that means is that prepaid users become more expensive to telcos because they have to pay a retailer to sell top-up cards” says Abraham. Typically, retailers take approximately 10-15% of commission, leaving the user with the rest.
“Telcos need to make up for the money they pay to intermediate top-up retailer and on top of that, make a profit. That’s a problem they need to solve,” he says.
In addition, many emerging countries do not yet have regulations in place to govern the transaction of mobile money.
While operators typically do not need special licences to facilitate transactions, they may be required to apply for licences under domestic legislation and regulations as they become increasingly involved in third party payments and cross-border remittance services.
Operators should also promote further interoperability in mobile money as it enables them to offer customers more flexible payment options as well as grow the number of transactions in the ecosystem.
The success of Kenya’s M-Pesa mobile wallet service has had a profound impact on the thinking of operators in the Asia-Pacific’s emerging markets and they will be eager to replicate that.
Launched in 2007 by Safaricom, M-Pesa presently boasts 15 million users with over 2 million transactions daily. The system was initially built to enable microfinance-loan repayments to be made over phone. It then expanded to become a general money transfer programme after its pilot testing, and has since been extended to pay bills and even salaries.
Its success has been largely aided by the high penetration of mobile devices in Kenya, its affordability and ease of sending money, as well as Safaricom’s dominant market position. It has since inspired foreign offerings in the Kenyan market from India’s Airtel Money and yuCash to France’s Orange Money.
There are valuable lessons that operators in Asia-Pacific could learn given the parallels between what M-Pesa has been able to achieve and how mobile wallets have shaped developing countries in the region.