APAC Buys Into Mobile Payments

Mobile wallets are gaining popularity around the globe, with the Asia Pacific region revealing itself not only as an early adopter but also as an innovator that is using the technology to engage customers.

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Mobile wallets are gaining popularity around the globe, with the Asia Pacific region revealing itself not only as an early adopter but also as an innovator that is using the technology to engage customers.

China is the standout. Its unique digital ecosystem has birthed some of the world’s most sophisticated and intuitive mobile wallets, according to a 2017 Forrester report prepared by senior analyst Xiaofeng Wang. As a result, Chinese consumers can do everything from buy pancakes from street vendors to manage stock accounts with just a smartphone.

And they are: For the first 10 months of 2017, mobile payments in China totaled a whopping 81 trillion yuan (US$13 trillion), according to the Ministry of Industry and Information Technology. That is 40% more than the entire previous year.

“Mobile adoption and innovations happen faster in emerging markets … because consumers in these markets have a strong mobile mindset,” Wang said.

Mobile-Wallet Marketing

According to Wang, China’s surge in mobile payments also has opened up a world of customer engagement opportunities, a.k.a. mobile-wallet marketing. This refers to using the “digital wallet” function on smartphones to engage customers via coupons and loyalty programs.

“In the West, mobile wallets focus primarily on payments. But mobile wallets born in China’s unique digital ecosystem have taken aggressive steps and become powerful customer engagement tools with innovative features, such as WeChat’s social gifting and Alipay’s augmented reality coupons and red packets,” Wang said.

Indeed, mobile app WeChat, with 494 million local users, and Alipay, Alibaba’s third-party payment tool, are paving the way for mobile-wallet marketing. This past February, for example, Alipay rolled out its annual Chinese New Year promotion, the Happiness Cards collection lucky draw, worth 500 million yuan (US$79 million). Within a week of launch, more than 140 million users had completed their collections.

WeChat wallet has harnessed similar marketing tactics to lure its almost 1 billion active monthly users, most notably via third-party partnerships and integration. Users can do anything from calling an external ride-sharing service and booking movie tickets to sending a cleaner to their homes and ordering personalised beauty products. Additional features include bill-splitting, wealth management, donating to charities, and a “scan-and-pay” capability that takes advantage of the fact that more than 90% of Chinese consumers use a form of mobile payment to buy offline purchases.

“As the use of mobile wallets increases, so, too, does the opportunity for retailers to reach consumers and generate a direct response,” said Shelly Shum, senior forecasting analyst at research firm eMarketer.

The Cash Advantage

As enthusiastic as the uptake of mobile payment systems has been in many markets across APAC, some territories, such as Australia and New Zealand, are facing a barrier to entry because they are cash-dominant.

“There’s still a strong role for cash in these markets; people are always going to like the tangibility, security, and flexibility of cash,” said Jon Marks, vice president and managing director for Australia and New Zealand at Diebold Nixdorf, a technology provider in the finance and retail industries.

Indeed, the growth of mobile payment systems has been more pronounced in areas where credit cards were never really taken up as a dominant payment option.

“China benefitted from a late-development advantage where consumers leapfrogged from cash straight to mobile payments, skipping credit cards,” Shum said. “Mobile payments have gained widespread adoption because it is more convenient and safer than cash since there is a risk of receiving counterfeit notes as change.”

India is also cashing in on demand after eMarketer dubbed it the world’s fastest-growing “proximity mobile payment” market in the world.

In India, the number of mobile-payment users soared from 32 million in 2016 to 56.2 million in 2017. It’s forecast to grow to 77.8 million this year—that’s almost a third of all smartphone users in the country.

Indonesia, where credit card penetration also is low, according to Wang, is also one to watch. “The success of Go-Jek in Indonesia and Google’s recent investment into the company is a great example of this,” Wang said.

Go-Jek, which started as a motorcycle-hailing phone service in 2015, has evolved into an entire mobile platform and application that offers a variety of on-demand services, such as transportation, grocery delivery, and mobile payments.

Presently, Go-Jek is the only large tech player in Indonesia with an e-money license. With the proposed launch of the Go-Pay mobile wallet this year and a strong focus on customer relations, Go-Jek could well be on its way to delivering on its promise of being Indonesia’s leading digital wallet provider.