Asia is paving the way for dig­i­tal pay­ments, but who are the play­ers that can dis­rupt the legacy- bound fi­nan­cial in­dus­try?

Norway-Asia Business Review - - Contents - HENRI VIIRALT

The war on cash in favour of dig­i­tal pay­ment sys­tems that are ex­pected to in­crease trans­parency, ef­fi­ciency and se­cu­rity have been mak­ing head­lines all around the world as of late, with ev­ery­one from fin­tech star­tups to tech in­dus­try gi­ants like Facebook and Line, to even gov­ern­ments jump­ing on the band­wagon.

“Prob­a­bly on av­er­age about 25% of the to­tal adult pop­u­la­tion in ASEAN has a bank ac­count. But there’s a mas­sive op­por­tu­nity to in­clude peo­ple by us­ing a mo­bile phone and hav­ing a pay­ment mech­a­nism linked to it, cre­at­ing op­por­tu­ni­ties for them.

It could give farm­ers ac­cess to mi­croin­sur­ance. It could give fam­i­lies in small vil­lages the abil­ity to save for their fu­ture, to make bill pay­ments with­out hav­ing to leave their fields or close their small pro­vi­sion­ing store—by en­sur­ing a safe and se­cure way of trans­mit­ting re­mit­tances at a lower cost,” says Mr Matthew Driver, Master­Card’s group ex­ec­u­tive, global prod­ucts and so­lu­tions, APAC, in an in­ter­view with McK­in­sey & Com­pany.

In Thai­land alone, the potential to dis­rupt the coun­try’s heavy re­liance on cash is ripe for the tak­ing. ACI, a lead­ing global provider of real time elec­tronic pay­ment and bank­ing so­lu­tions, re­leased the re­sults of its new Thai Com­merce & Pay­ments Study back in July. The sur­vey, con­ducted in col­lab­o­ra­tion with DataOne Asia, asked ap­prox­i­mately 300 con­sumers about their shop­ping habits and pay­ment pref­er­ences for in­store, on­line and mo­bile trans­ac­tions in Thai­land.

The study found that 40% of the re­spon­dents are al­ready us­ing al­ter­na­tive pay­ments meth­ods today, so it is es­sen­tial that mer­chants of­fer more than card based pay­ments.

“Through our joint re­search with Google, we es­ti­mate that today 11 mil­lion con­sumers are do­ing on­line pur­chases in Thai­land,” Mr Se­bastien Lamy, a part­ner Bain & Com­pany and an ex­pert in the firm’s dig­i­tal prac­tice, was quoted say­ing in a re­cent ar­ti­cle in Forbes. ”We be­lieve that this num­ber will dou­ble in the next three to five years, as de­mand con­tin­ues to grow and dig­i­tal of­fer­ings and the sup­port­ing lo­gis­tics and pay­ments in­fra­struc­tures con­tinue to im­prove.”

In­ter­est­ingly enough, an in­dus­try

re­port by Moody’s An­a­lyt­ics found that the in­creased use of elec­tronic pay­ments, in­clud­ing credit, debit and pre­paid cards, helped Thai­land’s GDP grow by USD 3.18 bil­lion (0.19% from to­tal GDP) between 2011-2015, mak­ing it the largest in­crease in Asia.

While the ma­jor­ity of ad­vance­ments in dig­i­tal pay­ment ecosys­tem have been ini­ti­ated by the pri­vate sec­tor thus far, the Thai gov­ern­ment has also been ea­ger to pitch in and some in­dus­try ex­perts are al­ready hail­ing Thai­land as the 2017 hub of ecom­merce and e-pay­ments among AEC.

How­ever, af­ter months of pro­mot­ing Promp­tPay, the up­com­ing na­tional e-pay­ments sys­tem that aims to make Thai­land a cash­less so­ci­ety and to sup­port the coun­try’s dig­i­tal econ­omy, the Bank of Thai­land an­nounced on 13 Oc­to­ber that it would be de­layed to an un­spec­i­fied date in the first quar­ter of 2017.

“De­spite the PR and me­dia hype, these home­grown so­lu­tions have yet to shift con­sumers away from cash on de­liv­ery, be­cause a lot of these heroic ef­forts have been ‘tech­nol­ogy for tech­nol­ogy’s sake’ — build­ing a faster car when what is re­ally lack­ing are more roads,” writes Mr Sheji Ho, group CMO at aCom­merce, South­east Asia’s lead­ing ecom­merce ser­vice provider, in an ar­ti­cle for TechCrunch.

Even so­cial me­dia gi­ant Facebook has been tri­alling an op­tion ex­clu­sively in Thai­land that would al­low users to pay for prod­uct listed on Facebook Pages di­rectly, with no redi­rect­ing to other pages nec­es­sary.

Line, a pop­u­lar chat app that lists Thai­land as its sec­ond largest mar­ket out­side of Ja­pan, has al­ready beaten Facebook to the punch, hav­ing launched ex­ten­sive pay­ment op­tions along with gratis next day gro­ceries, ac­quir­ing 2 mil­lion users for the ser­vice in the process.

With a good-sized fin­tech scene and in­no­va­tive ideas for im­proved ser­vices, it’s dif­fi­cult to see who the likely win­ners are that will be able to re­tain cus­tomers among the myr­iad pay­ment op­tions avail­able. For Thai­land, it may very well be up to a new strate­gic part­ner­ship that has re­cently been formed.

Back in April, Alibaba ac­quired a con­trol­ling share into South­east Asia’s largest on­line mar­ket­place, Lazada. With Thai­land be­ing one of Lazada’s top three per­form­ers, Alibaba is al­ready hard at work in learn­ing Thai con­sumers’ habits and mak­ing new friends.

In 2011, Ali­pay, Alibaba’s dig­i­tal pay­ment sys­tem, spun off Alibaba Group to es­tab­lish Ant Fi­nan­cial Ser­vices Group, which cov­ers ar­eas like dig­i­tal pay­ments, mi­crolend­ing, as well as bank­ing and credit scores. With a USD 60 bil­lion val­u­a­tion, Ant Fi­nan­cial is sec­ond only to Uber as the most valu­able non-pub­lic tech com­pany.

In Novem­ber, Ant Fi­nan­cial an­nounced an in­vest­ment and the for­ma­tion of a co­op­er­a­tion with As­cend Money, the owner of TrueMoney and the lead­ing fin­tech com­pany in Thai­land.

“The part­ner­ship with Ant Fi­nan­cial will def­i­nitely help strengthen As­cend Money’s ca­pa­bil­ity and our mar­ket po­si­tion in Thai­land and the re­gion. Ul­ti­mately, this will help us serve our cus­tomers bet­ter,” says Mr Teer­awat Tilok­skulchai, As­cend Group’s Chief Strat­egy Of­fi­cer. “Ant Fi­nan­cial is one of the most tech­no­log­i­cally ad­vanced and suc­cess­ful fin­tech com­pa­nies in the world so we can lever­age not only their tech­nol­ogy plat­forms but also their global part­ner­ship net­work in or­der to strengthen our busi­ness and op­er­a­tions.”

Al­though the do­mes­tic dig­i­tal pay­ments mar­ket is sat­u­rated with more play­ers pop­ping up all the time, Mr Teer­awat seems to be con­fi­dent in As­cend Money’s strat­egy to thrive in Thai­land and be­yond, and sees oth­ers as ‘co-pe­ti­tors’ rather than com­peti­tors.

He ar­gues that while there are many play­ers, the fin­tech in­dus­try in South­east Asia is still in its in­fancy, and there is am­ple room for As­cend to work along­side oth­ers to build the ecosys­tem and drive cus­tomer adop­tion – a move that in the end will serve the cus­tomer base bet­ter.

While there may have been some con­cerns among in­dus­try spe­cial­ists about the over­lap of users between Ant Fi­nan­cial’s Ali­pay and As­cend’s TrueMoney– both of which have sim­i­lar busi­ness mod­els and are avail­able in Thai­land – the prod­uct strat­egy seems to be vastly dif­fer­ent.

“We are fo­cus­ing on dif­fer­ent tar­get groups. Ali­pay is work­ing to serve Chi­nese tourists who travel to Thai­land and South­east Asia to in­crease their convenienc­e in be­ing able to use Ali­pay ser­vices in these coun­tries. TrueMoney is fo­cus­ing on lo­cal cus­tomers in each South­east Asian coun­try that we are in.”

Mr Teer­awat be­lieves the afore­men­tioned ben­e­fits that Ant Fi­nan­cial brings to the table will help set As­cend apart from other play­ers. Hav­ing built ca­pac­ity and ex­per­tise in mar­kets such as Cam­bo­dia, Viet­nam, Myan­mar, In­done­sia, and the Philip­pines, the com­pany will con­tinue to strengthen its op­er­a­tions in South­east Asia in the short to medium term.

The strong push to­wards a cash­less so­ci­ety in Thai­land and else­where in Thai­land, with vary­ing de­grees of readi­ness and fi­nan­cial in­fra­struc­ture is also some­thing that’s firmly on As­cend’s agenda.

“I be­lieve that the move to­ward a cash­less so­ci­ety is real and is not just a hype. Var­i­ous coun­tries in Europe, like Swe­den, are al­ready suc­cess­ful in turn­ing cash­less. It is un­de­ni­able that the cost of han­dling cash is ex­pen­sive while there are also se­cu­rity con­cerns. More­over, fi­nan­cial tech­nol­ogy that en­ables cash­less trans­ac­tions can also help pro­vide bet­ter ser­vices to the un­der­served who have limited ac­cess to the tra­di­tional bank­ing sys­tem, lead­ing to an im­proved stan­dard of liv­ing. At As­cend, we un­der­stand this and are com­ing up with new and bet­ter in­no­va­tions to push to­ward a cash­less so­ci­ety.”


Asia is paving the way for dig­i­tal pay­ments, but who are the play­ers that can re­al­is­ti­cally dis­rupt the legacy-bound fi­nan­cial in­dus­try?


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