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