Product strategy key to cashless adoption in APAC

Achieving scale is critical to ensure the viability of mobile payment systems and there needs to be regulatory and industry alignment across Asia-Pacific, as well as globally, for such payments to hit mainstream.

Establishing the right product strategy as well as regulatory and industry alignment, across Asia-Pacific and globally, will be critical for mobile payments to hit mainstream adoption.

Some 23 percent of transactions in Asia-Pacific last year were made using e-wallets, said Quah Mei Lee, Frost & Sullivan's industry principal of digital transformation practice, adding that mobile payments were seeing increasing adoption in the region.

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She noted that during last year's Singles Day online shopping festival in China, for instance, 90 percent of total gross merchandise volume was transacted on mobile, compared to 82.07 percent in 2016.

Such payments, though, were driven largely by China and India, said Quah, who was speaking Thursday at Frost & Sullivan's fintech outlook briefing in Singapore. Mobile payments in China rang up US$3.3 trillion last year, while this figure clocked at US$50 billion in India.

Apart from China, e-wallets were not as prevalent across the region and played a small role in Singapore, where cards still were the dominant payment method and most consumers each held multiple cards, she said. This, she added, should be a key consideration in the rollout of new payment services.

Quah further noted that several supporting regional as well as local regulations and initiatives should help Singapore move closer towards its goal of becoming a cashless society. She said the Monetary Authority of Singapore, for one, had committed S$225 million to drive the country's cashless society vision.

The European Union's upcoming General Data Protection Regulation (GDPR) also would see Singaporean companies, doing business with the region, face pressure to comply with the new regulations, she said.

The Frost & Sullivan analyst added that mobile biometrics also was increasingly relevant as Europe had mandated stronger customer authentication via its Revised Payment Service Directive. Mastercard, too, had set April 2019 as its deadline for the widespread use of biometrics identification, including fingerprint and facial recognition, for its customers, she said.

Mobile biometrics would become an enabler of mobile payments, Quah said, noting that telcos and banks in Asia had started to embrace it to support know-your-customer (KYC) authentication and facilitate other innovative services.

For mobile payments to take off, however, market players would need to get their product strategy right. This, she said, would be key to achieving scale, which itself was critical to ensure the viability of such payment model.

Alibaba's Alipay, for instance, had achieved significant success in China because it had the government's support and the e-commerce operator offered viable services to help drive its adoption.

She also pointed to AirAsia's e-wallet, BigPay, which offered "a clear value proposition" by providing cheaper foreign exchange rates than those given by banks and with no additional processing fees when customers booked flights with the airline. It also was able to tap its existing customer base to drive the adoption of BigPay and addressed a gap in the market by providing its travellers electronic bag tags to speed up baggage checkin.

Noting that mobile payments today remained fragmented, Quah said there would need to be "regulatory and industry alignment" across Asia-Pacific and globally for such payments to hit mainstream, moving forward.

She suggested, for instance, that support for both NFC and QR codes might be necessary to drive cross-border and universal acceptance.

Expect more "exotic" ICOs

Alongside the region's push towards cashless payments, on the fintech side, this year also could see more "exotic" assets being offered up in Initial Coin Offerings (ICOs) as such activities gained more traction, said Spike Choo, Frost & Sullivan's consulting director.

He noted that asset-backed ICOs, from gold, real estate, and even exotic cars already were being offered and this could further extend to other assets such as air miles, music albums, and movies.

Choo also pointed to the emergence of "behavioural insurance" services, including incentive-based and community risk-sharing offerings. As these companies fine-tuned their business models using big data, there could potentially be new models that would redefine how consumers purchased insurance, he said.

He pointed to China's online insurer Zhong An, as an example, where e-commerce shoppers could buy insurance to safeguard their deliveries. Singapore startup Bandboo also introduced a community-based risk- and reward-sharing model in which premiums were collected from groups of 1,000 members each. Payouts would be given to members who were retrenched as well as to all members if everyone in their group stayed employed and no claims were filed.

Choo, however, noted that such new business models remained untested against market conditions, for example, where a recession could lead to massive unemployment and questions over whether funds could sustain payouts under such circumstances.

Legal and regulatory compliances also could prove a challenge as more innovative business models emerged, he added, noting that market players should prepared--as they developed their services and proof-of-concepts--for industry regulators to introduce legislations that could impact their business models.