BANGKOK Cash is still king in Southeast Asia, but may be dethroned sooner rather than later as the region embraces the cashless society using smartpones tied to mobile payment systems.
One rising star in the cashless market is Thailand's Rabbit transit card, with 7 million domestic users. The Bangkok Mass Transit System (BTS), which operates the city's rail system, will start accepting a smartphone version of Rabbit at its ticket gates as early as this year.
BTS teamed up with the Thai unit of Line, a Japanese messaging program, to develop the app, dubbed Rabbit Line Pay. Some restaurants are already accepting Rabbit Line Pay for payment, and the partners hope to expand the network further to retail outlets, with the goal of making it the de facto standard in Thailand.
Other mobile payment systems are also in the works. Kasikornbank, a major Thai bank, has developed a system called K-Pay, which is currently being tested at dozens of dining venues and food stalls.
In Singapore, Oversea-Chinese Banking Corp. just launched a mobile payment app that can be used at over 1,000 merchants, including the Robinsons department store chain and fashion retailer Zara. By using the app to scan a QR code at the cashier, customers can pay for purchases directly from their OCBC accounts.
Meanwhile, Singaporean startup Liquid Pay is already accepted at over 100 food stalls, with plans to expand the figure to 25,000 retail locations by the end of the year.
Smartphone payments in Indonesia are skyrocketing among motorcycle taxi users thanks to the ride-hailing company Go-Jek. Last year, the company launched Go-Pay, a virtual wallet that has eliminated cash payments for 50% of transactions to date. Go-Pay can be used for a growing number of Go-Jek's ancillary operations, such as food deliveries and personal shopping services.
Singapore-based Grab is also entering the mobile pay market in Indonesia. In April, the company announced plans to acquire Indonesian start-up Kudo, which runs an online-to-offline payment service through its network of more than 400,000 agents in 500 cities and towns, including rural areas. Users visit these agents to make cash payments for online purchases, insurance and more.
Grab wants to integrate Kudo's platform with GrabPay, its own mobile platform. Kudo's presence in rural Indonesia will give GrabPay access to the unbanked, low-income population and the growing middle class. "We are specifically looking at the growing economy [of] younger, moving-through-the-classes [population]," said Jason Thompson, head of GrabPay, in a recent interview with Nikkei Asian Review.
UNTAPPED DEMAND The region is primed for mobile payment systems: On average, about 50% of the population in six major Southeast Asian nations use smartphones, according to British research firm Euromonitor. That figure is expected to top 70% in 2021, approaching the 80% rate of Japan and the U.S.
Mobile payment systems can also be credited, meaning users can top off their digital wallets in rural areas that do not have banks but do have a shop within a mobile payment network.
This is a huge convenience for people outside the conventional banking system. Only about 30% of Indonesians and Filipinos have bank accounts, according to 2014 World Bank data, while just a small percentage of Southeast Asians outside of Singapore and Malaysia have credit cards. With conventional financial services out of reach for so many, mobile payments are poised to dominate in the region.
Southeast Asia, home to roughly 600 million people, expects to see private consumption double to $2.3 trillion in 2020, according to market research firm Accenture. In 2021, Euromonitor International predicts that around $32 billion worth of mobile payments will be made in 2021 -- 10 times that of 2013.
Overseas investors are hungrily eyeing this development. In late May, Malaysian fintech venture Soft Space raised $5 million from Japanese e-commerce company transcosmos. Soft Space's mobile point-of-sale system is being used for AirAsia's inflight duty-free shopping, and the company is rolling out a similar system for the Malaysian arm of Japanese logistics company Yamato Holdings.
Yamato's drivers in Malaysia have a card reader that interfaces with their smartphones. When servicing pay-on-delivery customers, the drivers key in the amount receivable on their smartphones then use the card reader to accept payment by credit card or debit card.
Even lesser developed nations have entered the mobile payment arena. Vietnam's Momo and Myanmar's OK Dollar were mainly designed to help people wire money to rural areas. Now they can be used at retail stores, restaurants, airline ticket counters and other places.
CHINA FACTOR China, an Asian pioneer in mobile payment, still dominates the landscape. The country logged roughly $430 billion in mobile transactions last year, far more than Japan's $53 billion. The mainland market is dominated by Alibaba Group Holding's Alipay and Tencent Holdings' WeChat Pay.
The two companies are exporting their business models to Southeast Asia by partnering with local conglomerates and others. In Singapore and Thailand, their payment options are available at hotels, as well as convenience and department stores.
Mike Ghasemi, research director at U.S. market intelligence firm IDC, says mobile payments represent a chance to capture a large number of consumers who don't have bank accounts. "Mobile payment can replace the low credit card usage among the unbanked demographic, and solve the major headwind for payments in emerging markets," said Ghasemi.
Expanding mobile payment can enhance business opportunities for a wide range of sectors, including banks, the insurance industry and eventually the public sector. Mobile payment services can also help governments provide financial assistance to people in rural areas, Ghasemi added.
Mobile payment solutions are fast becoming drivers for bottom-up economic growth in Asia and may eventually herald the end of King Cash.
Additional reporting by Tomomi Kikuchi in Singapore, Wataru Kodaka in Shanghai and Wataru Suzuki in Jakarta.