Voice of the Industry

How countries transform into cashless societies in the aftermath of the COVID-19 crisis

Tuesday 22 December 2020 11:05 CET | Editor: Raluca Constantinescu | Voice of the industry

Siska Melinda, Associate at Frost & Sullivan, shares insights on how COVID-19 streamlined digital payment adoption in Asia–Pacific in 2020, transforming countries into cashless societies

While COVID-19 helped increase digital payment adoption, 2021 will be the critical year to retain these users by demonstrating the convenience of digital payment solutions. 

Despite many companies going digital and shifting their business activities online, the COVID-19 pandemic has inevitably left a dent in economies. In October 2020 the International Monetary Fund (IMF) estimated that the Asia–Pacific region’s economy would contract by 2.2% in 2020. Through this ordeal, the role of local governments has become increasingly crucial. Economists called out the importance of increasing government spending, which can be done in multiple ways, including disbursements of social welfare payments facilitated by digital payments service providers. 

In June 2020, the Malaysian government announced its economic stimulus package, the Short Term Economic Recovery Plan (PENJANA), which consists of 40 initiatives, one of which is the disbursement of MYR 50 to eligible Malaysians through e-wallet services providers. To qualify, applicants need to have an annual income of less than MYR 100,000 and have installed the MySejahtera application, the government’s mobile application for contact tracing. Malaysia’s key e-wallet services providers, Boost, GrabPay, and Touch ‘N Go, participated in this initiative

In Indonesia, the country’s pre-employment card programme offers participants are given IDR 1 million to take online courses of their choice. After they finish a course, the government transfers monthly post-training incentives worth IDR 600,000 for four months. As COVID-19 resulted in many workers being laid-off, the programme was swiftly redirected to prioritise those affected by the pandemic. Participants can receive these incentives through Bank Negara Indonesia (BNI) bank accounts or e-wallets (e.g., GoPay, OVO, and LinkAja). 

Digital remittance is also benefiting from the use of e-wallet services providers. In Fiji, remittances represented 5% of its GDP in 2019. According to the United Nation’s Pacific Financial Inclusion Programme (PFIP), Fiji has seen a drastic growth in digitally enabled remittances during the COVID-19 pandemic. In particular, the number and value of remittances sent through a mobile money application increased by 400% between February and August 2020

A similar initiative was launched in the Philippines, where remittances represented nearly 10% of the country’s GDP in 2019. The majority of these remittances originated from amongst 2.2 million Overseas Filipino Workers (OFWs), who regularly send money to their families back home. GCash, a leading mobile payment services provider in the country, established remittance services prior to COVID-19 by partnering with traditional players such as Western Union and MoneyGram. During the pandemic, GCash enabled verified users to receive remittances on its mobile platform for free. 

The COVID-19 pandemic also triggered a shift in consumer behaviour. COVID-19 instilled a sense of wariness among people as they consciously minimised contact with each other. This shift increased people’s reliance on ecommerce. Frost & Sullivan’s survey in June 2020 discovered that 53% of consumers in Asia–Pacific were shopping online more often than before COVID-19. In particular, 54% of consumers in Thailand, 57% of consumers in Singapore, and 68% of consumers in Malaysia are shopping online more often compared to the period prior to COVID-19. 

Along with the increasing take-up of ecommerce platforms, there is increasing use of digital payment services. In 2020 the Mastercard Impact Studies found that 46% of consumers in Asia–Pacific plan to use cash less often. Also, 75% of consumers in Asia–Pacific expressed that they would continue using contactless payment methods after the pandemic. Additionally, some countries have seen rapid adoption of ‘buy now, pay later’ (BNPL) services. Often advertised with ‘zero-interest’, BNPL services enable users to make payments in scheduled periodic instalments. 

In Singapore, approximately 1.1 million people, or 38% of the total population, have used BNPL services. One BNPL services provider, Hoolah, has seen 700% transaction volume growth since the start of this year. Hoolah was launched in 2018 as a BNPL solution for ecommerce platforms. Recently, the company extended its BNPL solutions to offline merchants, as it saw an opportunity amidst the drastically declining retail sales in the country. The company is also expanding to other countries, including Malaysia and Hong Kong. 

As COVID-19 continued to spread, digital payment services providers expanded their role to support economies. While enabling populations to receive social welfare payments and remittances easily, digital payment services providers enjoyed higher transaction volumes in use cases such as ecommerce, triggered by the growing wariness of contracting the virus through physical interactions. 

What’s next? 

COVID-19 has triggered increased use of digital payment services among consumers. Frost & Sullivan’s recent survey in June 2020 found that 82% of consumers in the Asia–Pacific region plan to start or increase digital payment usage to avoid physical contact. It is worth noting that the survey also found that 83% of consumers in Asia–Pacific plan to start or increase digital payment usage for convenience. 

It is no secret that most digital payment services providers acquire their customers using aggressive promotion strategies – such as cashbacks and discounts – which can be costly. For Lippo Group in Indonesia, which previously owned 100% stakes in OVO, the huge expense of these promotion strategies is one of the main reasons it divested 70% of its stakes in 2019. Hence, it is imperative to build organic user bases as they will continue to use payment services, even without promotions. 

Frost & Sullivan recommends the following action steps in 2021 to ramp up the acquisition of organic users: 

  • Continue to build use cases. Cash is a global payment method that provides unmatched convenience in terms of use cases and acceptance points. To dethrone cash, digital payment services providers need to build strong digital payment ecosystems that offer added value to users. For example, Alipay in China has successfully built demand for ecommerce, insurance, investments, ride-hailing services, and more. Alipay also enables its users to conduct cross-border payments in other countries such as Singapore, Thailand, the UK, and Australia. 

  • Match the technological pace and preference of consumers. Technology can enable new and exciting payment experiences for consumers. However, it is important to match the pace of innovation with users’ tech-savviness to ensure the best user experience. For instance, mobile money services providers in Fiji, Bangladesh, and Pakistan still run agent networks to support their mobile money applications. This is important as users there require support to open accounts and conduct transactions. 

  • Work hand in hand with governments’ initiatives. Japan’s government offers rebates for using digital payments to ease the impact of the sales tax increase in 2019. According to a survey in January 2020, more than 86% of the Japanese plan to continue making cashless purchases due to convenience even when the rebate programme ends. Government initiatives can provide an opportunity for digital payment services providers to convince consumers that digital payments are convenient. 

COVID-19 has triggered disruption in the digital payment services industry. It is time for digital payment services providers to leverage this momentum to retain their users and transition them into the new ‘cashless’ normal. Cashless societies will be the future. COVID-19 just made it an unavoidable reality sooner. 

About Siska Melinda 

A passionate self-learner who is interested in multiple fields, mainly accounting and finance, data science, and programming, Siska Melinda, Associate at Frost & Sullivan, currently focuses on Mobile Payments and Digital Wallets research in Asia–Pacific. 



About Frost & Sullivan 

Frost & Sullivan is a global business consulting firm. Our market research and analysis as well as growth strategy consulting practices are uniquely positioned to not only identify growth opportunities but to also empower and inspire our clients to create visionary growth strategies and make their goals into a reality.


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Keywords: Siska Melinda, Frost & Sullivan, COVID-19, digital payment, payment solutions, payments service providers, ecommerce, e-wallet, Asia–Pacific, mobile payment, consumer behaviour, BNPL
Categories: Payments & Commerce | Online Payments
Countries: Asia
This article is part of category

Payments & Commerce