Interview with Quah Mei Lee on Alipay, WeChat Pay and their impact on local Southeast Asian mobile wallets

1. Could you present some key aspects related to the way people pay in Southeast Asia (p2p payments/in-store payments/ecommerce payments)?

Southeast Asia is inching its way towards going cashless but is highly fragmented and is still very much cash based. There are two extremes in terms of the way people pay in the region. At one extreme, there is Singapore with over 80% of consumers that have adopted electronic payments with the dominant payment method being credit/debit cards.

With 7.6 million credit cards amid its 5.6 million population, it is common for ecommerce payments to be paid for by card. At the other extreme, there are 2 of the 5 main archipelagos in the world i.e. Indonesia and the Philippines. Indonesia, in particular, has the highest population in Southeast Asia spread across thousands of islands and is a place where e-money in card and mobile form have been widely used until today, driven by the local government initiatives. In the Philippines, P2P transfers are commonplace. In both Indonesia and the Philippines, credit/debit card penetration is the lowest in the Southeast Asia region and therefore, it is common for ecommerce payments to be paid for by cash on delivery or bank transfers.

2. Are there any market specifics related to the pace of becoming cashless in the region? 

Regulatory push, standardisation, local consumer behavior, the availability of a ubiquitous payments infrastructure and comprehensive solutions play a role in determining how fast the transition to cashless is going to be.

While regulatory push plays an important part, local consumer behaviour takes time to change unless there is an underlying influencing factor or the consumer sees the benefit. Of course, if there are few or no solutions targeting segments determined to use cash e.g. the poor, the elderly, people with disabilities, people living in rural areas, short term visitors and tourists, this will definitely slow down the pace of becoming cashless in the region and could even become a bottleneck.

Even in a populous country with high propensity to innovate like China, there isn’t already a specific solution targeting the elderly, even though the segment makes up 10.8% of the population and it is technically feasible to build a simple payment solution within simple phones tailored to the elderly. The reason is likely to be cost effectiveness of the solution and the ability to monetise the segment. Southeast Asia countries will find it even more difficult to address this segment due to the lack of scale.

3. What are some of the most important initiatives to reduce the usage of cash in the region? 

The most important initiatives are government driven initiatives towards lessen the dependence on cash. These include drafting and implementing payment frameworks which both cover acceptance and usage, standardisation as well as addressing data privacy and protection issues. Examples include Malaysia’s Payment Card Reform Framework and minimum standards for mobile payment. Supporting initiatives would be joint efforts by the industry towards improving user experience as well as acceptance of mobile payments. Mobile payment solutions need to be easy to use by the masses, especially the elderly.

4. What are the leading mobile wallets in these countries?

The leading mobile wallets in these countries vary by country and by service type/category. Leading wallets in Singapore include DBS PayLah, Grab Pay and Singtel DASH, whereas across the border, in Malaysia, it would be Boost,Grab Pay and vcash. Some are common regional players but the others are local home grown mobile wallets, which tend to excel in their own local market due to their unique understanding of local behavior, needs and preferences. The influence of regional players e.g. Grab Pay and Boost, on local markets vary by country as its appeal depends on the local need for the value-added services e.g. regional availability of service, being paired with payments, the business model and the ability of these regional players to penetrate the new market quickly.

5. What local mobile wallets are successful and why? What impact have Alipay and WeChat Pay on the local mobile wallets?

A critical success factor for a payment solution is product strategy. It is increasingly the case that pure payments players are finding it hard to sustain their business model in the highly competitive market place. Successful seamless, comprehensive solutions did not start from scratch, addressed a gap in the market, offered more than just payments, offered a clear value proposition and also incentivises users in addition to making their life easier. Having a ready convertible base and talented staff is a plus and helps with achieving scale which is critical to ensuring viability of a payments business model.

Alipay has global acceptance pinned down and has partnered for local presence in most of Southeast Asia including Malaysia, Thailand, Singapore, Indonesia and the Philippines. With a footprint this wide, it could potentially impact the regional travellers, especially those bound for China, as well as the ecommerce customers keen on purchasing from Alibaba sites such as Taobao, AliExpress and Tmall. WeChat has recently announced its business strategy to maintain their focus on the Chinese tourist, so with the exception of its presence in Malaysia, WeChat Pay is not likely to have much impact on local country markets in Southeast Asia.

Quah Mei Lee will be speaking more on the topic at SUBCOM: Subscription Payments Exchange event in San Francisco, on the 30-31 July 2018.

About Quah Mei Lee

Quah Mei Lee is an Industry Principal Analyst with the Frost & Sullivan ICT practice. She leads Mobile & Wireless Research for Asia-Pacific and focuses on telecoms and payments strategy. Supported by her expert team, she drives thought leadership in telecoms and payments strategy and mobile digital services research.

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.