Payments infrastructure in Asia is generally fragmented and large numbers of people in emerging markets tend to be unbanked through traditional methods. While access to points of sale or bank branches is limited for the unbanked, mobile and internet penetration is on the rise.
“The payment landscape in Asia-Pacific has changed significantly over the past few years,” said Marc Mathenz, senior vice-president and head of Asia-Pacific at First Data Corporation. “There has been a continuous trend away from traditional payment channels and non-electronic payments like cash and cheque to credit cards, domestic debit cards, as well as internet banking and payment.”
Technology is perhaps the most important driver behind implementing new mobile and internet payment tools. Service providers like First Data provide financial institutions and merchants with the systems and solutions to push this next payments generation through to the unbanked. According to Mathenz, the key influencers around mobile-based technology and applications are likely to be the central banks, regulators and merchants.
Many financial institutions and merchants have well developed solutions and services for the more affluent population in Asia’s markets. However, in Mathenz’s view they are beginning to place the unbanked population in higher priority. He believes financial institutions and merchants in markets with less developed payments infrastructure will skip the branch-based payment model completely as they focus more on tapping the opportunities that can be derived from the unbanked.
“As the attributable revenue in the top and middle segments of the market is becoming quite saturated for financial institutions and merchants, they want to explore new avenues and channels to tap into opportunities represented by people in the lower segment of the pyramid,” Mathenz noted.
It is important that these market players develop highly scalable solutions that can be operated with extremely low costs because the value per transaction for this segment of the population tends to be rather low. But what does attract financial institutions and merchants to this revenue stream is the potential for high transaction volume. He says that some financial institutions and merchants are betting on a portion of the lower segment moving up to the middle.
“They want to capture this sub-segment early but will only be successful if they have a business model that supports high volume but low value transactions,” Mathenz explained.
The fragmented payment market itself presents many opportunities for financial institutions and service providers alike but it is crucial for these players to minimise transaction costs and manage the risks associated with mobile, internet and contactless technology.