The Asia Pacific mobile payment landscape is currently in an exciting phase of development, but remains fragmented. Asian telcos will likely need to wait at least another two to three years to see traction with mobile payments. Here’s why:
- User readiness. Let’s face it: Cash and credit/debit cards still dominate the payment landscape, and are a lot more convenient to use. While penetration of feature and smartphones has grown substantially in Asia, not many people actually use their phones for mobile payments. Even in markets like Australia and South Korea, cash and credit cards remain highly popular among consumers. And if demand remains low, merchants will not deign to accept mobile payments — creating a vicious cycle.
- Infrastructure development. Telecom infrastructure in many Asian countries remains uneven with spotty coverage, (e.g. India and Indonesia). Without proper network access, mobile payments will not propagate outside of urban areas, if at all. While Globe’s Gcash has seen some level of success, the truth is that mobile payments remain nascent in the Philippines specifically and in Asia more broadly. In addition, there is still limited handset support for mobile payments (e.g. some Android models are not able to work with a service). Australia’s Commonwealth Bank went ahead with its m-payment launch after deciding not to wait for incompatible handsets to catch up.
- Standardization. Many countries appear to have placed bets on near-field communication (NFC) as the standard bearer for mobile payments, but this is a medium- to long-term plan. Even NFC itself is not free of competing approaches, something that my colleagues, Thomas Husson and Denee Carrington, have written about. To muddy the waters further, mobile Point of Sale (mPOS) providers like Square and Paypal Here offer merchants a pluggable smartphone card reader that turns them into a credit/debit card POS, making it even harder to achieve common m-payment standards in the near term. Confusing users with multiple standards means dampening user adoption.
What it means:
- Partner. Telcos should plug into an ecosystem of partners rather than going it alone. Access to regulatory insights, market expertise, and speed to market far outweigh concerns about dividing up the potential revenue pie or user base. No one dominates mobile payments, and I don’t expect this to change in the medium to long term.
- Invest. This is the time to integrate mobile payment plans with a wireless infrastructure strategy. For instance, telcos need to ask if it makes sense to improve existing coverage in urban areas or to expand 2G/2.5G to rural areas to encourage the use of mobile payment apps.
- Educate. The convenience of cash and cards cannot be understated; mobile payment needs to be a demonstrably better payment option. This also means assuring users that mobile payment is secure (e.g. with two-factor authentication). Regulators and industry players have to be seen to be protecting user interest.
While mobile payments will drive great opportunities in the next couple of years, telcos need to build the right partner ecosystem and raise user confidence in order to improve their chances of success.