Cash is not king any more in Southeast Asia, as the region witnesses a wave of cashless transactions, driven primarily by a thriving mobile internet economy. Smartphones, powered by mobile internet, have become an indispensable part of people’s lives and are emerging as a socio-economic tool to bridge the technology divide in SEA countries. Close to 415 million people in the SEA have internet access, up from 380 million in 2018. Internet penetration has gone up from 25 per cent to close to 63 per cent in the last five years.

A large proportion of Southeast Asians are now using their smartphones to do banking. Two countries where there has been a surge in mobile payments are Vietnam and Thailand, with people using e-wallets to pay for goods and services and make utility payments. They are outpacing their developed counterparts such as Singapore and Malaysia in the region in electronic payments. In fact, a new industry report reveals that Thailand leads the way in mobile banking penetration globally.

A look at the evolving mobile money ecosystem in the region…

Vietnam

While Vietnam has been promoting electronic payments for almost a decade, it is only recently that mobile payments have picked up pace. To put things in perspective, the country has about 48 million bank accounts, as against 120 million mobile phone subscriptions. Further, the majority of these bank accounts are in urban areas, whereas telecom connectivity is a countrywide phenomenon.

According to a recent PwC report, mobile payments in Vietnam are increasing at a much faster pace than elsewhere in the SEA region. This is evident from the fact that the percentage of consumers in Vietnam using mobile payments has increased from 37 per cent in 2018 to 61 per cent in 2019.

Much of this growth can be attributed to the initiatives of local telecom players, who are the main drivers of mobile money transactions. Over the years, the Vietnam Posts and Telecommunications Group, Viettel and FPT, all have introduced e-wallets and encouraged people to get on to the digital money bandwagon.

Besides, several payment apps and fintech companies have mushroomed in the market that help users pay bills, send money or make purchases across several payment points throughout the country. As per industry reports, there are about 35 start-ups and platforms providing digital payments in the country. Of the 29 providers of intermediary payment services licensed by the State Bank of Vietnam, 27 offer e-wallet services.

Momo, one of the most popular e-wallets in Vietnam, has managed to sign up over 10 million customers within two years of launch. The company claims that it has established a network of 100,000 stores in the country. ZaloPay, a mobile payments start-up, backed by VNG, an online entertainment and social media platform, has also grown rapidly since its launch in 2017.

Besides industry players, the Vietnamese government too has been consistent in its efforts to give the requisite policy and regulatory push to the mobile money ecosystem in the country. In 2017, the government had announced that it aims to reduce cash transactions to just 10 per cent by 2020, allowing digital methods to take their place. Although the target is very ambitious, it has infused a new life into an otherwise slow-moving sector. Most fintech start-ups have started/expanded operations after 2017.

Following on its intent, the government, in January 2019, issued a document asking the central bank to come up with new ways to encourage the use of e-wallets. One such suggestion is to allow people to add money to their wallets without going through a bank account. It also approved a pilot project that enables money transfers and purchases through mobile phone accounts for small transactions. Moreover, as per recent reports, the State Bank of Vietnam is drafting a regulatory sandbox for fintech companies to test new technologies. VNPT and Viettel, two of the country’s major telecom providers, have also been given the green light to explore the deployment of mobile money, which can potentially be transferred between mobile users, even those without smartphones.

Thailand

Over the past five years, the payment systems landscape has changed massively in Thailand. The country’s adoption of digital payments has recorded significant progress, up 83 per cent in 2018 from 2016, while fund transfers through traditional channels, such as bank branches and ATMs dropped by a double-digit percentage during the same period. Another industry report cites that 74 per cent of Thailand’s internet users access banking services through their mobile devices.

Government has had a rather big role to play in driving the adoption. Implementation of the government’s PromptPay service in early 2017 was a turning point and digital payment transactions in the country have risen since. PromptPay is part of the government’s national e-payment scheme, a project designed to move Thailand towards a cashless society. It is part of the government’s Thailand 4.0 initiative, which seeks to create a value-based economy driven by innovation, technology and creativity. The system assigns ID numbers and/or mobile phone numbers to bank accounts, which are used by transferees (instead of a bank account number) to carry out transactions. As at the end of 2018, PromptPay’s registration numbers had reached 46.5 million, of which 29.3 million signed up with their citizen ID card, 16.8 million with mobile phone numbers, 71,000 were registered by corporate firms and the remainder via e-wallet.

Banks too are giving the much-needed fillip to the digital payments segment. In March 2018, the country’s four largest banks, namely, Bangkok Bank, Kasikorn Bank, Siam Commercial Bank and Krung Thai Bank, slashed the transaction fees associated with internet and mobile-led payments for their account holders. Kasikorn Bank has been the most successful of the big banks so far in driving user adoption of its mobile banking platform.

Several large businesses in the country are also developing payment wallets to facilitate ease of payment for their existing customers.

Going forward

Digitally, these are very interesting times for markets in the SEA region. A research study by Google and Temasek Holdings estimates that the size of the region’s internet economy will more than triple from $72 billion in 2018 to $240 billion by 2025, led by mobile internet services. This promises big growth opportunities in the region’s mobile-based payment services segment. The region will emerge as a huge growth market for digital payment service providers in the near future, with mobile payments in the SEA expected to increase to $30 billion by 2021, accounting for approximately 43 per cent of the total non-cash transactions in the region.

Increasing smartphone penetration, a growing tech-savvy generation and a surging internet user base will continue to act as growth drivers for the digital payments space in the region. Besides, governments across SEA countries will be instrumental in encouraging the concept of a cashless economy.

With plenty of favourable developments, SEA’s mobile payments services can expect to attract large amounts of global investment.