Price Waterhouse Cooper’s (PwC’s) 2019 Global Consumer Insights Survey revealed a startling statistic: for the first time since PwC started conducting their annual studies, people rely more on mobile phones than any other digital device. In retrospect, maybe this conclusion could have been drawn sooner; after all, there are more mobile devices in the world than people. Yet, regardless of the timeline, the “steady encroachment of digital technologies into every corner of consumers’ lives” is a reality–especially in the burgeoning economic hub of Southeast Asia.
Why do mobile wallets exist in Southeast Asia?
Southeast Asia leads the way in mobile payments growth
The digital encroachment has led to an explosion of mobile payment services. In contrast to their slow growth in Westernised nations, these services are rapidly integrating into Southeast Asia’s emerging economies because they are not forced to compete with established financial structures and landline-based telephone systems. Subsequently, PwC awarded 6 out of 10 placements in their Top Ten for mobile payments growth to Southeast Asian countries–which is no small feat for a region that has only recently started to rise through the ranks of development.
While Vietnam leads the field regionally and globally, PwC recorded dramatic increases in Southeast Asian adoption rates after surveying 21,480 respondents from 27 territories across the world. From 2018 to 2019, Vietnam’s usage increased by 24%, while those of its neighbours followed close behind; 19, 17, 14, and 9% for Thailand, Malaysia, the Philippines, and Indonesia, respectively. To put these percentages into perspective, China, one of the world’s leading economies, saw no increase in that year.
No longer a westernised playing field
If you’re surprised that highly developed Western nations aren’t masters of the mobile playing field, bear in mind that traditionally underdeveloped financial systems tend to have fewer government regulations, which makes for much less red tape. In fact, Southeast Asia is rapidly catching up with Japan and the U.S. in terms of the percentage of its population that uses smartphones–a figure which is expected to exceed 70% in 2021. You could argue that the Asian market may be more receptive to mobile innovation. After all, Southeast Asian consumers are more socially engaged online, desire more specialised services such as cash-on-delivery, and are more eager to avoid face-to-face interaction with, for example, store clerks.
Three reasons why the results are promising
The Vietnamese government is aiming to make financial transactions almost entirely electronic by 2020, as 94% of local Vietnamese banks have invested in digitalisation, and 42% of those banks consider “going digital” to be their top business strategy priority. Here are three reasons why:
1. Consumers increase their spending
PwC’s report highlighted Yoox Net-a-Porter Group, a luxury fashion retailer that found that their mobile market spent significantly more and bought more frequently than their desktop consumers. It’s simple economics: when people can efficiently transfer funds and initiate transactions, they purchase more and spur the growth of the national economy–which is exactly what governments and banks want.
2. Access to banking expands
In Southeast Asia, more than 73% of the population is unbanked, meaning that they have no access to traditional banking or payment services and rely solely on cash. This is problematic for both the unbanked and the bankers; cash can easily be lost or stolen, consumers can’t benefit from many banking services, and the financial system lacks transparency.
Mobile payments can offer a much-needed solution. In Vietnam, mobile wallet developer OnOnPay allows previously unbanked rural customers to upgrade their financial health. As there are many telecommunications firms (the mobile infrastructure), financial services such as MoMo, 123Pay, Mobivi, NganLuong, and Payoo may soon reach 100% of Vietnam’s population.
3. Governments say goodbye to the ‘Grey Economy’
Once cash is forgone in favour of online financial services, transactions can be tracked and recorded, discouraging tax evasion, money laundering, and terrorism financing. In Vietnam and other countries in Southeast Asia, governments could benefit from unprecedented levels of financial transparency, which would allow them to monitor and ensure proper payment of personal income taxes and thus bolster their national coffers.
Cashless and out of control?
Taken to its logical conclusion, the PwC report portrays a Southeast Asia that is moving toward an almost cashless society, in which money is exchanged and transactions recorded in electronic form only. Already, a smartphone is often the sole item one needs to carry in Asia when going out.
This is excellent news for national governments throughout the region. With Vietnam, Thailand, Malaysia, the Philippines, and Indonesia leading the way in mobile payments, ASEAN is projected to double private consumption to $2.3 trillion in 2020 and become the world’s fourth-largest economic region by 2030. That is an incredibly rapid economic transition, and as such, ASEAN nations will need to implement the necessary measures to combat an often-overlooked side effect of digital transformation: data hacking and the subsequent violation of consumer privacy.
We explore the explosive Fintech growth in the region
In regards to data protection, the region’s legislation currently varies dramatically. While Indonesia and Vietnam are excellent role models, Brunei and Myanmar’s data privacy laws are non-existent. We’ve already witnessed the consequences of these sub-par protection measures in several Southeast Asian data breaches. Recently, the personal data of 46,000 customers of Thai mobile operator TrueCorp were found to be publicly available on Amazon Web Services, and in 2017, Malaysia was forced to investigate an attempted release of 46.2 million mobile customers’ data.
The upshot? As mobile payments become more popular across Southeast Asia, ASEAN nations will experience extreme economic growth, diminished corruption, and more equitable access to financial services. Yet as ever-increasing amounts of data are gathered by technological corporations, the same countries that top the charts for mobile payments growth will need to collaborate to ensure that all this data is safe and used for the right purposes.
If ASEAN can pull that off, we may just be witnessing the rise of the next economic superpower.