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You Get What You Scan For A unique path towards digital payment transformation in Asia’s emerging markets BY PAUL LEISHMAN
T
he transformation of payment practices in emerging Asia is underway. Let’s take a closer look at what and who is driving this change. Most people in countries like Indonesia, India, and the Philippines do not use credit cards. The World Bank reports that card penetration among those 15 years and older in these countries in 2017 was 2.4%, 3.0%, and 1.9%, respectively, which remained largely unchanged from 2011’s figures of 0.5%, 1.7%, and 3.1%. The region’s dominant ecommerce companies were established during this time, and the answer to low card penetration wasn’t to fall back on local digital payment methods, as none existed in most cases. Instead, companies relied on something that’s uncommon in mature markets: cash on delivery. Here’s how it works: the customer places an order for a pair of shoes on a website, delivery time is set, and the customer assures the company that he or she will be waiting at the door to hand over cash at the agreed time. When the delivery person arrives with the shoes, the customer (a) is there, pays for them, completes the transaction, and leaves all parties happy, or (b) is not there, and the delivery person trudges away, having wasted time and company money. Digital payment innovation was long overdue, and 2018 proved to be the year it arrived. Just as Asia’s emerging markets are diverse, solutions being brought forward are, too. Straying only slightly from the behavior customers are already comfortable with, we’ve seen convenience stores (i.e., 7-Eleven in the Philippines and Thailand, 52
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Alfamart and Indomaret in Indonesia, and more) introduce digital payment offerings which enable customers to make a purchase online, and pay using cash or a debit card in-store. This way, anyone within walking distance of a convenience store can buy things online, even if they don’t have a bank account. apps to allow customers to transact online Banks have gotten in on the action, too. from their accounts. While credit card penetration in emergInterestingly, the most dramatic ing Asian markets is low, bank account innovation in digital payment came from penetration is often sigcompanies that were seen nificantly higher. Take You may be wondering as complete outsiders to Indonesia, India, and what role the blockchain the existing system, such the Philippines as examas GOJEK in Indonesia, has in all of this. ples, where 48%, 80%, Paytm in India, GCash in The answer is: none. and 32% of those 15 the Philippines, and othyears and older report having an account ers that have poured enormous resources at a formal financial institution in 2017, into building e-wallets and disrupting the respectively (World Bank). In recent years, digital payment space. banks have started to introduce respectable Take GOJEK, for example. It’s a super
