Towards Cashless Societies
    Category: Column By : Quah Mei Lee Read : 359 Date : Friday, February 09, 2018 - 10:31:30

    Throughout the Asia-Pacific region, where smartphone penetration is the highest in the world, local governments have made major progress toward cashless societies, led by the region’s most developed countries such as Australia and Singapore. Going cashless is seen as a catalyst for the mobile payments market: both in markets where the use of cards transitions gradually into the use of mobile payments, and in markets where consumers are leapfrogging to mobile payments from cash. The common denominator is the smartphone, a tool that allows the rapid growth of mobile payments.

    Ideally, a cashless society revolves around an ecosystem that exclusively utilizes e-payment methods such as e-money, debit cards and credit cards. To implement this ideal, mobile payments must realize their full potential as a key enabler. It means ubiquitous, cost-effective use of app-based and online solutions in a region where smartphones are prevalent.

    Mobile payments must also be integrated into daily life, including options such as micro-payments, financial services and wide acceptance in retail. The mobile payments market in Asia-Pacific is led by Japan, South Korea, Australia, Singapore and China. The regional regulatory push towards cashless societies across the Asia-Pacific region will help the $72 billion market in 2016 (ex-China and ex-India) grow to reach $272 billion by 2021. The China market alone will grow to $1.4 trillion by 2021.

    Regulatory changes, standardization, and a ubiquitous payments infrastructure—as well as local consumer behavior—play a role in determining the take-up of mobile payments and how fast the transition will be 100% cashless per country. Although benefiting from regulatory pushes, the initial slow take-up is mainly due to the drawbacks of today’s mobile phone as an end-device, with its need for additional security features such as biometrics, data privacy and, above all a phone that doesn’t just copy a physical wallet.

    Standardization is also important. Local e-wallets built to differing standards must be harmonized. Going 100% cashless means a standard interface must be available everywhere, even for church donations, foreign exchanges and so on. It must include all segments of society, such as the poor, the elderly, rural residents and tourists.

    Regulators must address international coordination on payments, security, and data privacy issues. Plans should keep in mind the end goal of 100% cashless and cater for small merchants and usage solutions outside of major towns and city centers. Governments can lead the incorporation of identification into mobile phones. Ultimately, the focus now should shift to mobile payments in order to build a 100% cashless future across Asia Pacific.

    Because cash is seen as a permanent payment option, solution providers aren’t developing mobile solutions that truly disrupt the payment ecosystem. Apple Pay, Samsung Pay and Android Pay have caused some disruption—collectively, these three hold over 40% of global mobile payments transactions. The China players are AliPay and WeChat, and Hong Kong’s Octopus. Mobile payments are, at present, a small, albeit growing, fraction of the global payments market, but we need to keep our eye on 100% cashless as the goal despite the challenges.