Mobile Payments in Southeast Asia

With the rapid growth of smartphone penetration in Southeast Asia, e-commerce and mobile commerce is one of the hottest issues in the region. Not only local players but also global e-commerce players have entered into the region to expand their business. However, a number of Southeast Asian countries still have low banking account penetration rates, hence people may not have access to payment methods for e-commerce and mobile commerce. Mobile payments may be one of the solutions for e-commerce payment. With the growing popularity of e-commerce and m-commerce, mobile payments is receiving more attention than before. Not only global mobile payments players such as PayPal but also local players like MOL, Fasspay, 2C2P, Smart Money, and GCash operate business in Southeast Asia. Some Southeast Asian countries still have a relatively high level of unbanked population but mobile payments is rapidly being accepted in the region because smartphone penetration rates are growing much faster than bank account penetration rates.  Also, people can hold a mobile payments account without a banking account at some mobile payments services. However, there are some obstacles to the future growth of mobile payments in Southeast Asia. A number of people are not well aware of mobile payments services, hence mobile payments players should invest more into marketing activities, although investment in infrastructure and equipment is also important. A number of payments players are considering entering into the Southeast Asian mobile payments market, but they may face difficulties to set up their business in the region. Each country has different regulations, telecommunications infrastructure, payments infrastructure and financial environment. Players who consider entering into the market should develop strategies to fit each country’s conditions. Celent believes that mobile payments in Southeast Asia will grow strongly for the next few years because the infrastructure is already in hand and smartphone penetration is still growing swiftly. Celent will keep an eye on this trend and update the trends in upcoming reports and blogs.


先週、サムスンがスマートフォン決済ソリューションベンダーであるループペイを買収したとの報道があった。今回の買収は今後のサムスン製スマートフォンの更なる飛躍を意味するものになるのかが注目されている。 ループペイの技術の長所は汎用性であり、既存の磁気式カードリーダーにスマートフォンをかざすことで決済が遂行される。既存のスマホ決済は専用端末機を要するケースが多く、アップルペイも然りだ。 しかし、サムスンが今回導入したスマホ決済技術は専用端末機の導入は必要としない。加盟店は端末機のための追加コストがかからないため、導入に積極的な姿勢を見せるだろう。既存のスマホ決済にはなかった、汎用性・互換性を備えているループペイ社の技術は今後、サムスン製スマホの更なる成長を牽引する要因のひとつになるだろう。

Samsung’s acquisition of smartphone payment solution vendor LoopPay

Last week, Samsung announced the acquisition of LoopPay, a US-based smartphone payment solution vendor. It has been receiving attention as it may be poised to bring further growth to Samsung’s smartphone. The strength of LoopPay technology is broad versatility. Its technology enables smartphone payment at a touch to a magnetic card reader. Most existing smartphone payment services require the implementation of a dedicated payment terminal, and ApplePay is not an exception. However, dedicated terminals will now not be required with Samsung’s smartphone payment technology. The fact that a merchant will not incur additional cost for a payment terminal makes this smartphone payment service more attractive. The LoopPay technology with its versatility and compatibility should become one of the future growth drivers for Samsung smartphone.

Apple Watch is a game changer

The Apple Watch unveiled a few hours ago is a game changer. Even if the “iWatch” flops, the voice input function will have a profound effect on lifestyles, finally liberating users from the tedious and clumsy digital (as in fingers) input that has dominated human-device interaction since the advent of the typewriter (actually since the invention of writing). Like the smartphone and the tablet before it, the Apple Watch marks another giant leap in usability, and in turn has the potential to boost adoption of digital financial services. In a best case scenario, mobile payments, digital wealth management services, and biomonitor-based insurance could all reach their long-awaited tipping points and achieve widespread adoption. It should come as no surprise due to Apple’s reputation for design, but the fact that the Apple Watch looks like a watch,  not a Dick Tracy-era device, will be a major factor in its adoption. The slim form factor and accuracy of the timepiece place the iWatch squarely in the jewelry accessories market as much as in the smart device market. This is a virtual first in the computing industry (it is hard to imagine many people wearing the clunky Samsung Gear as a fashion statement) and its significance in driving demand for the device should not be underestimated. No doubt we will see iWatch shops in the jewelry sections of department stores globally before long.

App Card Makes Payment Easier

In 2013, South Korean payment industry entered a significant phase of payment. It is the introduction of App Card. App Card is the smartphone application which takes the place of plastic credit card and is used for both online and offline payment. In September 2013, six South Korean card companies including Shinhan Card, KB Card, Lotte Card, Hyundai Card, Samsung Card and NH Card collectively launched App Card. By the introduction of App Card, the process of smartphone shopping was streamlined. Previously, when a customer purchase something on smartphone with a credit card, they had to enter the credit card number every payment and PIN number and public key certificate were also required. The public key certificate should have been copied from the computer when a customer uses a credit card for smartphone payment at the first use. However, by using App Card, they can use smartphone payment with only six-digit PIN number after downloading the application and storing the credit card number to get started. Users don’t need to enter the credit card number on a smartphone every single payment. Capture1 This enhancement has been enjoying high popularity. For the first two months after the launch, the number of App Card users tapped 900 thousands and reached 3 million only for four months. Celent estimates that this growth will continue in 2014, albeit turning a little slower pace. Capture Source: SBS This service cannot be used at a number of offline shops at the current moment but the number of acceptance of App Card is expected to expand in 2014. The growth of offline acceptance will bring swifter growth for App Card.

On Innovation

Celent held our most recent Innovation event in Singapore the last week of November, following similar events in New York, Boston, Toronto, Tokyo, London, and, most recently, San Francisco. Most of Celent’s work is focused on specific financial industry verticals, but Innovation is a topic that transcends industry barriers, and so—by design—do many of our Innovation events.

In Singapore we had representation from the entire financial services spectrum—banks, credit cards, insurers, capital markets firms and exchanges. We presented some of Celent’s recent thinking on innovation, much of it from our new innovation survey. But the main event was a peer discussion between the participants themselves.

It was one of the more lively discussions I’ve seen. We set aside two hours for the peer discussion, and it went by in a flash. Participants jostled to get their say in, and the session ended with the feeling that it could have gone several hours more. I think one of the keys was that there were a lot of different types in the room: the abovementioned full spectrum of FIs, from both the business and IT side, and even from compliance.

Everyone was naturally interested in how their “colleagues across the aisles” looked at innovation, how far each had come in achieving it, and what their technology, operational and cultural approaches were—or were not. Participants brimmed with on-the-spot case studies of initiatives at their firms. This was also refreshingly unusual, since firms are often reticent to divulge competitive information and “secret sauces.”

I think the reason for this relatively high level of enthusiasm lies in the industry’s realization that innovation is crucial to long-term success–and considering the rapidly expanding number of disintermediators, and the remarkable success of some of them, maybe even needed for short-term survival.

Is Mobile Payments Market in Japan Growing Or Not?

People think that Japan is one of the countries that is an early adopter of contactless mobile payments. We can certainly agree this is true. However, whether contactless mobile payments are common in Japan is another question. The answer is in fact “No”. In other words, mobile payment-enabled phones are widespread because many mobile phones are preloaded with the mobile payment function, but the active users are far less than the penetration of mobile payment enabled phones. As of August 2012, there are approximately 126 million mobile phone contracts in Japan. Among those, 58% or roughly 73 million mobile phones are embedded with a mobile payment chip. This is equivalent to 20% of all e-money cards / devices, which total about 180 million cards. How is the transaction volume? Monthly transaction volume of e-money, including not only mobile payments but plastic e-money, recorded 260 million in July 2012. That is, monthly transaction volume per card is only 1.5 transactions. Recently, smartphone subscriptions have been rapidly increasing and mobile payment embedded smartphones have also gradually penetrated. Approximately 34% or 10 million of smartphones have mobile payment chips, and of these 3 million subscribers use the mobile payment function. Does this seem like a high number? Smartphone users usually tend to prefer new things compared to feature phones users but merely 30% of mobile payment embedded mobile phone subscribers use mobile payments. Given the low transaction volume of all e-money cards, mobile payment registered users don’t seem to use mobile payment actively at this moment. It could be because of the lack of recognition of mobile payment or simply the lack of allure and advantage of mobile payment. That is why Celent estimates that the active users of mobile payment are 10% or less of mobile payments holders. A number of overseas media believe that mobile payments are very popular in Japan. However, it is not true. Yes, the infrastructure of mobile payments has been established well but the active users are not so many yet. To increase the number of active users, mobile payments players in Japan should not only preload mobile payment functions in mobile phones but also develop a strategy for promoting mobile payment effectively.

A Challenge for Korean Insurers: Enabling Paperless Policies

I recently published the Celent report “Electronic Signatures in South Korean Insurance: Enabling Paperless Policies”. Actually, at first I intended to write a report about e-business in the South Korean insurance industry. (I will get to that topic next year …) However, I found that South Korean insurers sell more than 80% of their products through sales agents. Furthermore, I found that there is a new trend for sales agents: the adoption of e-signatures for policies.

Adoption of e-signatures has significantly changed the work flow for insurance sales agents in South Korea. With a paper-based insurance contract, a sales agent must visit the home or other location of the policyholder at least twice; however, with an electronic contract, the sales agent only has to visit the individual once to complete the transaction process—from explanation to signing the contract.

Another merit of this so-called “smart insurance” is that it eliminates the need for the sales agent to input customer data after returning to the office because after being e-signed the contract is sent directly to the server. Smart insurance also obviates the risk of losing a signed paper contract before inputting the data—a risk that has until now been a part of doing business on paper.

To determine exactly what benefits the industry expects of e-signatures, Celent conducted a survey of insurers in South Korea. The salient points articulated by interviewees are listed below.

• Streamlining and heightened efficiency throughout the contract process. • Reducing costs such as paper and storage expenses. • Enhanced customer satisfaction. • Realizing green IT.

I will write a report on direct insurance channel including e-business in South Korea in early 2013. Don’t miss it!

Digital Wallet? But Real!

Hana Bank, well-known for being a smartphone banking pioneer in South Korea, launched a new digital wallet service called Hana N Wallet earlier this month. Hana N Wallet offers some new functionalities such as: • Convenient money transfer without account number and troublesome public certificate key which Korean regulator requires to online financial trading users in South Korea. Hana N Wallet 1 (P2P Money transfer) • Cash Withdrawal at ATM with six digits after receiving SMS when someone sends money to the other. Hana N Wallet 3 (ATM Withdrawal) Hana N Wallet is designed for use with a smartphone. When consumer A sends money to consumer B through consumer B’s phone number, consumer B receives an SMS and a “cash nut” payment into person B’s Hana N Wallet. What if person B doesn’t have Hana N Wallet in her/his smartphone? Just download it through the URL in the SMS! The “cash nut” can be withdrawn at any Hana Bank ATM, without an ATM card. This is done by entering a six-digit number provided by Hana N Wallet. People can use Hana N Wallet if they don’t have a Hana Bank account. Celent thinks that this service can attract potential customers and should lead to an increase in customer count. Celent believes Hana N Wallet could bring a significant change for not only the Korean banking industry but the Korean payments market. If other banks launch similar services in the near future, the Korean digital wallet market will be more buoyed. Hana Bank will launch other new services in a couple of months. Let’s wait and see how things go…