The rate of development in the payment industry has rarely – if ever – been faster, and no region has its foot as hard on the accelerator as Asia. John Chaplin, chair of the Global Payments Innovation Jury, analyses the results of its latest research into innovation and change in the sector
Innovation in payments is steadily increasing. Across the globe, there is a higher level of focus on innovation, driven by a combination of startups entering the market and established businesses digitising as fast as possible.
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Yet, despite this collective push, the pace and the direction of payments innovation varies significantly from region to region.
One region that is consistently seen as leading the way is Asia. Driven by rapid population growth, high willingness to accept new technology and its sheer size, Asia is leading a wave of disruption that is fundamentally changing the global payments landscape.
Asia’s dominance as the home of payments innovation was reflected in this year’s Global Payments Innovation Jury report.
Published every two years and comprising the views of 70 successful payments executives from 37 countries, the report considers many aspects of the worldwide industry and gives its considered view on how innovation is occurring and bringing about change.
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By GlobalDataBy a very substantial margin, the jury rates Asia as home to most payments innovation over the next two years, a position that it has held since the inaugural 2008 jury. However, the 2017 jury sees Asia’s innovation leadership position as being stronger and more entrenched than previous juries.
WHY IS ASIA THRIVING?
The fintech boom in Asia is well documented, and continues to go from strength to strength.
China is clearly intent on being the global fintech leader; India is acting as the other regional powerhouse, with an aggressive payments modernisation and innovation agenda driven by the National Payments Corporation of India.
It is important to emphasise here that payments innovation in Asia goes beyond the ‘China effect’. Many other countries in the Asia region are modernising their payments infrastructures and creating environments that support innovation.
For example, smaller markets such as Hong Kong, Malaysia and Singapore are rapidly modernising their payments infrastructures, and are also aiming to be significant players in fintech – with Singapore in particular showing the way.
The opportunities in the region are widespread due to rapid population growth, high willingness to accept new technology and the sheer size of the market opportunity to convert from cash to digital payments in economies where the reach of traditional banks is limited.
The value of mobile payments in China alone in 2016 was estimated at $5.5trn, 50 times more than the value of mobile payments made in the US.
PREFERENCE FOR B2C
Although B2B is seen as offering the best profit potential globally, jurors in Asia believe that consumer payments provide the biggest opportunities in their markets.
Consumer payments are seen as the major opportunity in this region, as there is still so much potential to put financial services and payments instruments into the hands of unbanked consumers for the first time, facilitated by increasing mobile phone and broadband penetration.
Indeed, innovators in Asian markets may find the path to B2C profitability smoother than in more developed markets because they are not trying to build on top of or work around ageing legacy systems.
Paytm in India has built its own ecosystem and has therefore been able to move quickly in a market that often does not move very fast.
HOME TO FUTURE GROWTH
The abundance of opportunities available in Asia is having a clear positive impact on where jurors would prefer to establish their next payments venture.
Almost half (47%) state that – irrespective of where they are currently based – Asia would be their preferred location if they were starting a payments business today.
With success stories from bKash in Bangladesh, Alipay in China and Paytm in India, and the commitment of central banks to the modernisation of payments infrastructures, Asia is unsurprisingly seen as the most attractive market.
The jury ratings and comments suggest that much of the effort in the fintech hubs in Europe and the US is being directed towards opportunities in markets like Asia and Africa. Entrepreneurs in Europe and the US are very active in payments innovation, but it seems they are not so convinced that the best business opportunities lie within their own geographies.
Although there is stiff competition to be crowned the hub of most payments innovation, there is no doubt that Asia is still king. While the western world has been burdened by mature banking and payment systems, Asia has, and still is, leading a new wave of payments innovation.
Free from the burden of legacy banking systems and motivated by increasing customer demand, a favourable view of technology, and population size, payments innovation in this region has become almost unstoppable, and in that regard, one to watch.
