Banks should adopt mobile payment or risk becoming irrelevant: Forrester

Visa says over half the people in Asia use mobile payments, and Criteo puts the Southeast Asian conversion rate at 45 per cent

By Kevin McSpadden

As Southeast Asian merchants, startups and consumers increasingly adopt mobile payment systems, banking executives need to evaluate and integrate mobile solutions or risk being left behind, says a recent report published by Forrester Research.

Furthermore, the report says if banks do not move quickly, they risk becoming irrelevant, surrendering customer relationships and missing out on key consumer data.

“The huge success of mobile payment services offered by tech titans and messaging app providers such as Alipay and WeChat in China, the potential expansion of Apple Pay, Samsung Pay and Payments by Facebook into Southeast Asia, and the rapid growth of mobile payment systems by telcos, card networks and tech startups are making it more critical than ever for e-business executives at the region’s banks to evaluate whether they need to provide mobile payments to their customers,” the report says.

Visa’s 2015 Regional eCommerce Monitor Survey, in which the credit card giant surveyed 11,760 people across APAC in May and June, showed the gap between online purchases made on desktop versus mobile is shrinking. The report said m-commerce activity has increased by 22 per cent year-on-year.

Data given to e27 by Visa showed 56 per cent of respondents made online purchases via mobile. However, only 30 per cent of people surveyed said they prefer to make mobile payments.

Another report released today by French performance marketing company Criteo said 45 per cent of Q3 sales conversions in Southeast Asia were done via mobile, a 27 per cent increase from Q2. Indonesia was the most active at 56 per cent.

Expanding into APAC, Criteo data says Japanese consumers make payments on mobile at nearly three times the rate of those in the US.

Breakdown of risks

The Forrester report cited three motivations for banks to get on the mobile payment bandwagon.

First is the risk of becoming irrelevant. The report points out that, in previous generations, banks were the only institution for handling payments. Today, the market is filled with payment alternatives — PayPal being the most obvious.

For example, about 18 months ago, PayPal launched a service called PassPort with the intention of boosting international sales.

“PassPort enables [companies] to explore new international sales opportunities, find new sales peaks and tap into global holidays beyond [its] country’s borders. Our tools will provide them with the understanding of gift giving traditions country by country and ways they can tap into new or additional commerce cycles and sales trends,” PayPal General Manager of Singapore and Southeast Asia Rahul Shinghal tells e27 via email.

PassPort gives businesses invaluable data and assuming it leads to a boost in sales it may also mean the entrepreneur permanently migrates operations to PayPal.

The loss of relevance leads to the second concern: losing relationships. Forrester calls it the ‘dumb pipe’ phenomenon; losing engagement while still paying for the infrastructure.

The last point is the risk of losing customer data.

Alipay and Paypal have over 350 million active users between them. Smaller companies in less mature markets, like Philippine-based Ayannah, are even getting significant traction. Ayannah, which promises “digital financial services for the world’s unbanked”, claims over 10 million users.

Paypal’s Shinghal drives home the point:

“We are on the cusp of the mobile-first era and at PayPal we have seen our mobile growth rise from less than one per cent of our payment volume in 2010 to more than 20 per cent in 2014.”

A looming threat or a potential opportunity?

Forrester makes an effort to cite Apple Pay and Samsung Pay as two services not currently in Southeast Asia that, once they enter the market, will force banks to develop a business partnership for the simple reason of pragmatism.

But, while Samsung and Apple certainly are tech giants, it may be some time before the payment services come to Southeast Asia.

Samsung Pay processed US$30 million worth of transactions its first month in South Korea but is currently focussed on a US expansion. Apple Pay is still struggling to gather momentum in the US.

That means other companies are filling the demand. One example is fastacash, a social payment service with a notable client — DBS Bank.

Yesterday fastacash announced it will be expanding into Myanmar through a partnership with the strictly mobile platform, MyPay.

e27 does not know the specifics of DBS and fastacash’s business arrangement but as of yesterday the bank has a working relationship with a fintech startup making inroads into Myanmar’s mobile payment ecosystem.

So, what to do?

Rather than outline a grande scheme for the banking industry, Forrester suggests individual regional banks build partnerships with fintech companies, ala fastacash and DBS.

It recommends that banks accurately dissect needs, pinpoint challenges in the market (consumers trusting mobile payments is a big one) and find a company capable of solving the problem.

But, most urgently, Forrester emphasises the time to make the move is now.