Nomura

ASEAN internet: Opening up the mobile wallet

  • The gross transaction value of mobile payments is expected to rise to USD109bn in FY27F
  • Why now? 43% of Fintech funding in ASEAN is concentrated in firms related to digital wallets, remittances and payment gateways
  • We look at the five-factor model to rank 38 different mobile wallets in the region

After countries like China and India, where resident rely on mobile wallets in their day-to-day lives, ASEAN is slowly catching up. Cash remains the dominant transaction mechanism in most of Southeast Asia, with 70% of consumer payments still conducted through a physical exchange. However, with smartphone and mobile purchasing penetration in ASEAN already at 46% and 25%, respectively, payment transactions via mobile phone(s) are likely to increase. Additionally, gross transaction value of mobile payment is expected to rise to USD109bn over FY17-27F, implying a 25% increase over ten years.

Although we expect the adoption of mobile wallets/payments to accelerate in ASEAN, the difference in adoption rates between the ASEAN and China remains stark. However, we believe this is likely to change in the next ten years. It is estimated that current mobile payment penetration in ASEAN is only about 7%, and this is expected to increase to about 27%, or 167mn users, by 2027F. Similarly, as incomes grow, the average mobile payment value per capita could increase from USD282 to USD649 over this timeframe.

Why now?

Part of the reason for ASEAN’s delay in adopting mobile wallets to date is the lack of acceptance, low banked and credit card penetration, and high regulatory barriers in most markets. However, there are multiple reasons why the operating environment is improving:

  • Fintech funding in ASEAN has improved, with investment concentrated within digital wallets, remittances and payment gateways.
  • Better smartphone penetration in the region. Connections speeds are rising due to better 4G infrastructure and enhanced security.
  • Cash-on-delivery risk is high, potentially resulting in higher dependence on mobile wallets as a payment option, especially due to the rise in e-commerce penetration.
  • Regulatory frameworks are improving and governments are starting to recognize the benefits of a cashless society.
  • Mobile payments via e-wallets can be based on digital cash rather than credit cards, enabling compression of transaction costs for merchants.

Regional leaders best positioned

We use a five-factor model to rank 38 different wallets in the region. Our proprietary analysis of 38 mobile wallets in the region is based on an assessment of five factors that we think are critical for success in the industry

  • Market regulatory environment and a country’s digital readiness
  • Use cases available and differentiation of each use case
  • Customer acceptance based on existing downloads on Google Play
  • Ease of top-ups
  • Existing ecosystem and investor support

Using this matrix, GoPay (Go-Jek), True Money (True/CP Group) and GrabPay (Grab) are best positioned in the region. Commonalities among these companies include a regional presence, strong investor backing and a large number of already developed use cases.

For more insight on ASEAN’s development of e-wallets, click here.

Contributors

  • Andrew Orchard

    Internet and media sectors, China

  • Jialong Shi

    Head of Internet Research, China

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