2018 - 2019 Edition of Citi Perspectives for the Public Sector

Citi Perspectives for the Public Sector |  2018-2019 27 3. Asia’s mobile payments tipping point There has been incredible disruption in the payments space in Asia with a preponderance of wallets for instant payments and merchant settlements. The world of instant has arrived, creating new business opportunities. Instant claim settlements, instant premium redemptions and instant e-commerce payments are now possible and are efficient, transparent and secure. The changing shape of e-commerce in Asia The e-commerce landscape of the past five years has dramatically evolved and caught the attention of consumers and businesses alike. Gross-merchandise value sold online in Asia is equivalent to the rest of the world combined and is growing at 25% a year. Several factors have contributed to reaching critical mass. These include having three of the world’s most populated countries — China, India and Indonesia — a young workforce and a growing affluent middle class. In addition, the region has enhanced technology infrastructure, an increasingly digitized payments landscape encouraged by regulators, and a proliferation of smartphones, which has further spurred access and connectivity for millions in the region. In Asia one of the biggest challenges is digitization of physical cash handed over by the buyer to the courier or third-party logistics provider on delivery of goods. However, a transformation is now taking place. Across the region, mobile wallets for the less banked, and instant payments for the majority that have access to bank facilities, are digitizing physical cash and augmenting credit cards as the most common payment type for e-commerce. New features such as ubiquitous QR code interfaces, centralized virtual tokens that link securely to bank account details, and Request- to-Pay are key features of many new instant schemes and are playing a part in digitizing cash for online and offline payments. As one of the most advanced digital economies in the world, China has shown how mobile wallets can scale quickly, while India has shown that a top-down approach also works for encouraging people to make instant tokenized payments securely from bank accounts for a variety of purposes. Every country is replicating these trends in different ways. Social channels will also play a key part in commerce and payments. They have become a huge influencer for younger people, with 81% of millennials making a purchasing decision based on social media. Messaging platforms have become critical for commerce and are expanding into processing transactions to support their advertising customer base. Social channels such as WhatsApp, WeChat, LINE, Facebook Messenger and other messaging platforms will become another hub for digital transactions, especially for the youngest generation, and will become an important new revenue stream for e-commerce retailers, merchants and sellers. Big tech goes big in banking and beyond The presence of big tech, especially in China, Korea and India, has a major impact on how digital financial services evolve in the region. Big tech has pre-existing scale and client reach compared to fintechs and sometimes surpass banks or mobile operators. Over the years, big tech firms have established comprehensive multi-licensed financial ecosystems including a payments business, wealth management products, consumer finance, insurance, logistics, social media and more. Internet-based platform companies, such as Amazon and Alibaba, have captured an ever- increasing share of consumers’ time and attention. They view payments and financial services as an important tool that monetizes the vast amounts of data that their ecosystem apps have generated on individuals. They can also provide banking services to less well-banked users to enhance stickiness and cross-sell advertising, e-commerce or other services such as travel and even healthcare.