Fintech in APAC

Fintech in APAC: Digital
Payment Platforms
October 2019
Kendrick Sands, Head of Consumer Finance Research
2
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© Euromonitor International CONSUMER FINANCE: FINTECH IN ASIA PACIFIC – DIGITAL PAYMENT PLATFORMS PASSPORT 2
INTRODUCTION
MOBILE PAYMENTS AND WALLETS
REMITTANCES AND INTERNATIONAL
TRANSFERS
MOBILE POINT OF SALE
CONCLUSION
APPENDIX
REPORT DEFINITIONS
INTRODUCTION
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INTRODUCTION
Fintech in Asia Pacific
▪ The impact of fintech over the past five years has profoundly transformed the Disclaimer
financial services and payment spaces globally. The region that has been Much of the information in this
briefing is of a statistical nature and,
impacted most is Asia Pacific, which, as the largest region for payments, while every attempt has been made
population and economic output, has created the framework for other regions. to ensure accuracy and reliability,
The companies which constitute fintech have expanded, and cover a wide range Euromonitor International cannot be
held responsible for omissions or
of products and services. In this report, the focus is on digital payment solutions, errors.
which will be covered by a series of case studies across the Asia Pacific region. Figures in tables and analyses are
calculated from unrounded data and
To further narrow the definition of digital payment solutions, the three categories may not sum. Analyses found in the
that are covered are mobile payments and wallets, international money transfers briefings may not totally reflect the
and remittances, and mobile points of sale. The innovative companies covered companies’ opinions, reader
discretion is advised.
are relatively young companies that have developed solutions in areas which
traditional financial institutions offer services which are inadequate in some Fintech is transforming
respect, or areas which have been either unable or unwilling to address. This financial products and services
can make fintech either complementary to, or in direct competition with at a rapid rate around the world.
The Asia Pacific region is the
traditional financial institutions. The relationship between fintech and banks in most obvious example of the
these markets varies on this spectrum in Asia Pacific, as it does globally, and is transformation, and the
determined by a number of factors. payments industry is a perfect
example of what is happening.
Digital payment This strategy brief will use case
studies to illustrate how fintech
platforms through digital payment
platforms has fundamentally
changed the payments industry.
The categories discussed are
Mobile payments and International money mobile payments and wallets,
Mobile points of sale
wallets transfers and remittances remittances and mobile point of
sale.
INTRODUCTION
Key findings
Pursuit of going Governments in many Asia Pacific markets have made going “cashless” a key priority
“cashless” is in recent years, and we are now seeing positive results from previously adopted
working regulations. Cash use is down throughout the region, more consumers are banked,
and competition has increased in financial products and services.
Loyalty and rewards In developed Asia Pacific markets, competition has intensified as markets are flooded
driving fintech with payment platforms. This has rapidly increased adoption and made companies
adoption look to reduce costs and provide additional value to payments.
Rethinking Traditional financial institutions’ approach to determining creditworthiness resulted in
creditworthiness many qualified consumers not having access. Fintech’s development of alternative
measures, like shopping behaviour, might provide a better guide.
Demographic Throughout the region, younger consumers have more disposable income, greater
factors point to access to technology and a better understanding of how to use it. This will ensure
sustained growth continued growth of fintech throughout the forecast period.
Consumer demand A strong economic performance throughout the region over the past decade is
for financial services producing a large middle class in the region. This consumer segment is fuelling the
increasing need for financial products and services.
Digital payment Digital payment platforms are increasing the value of transactions by leveraging the
platforms increasing data created. This additional value can be distributed to merchants to increase
transaction value acceptance, and to consumers to increase adoption.
Fintech is taking a Many successful fintechs have become regional and international companies, with
regional approach customers around the world. A clearer regulatory environment is breaking down
borders and providing greater opportunities for expansion.
INTRODUCTION
TRANSFERS
CONCLUSION
APPENDIX
REPORT DEFINITIONS
Cash is still king in Southeast Asia, but this is changing
▪ Due in part to its sheer population size, Consumer Payment Transactions: Southeast Asia
Indonesia is the largest market in Southeast Breakdown by Country 2014-2019
Asia in terms of consumer payment value. With
approximately 41% of the region being
unbanked, it is no surprise that cash is still king.
▪ Singapore stands out as the only market where
cards have leapfrogged cash. The country’s
advanced payments infrastructure has helped
promote the use of credit and debit cards.
Consumers value the speed, convenience,
security and rewards that card payments bring.
▪ Governments in the region are pushing for a
cashless economy. The Indonesian government
is investing in the development of a robust
infrastructure to support the growth of digital
payments. Bank Indonesia recently launched the
Quick Response Indonesia Standard (QRIS)
code system to boost interoperability between
the various digital wallets. Southeast Asia has
been a hotbed for fintech innovation. According
to a Google-Temasek study, fintechs in
Southeast Asia received USD500 million in
funding in the first half of 2018 alone, more than
twice as much in all of 2017.
Southeast Asia’s super-app, Grab, expands into digital finance
Grab’s GMV in Southeast Asia 2016-2019
▪ Grab first started in 2012 as a ride-hailing app, and

has since evolved into Southeast Asia’s “everyday Transport
super-app”. After the acquisition of Uber’s business Food Delivery
in Southeast Asia, the Singapore-based startup Payments
has been expanding its other digital services
offerings such as food delivery, parcel delivery,
digital payments and financial services.
▪ Grab has raised over USD9 billion since its Source: Grab
inception, backed by notable investors like
SoftBank, Toyota, Microsoft and Booking Holdings.
Grab is Southeast Asia’s first “decacorn” (value
exceeding USD10 billion), with a current valuation
of USD14 billion.
▪ M-commerce in Southeast Asia experienced a
more than six-fold increase in transaction value
over 2015-2019. Grab plans to capitalise on this
opportunity, demonstrating its ambitions to expand
its footprint in digital payments and financial
services in ways that address the region’s
unbanked and underbanked population.
Opportunity for Grab to serve the unbanked through digital finance
▪ Per capita disposable income is forecast to see

healthy growth across the region over 2019-
2024, with Malaysia, the Philippines and Vietnam
expected to perform particularly strongly, with
CAGRs of 4-6%. The region’s income growth,
high smartphone penetration and huge
unbanked population will drive demand for on-
demand services and digital finance.
▪ M-commerce in Southeast Asia is expected to
triple between 2019 and 2024, recording a
CAGR of 26%. Grab can leverage the strong
network effect from its existing customer base to
increase GrabPay’s user penetration. Besides
acquiring more merchants to generate cross-side
network effects, Grab’s ability to embed itself
seamlessly in the customer’s path to purchase
will provide users with a greater incentive to use
GrabPay.
▪ Grab’s Pay Later service and micro-loans
address a key pain point of the unbanked. Quick
access to affordable credit will provide a strong
use case for Grab’s ecosystem. This will pave
the way for financial inclusion and increased
economic activity.
INTRODUCTION
TRANSFERS
CONCLUSION
APPENDIX
REPORT DEFINITIONS
REMITTANCES AND INTERNATIONAL TRANSFERS
The remittance and payments landscape in Hong Kong
▪ The total remittance flows of Hong Kong (sum of

inflows and outflows) grew at a CAGR of 6% over
2008-2018, on the back of stronger migration
trends. This is expected to continue to boost
household incomes, enhance consumer
purchasing power and enable more spending on
non-necessities. The high cost of sending
remittances through mainstream financial
institutions has restricted total transfers, but low-
cost fintech alternatives are increasing the number
of consumers willing to send money, and the total
value sent.
▪ Established payment methods, such as credit
cards, the Octopus card and cash, continue to
resist the rise of mobile wallets. However, this is
expected gradually to change in the coming years,
as consumers in Hong Kong become more
accustomed to these types of payments. Paper
payments have already been displaced to a large
degree in Hong Kong, accounting for only 3% of
total consumer payment value in 2019. The rise of
electronic transfers is predicted to move consumer
electronic payment value share of total consumer
payment value from 39% 2019 to 55% in 2024.
Two different approaches to revolutionising remittances
▪ Founded in 2015 by Benjamin Wong, Transwap is ▪ Founded in 2014 by George Harrap and Maxine
a fintech platform based in Singapore and also Ryan, Bitspark is a Hong Kong-native fintech
incorporated in Hong Kong, with operating platform that claims to be the “world’s first crypto
licensees currently in Singapore, Hong Kong and money transfer ecosystem”. The company
Indonesia. Focusing mainly on small and medium- promotes itself as a “bankless money transfer
sized enterprises (SMEs), Transwap allows ecosystem that enables businesses and people to
businesses to send money across 160 different cash in and cash out cryptocurrencies across Asia
countries and in 120 currencies in a seamless and and Africa”.
cost-effective manner.
▪ Bitspark builds on blockchain technology and uses
▪ Transwap’s proprietary online platform and API, cryptocurrency to “create a parallel financial
coupled with its network of foreign exchange system that allows for liquidity and direct
partners, allows it to offer more competitive rates settlement on nearly every currency in the world”.
than traditional remittance companies or banks.
▪ Bitspark’s network covers eight countries in the
▪ The company is backed by Quest Ventures, a Asia Pacific and Africa regions: Hong Kong,
venture fund based in Beijing and Singapore Malaysia, the Philippines, Indonesia, Vietnam,
targeting early-stage tech Internet start-ups. Pakistan, Ghana and Nigeria.
Source: Company websites, Trade Interviews
Ageing population and rising internet penetration drive the industry
▪ The share of the Hong Kong

population accounted for
consumers aged 65 years or
over is predicted to increase
from 18% in 2019 to 27% in
2030. This is expected to drive
strong demand for foreign
domestic helpers, which in turn
will drive remittance flows out of
Hong Kong.
▪ The number of internet users is
expected to grow rapidly in the
Asia Pacific region, which is a
prerequisite for the adoption of
new fintech solutions.
Source: Euromonitor International 2019
INTRODUCTION
TRANSFERS
CONCLUSION
APPENDIX
REPORT DEFINITIONS
Kakao Pay in South Korea
▪ Kakao Pay is a leading mobile-based payment

solution from the Kakao Group, which also supports
South Korea’s largest social messaging application,
Kakao Talk.
▪ Kakao Pay has been providing both an online
payment solution and a QR code-based offline
payment solution since 2017.
▪ Kakao Pay is operated when consumers register their
bank account or financial cards to their mobile
KakaoPay function in the KakaoTalk application.
▪ Since KakaoTalk is already the most widely used
social messaging application in South Korea,
KakaoPay has been able to benefit from the heavy
user traffic and consumer awareness. The company
also offers a variety of other digital services, including
games, investments, IT services, AI applications and
various shopping platforms. Source: KakaoPay Corp
More than a payment app
▪ Kakao Pay is aggressively expanding its

acceptance by various industries. Having
started with retailing and foodservice outlets,
Kakao Pay is now processing tax payments to
governments and utility bills to
telecommunication companies.
▪ As South Korea is already becoming a cashless
society, and South Korean consumers are
highly tech savvy, mobile-based payment
solutions are rapidly increasing.
▪ In addition, Kakao Group has opened the digital
only bank Kakao Bank, which is expected to
appeal to its Kakao Pay customers.
▪ Kakao Group has various other services, such
as Kakao Taxi, which is a platform to call a taxi,
and Kakao Shopping, which is an e-commerce
platform. Kakao Pay is expected to be
expanded along with Kakao Group’s other
businesses by being the exclusive payment
option. As Kakao offers a wide variety of
services and products, Kakao customers do not
need to use a variety of apps and can stay in a
single app for all their daily needs, whether it be
shopping, communication or transportation.
INTRODUCTION
TRANSFERS
CONCLUSION
APPENDIX
REPORT DEFINITIONS
CONCLUSION
Digital payment platforms providing value to consumers and merchants
Mobile payments and wallets Remittances and international Mobile point of sale
transfers
▪ Asia Pacific demonstrates the ▪ Transwap and Bitspark have ▪ Removing barriers to merchants
potential for mobile devices and increased the simplicity and accepting cash alternatives has
direct electronic or card reduced the cost of transferring always been a central issue in
payments. Fintech in this space funds internationally. These payments. Both the initial
has not transferred value from examples illustrate the potential investment in the POS terminals
traditional payment players – it for this field in other regions, as well as the fees have
has created additional value. and continued disruption is discouraged small merchants.
Beyond enhancing the consumer inevitable. Ultimately, traditional
Fintech solutions stand to
purchasing experience, fintech financial institutions stand to
increase the convenience and
has improved the shopping and lose a revenue stream from
post-purchase experience by fintech in this space if there are overall security of consumer
opening a consistent line of not regulations limiting which payments going forward. The
communication between the companies are able to exact technology that will prove
merchant and the consumer. participate in the space, or if most popular over the forecast
However, the increasing there are capital requirements period among consumers may
incentives provided to consumers or other restrictions that prevent differ by region and even by
by platforms to drive volume is fintech from entering. The country, but with several cost-
reaching unsustainable levels in introduction of cryptocurrencies effective solutions, more and
some markets, and may result in also has the potential to impact more merchants will be able to
an additional cost to the the security of transfers and move away from cash. QR in
consumer going forward. could negatively impact the Asia Pacific has a clear lead
customer experience. over alternatives in the space.
INTRODUCTION
TRANSFERS
CONCLUSION
APPENDIX
REPORT DEFINITIONS
APPENDIX
Defining the cost of policy
Effectiveness of policy Cost to payment players Government involvement
▪ For payment policy to be ▪ The cost of supporting paper ▪ There are two aspects of
considered effective it has to payment alternatives varies government involvement with
drive greater card or according to a country’s regards to a payment policy:
electronic payment value, infrastructure, but a policy can enforcement and direct cost.
while reducing overall paper determine who has to bear the The cost of enforcement takes
payments. As simple as this cost to further facilitate non-cash into account establishing an
may seem, many policies payments. The cost of a accountable entity for
adopted can have negative transition can fall on the enforcement, establishing
unintended consequences. consumer, the government, the punishment for violation, and
The effectiveness of a policy merchants, or on the card and establishing a method for
is rated on a scale of five in electronic payment players. For determining degree of success.
terms of the impact it has this particular ranking, the Direct cost takes into account
been able to have on payment players are considered how much of the transition the
reducing overall paper the card issuers and the card government sponsors. In a
payments without regard to payment networks specifically. In market where the government is
the cost it may impose. An the case of an EMV chip upgrade fully involved, it would subsidise
example of the most effective policy, a score for the highest card terminals for merchants,
policy would be banning cost going to card payment the issuance of cards and bank
paper currency, while an companies would be issuers re- accounts for consumers, and
ineffective policy might issue all cards to be compliant, create an agency that inspects
actually encourage paper and networks fund the update of the level of card or electronic
payment usage. merchant terminals. payment adoption at the POS.
INTRODUCTION
TRANSFERS
CONCLUSION
APPENDIX
REPORT DEFINITIONS
REPORT DEFINITIONS
Data parameters and report definitions
▪ CAGR – compound annual growth rate.

▪ 2019 figures are provisional and based on part-year estimates.
▪ All volumes expressed in this report are in US dollar terms, except where noted.
▪ All forecast volume data cited in this report are expressed using a 2019 fixed exchange rate. Conversely,
all historical data use a year-on-year exchange rate. A 2019 fixed exchange rate is applied for those
situations in which historic and forecast data are used together in the same graphic.
▪ All forecast volume data cited in this report are expressed in constant terms; inflationary effects are
discounted. Conversely, all historical data are expressed in current terms; inflationary effects are taken into
account. In situations where there are both historic and forecast figures in the same graphic, the data are
expressed in constant terms.
▪ Mobile commerce is defined by Euromonitor International as a payment transaction involving the exchange
of funds for either goods or services conducted via a mobile handset. The location of the payer and
supporting infrastructure is not important. The consumer may or may not be “mobile” or “on the move”, or at
a physical POS terminal in a bricks-and-mortar store. The payments may be made via credit cards, a pre-
paid wallet or other payment method, such as a bank or PayPal account, connected to the mobile device.
▪ Banked population refers to those individuals aged 15 years and older who have a relationship with a
formal financial institution defined by one – or a combination – of the following products: transactional
account, demand deposit accounts or credit card. A member of the underserved population, though, only
has one of these products.
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Thank you
Kendrick Sands, Head of Consumer
Finance Research
Kendrick.Sands@Euromonitor.com
https://www.linkedin.com/

Fintech in APAC

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Fintech in APAC: Digital

This piece of content includes proprietary information from

For usage requests and permission, please contact us

About Euromonitor International and Passport

Euromonitor International is a global market research company providing

Our global market research database, Passport, provides strategic intelligence

Fintech in Asia Pacific

Cash is still king in Southeast Asia, but this is changing

Southeast Asia’s super-app, Grab, expands into digital finance

Grab’s GMV in Southeast Asia 2016-2019

▪ Grab first started in 2012 as a ride-hailing app, and

Opportunity for Grab to serve the unbanked through digital finance

▪ Per capita disposable income is forecast to see

The remittance and payments landscape in Hong Kong

▪ The total remittance flows of Hong Kong (sum of

Two different approaches to revolutionising remittances

Source: Company websites, Trade Interviews

Ageing population and rising internet penetration drive the industry

▪ The share of the Hong Kong

Source: Euromonitor International 2019

Kakao Pay in South Korea

▪ Kakao Pay is a leading mobile-based payment

More than a payment app

▪ Kakao Pay is aggressively expanding its

Digital payment platforms providing value to consumers and merchants

Defining the cost of policy

Effectiveness of policy Cost to payment players Government involvement

Data parameters and report definitions

▪ CAGR – compound annual growth rate.

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