The use of mobile money continued to grow in Asia in 2019 according to the GSMA’s latest State of Mobile Money in Asia report, as more of the continent’s citizens found it easier to transfer money and pay for goods and services using their smartphones. The ongoing pandemic has only accelerated some of the trends highlighted in this report.
More than 30 mobile money services across the whole of Asia now have over 1m active 90-day accounts, and 42m new accounts were registered in 2019 – 30m in East Asia and Pacific and 12m in South Asia. That grew the combined total 10% year on year to 473m – with almost 25% of Asia’s adult population having signed up to use mobile money.
In East Asia and the Pacific, which includes big spending Japan and South Korea, that figure rises to 32%, compared to just 24% in South Asia though the latter has a much larger volume of potential subscribers. That is a direct result of East Asia (which also includes China) having a larger number of services – 52 compared to 37 in South Asia – after a considerable number of new providers emerged in the last year.
In South Korea for example, an additional 16 local banks and 31 fintech companies had started offering mobile money services after the country’s Financial Services Commission (FSC) open up its closed inter-bank payment network to non-bank companies at the end of 2019 (more detail in our recent blog “Open Banking Regulation Shakes Up Mobile Payments Market in South Korea” here).
Consumers in Japan and South Korea are also more likely to fund purchases using direct carrier billing (DCB) rather than credit or debit cards. DCB spending limits set by telcos and mobile network operators (MNOs) are significantly higher in those countries compared to elsewhere in the world, a situation which encourages people to purchase more goods using their mobile phone accounts. DCB options are available for customers of specific MNOs in South Korea via SK Telecom, Korea Telecom (KT) and LG(U+), and in Japan, though carriers including our parent NTT DOCOMO, KDDI and SoftBank.
Agents and bank integrations driving transaction growth
Mobile money adoption is also being driven by the 5m mobile money agents across the continent, which digitised US$43bn of physical cash between them in 2019 estimates the GSMA. That network of stakeholders is particularly important in rural and hard to reach areas where banks and other financial institutions do not have branches.
Almost twice the amount of value is circulating in Asia’s mobile money system than exiting it, however, with US$4.6bn of outgoing transactions made up of cash payments (54%), bill payments (21%), mobile to bank (M2B) transfers (17%) and auto top-ups (ATUs – 6%). Of the estimated US$8.6bn, which remains in circulation, 94% represents P2P transfers and 6% merchant payments.
Providers are increasingly integrating their services with banks and other fintech platforms using application programming interfaces (APIs), making it easier for users to pay for goods and services at a broader range of merchants, and transfer money to people holding different bank accounts. Mobile money account to account (A2A) interoperability is now live in six Asian countries, with mobile transactions to bank accounts accounting for 17% of outgoing transactions in 2019.
Over a third of the companies using mobile money to make bulk disbursements are in South Asia, which is also home to over half of merchant accounts. The number of banks allowing mobile money to bank interoperability is high in both South Asia (27) and East Asia and the Pacific regions (16) and growing at a steady clip.
QR codes swell POS mobile payments
The GSMA estimates that 43% of all mobile money transactions on a global basis were carried out in Asia in 2019, with the value of mobile commerce in the region expanding 24% to US$204bn compared to 2018.
The rapid adoption of mobile internet and smartphones certainly helped boost merchant payments and e-commerce activity, with the vast majority (84%) of merchant payments carried out online, representing 75% of the total value.
An early switch to using QR codes in Japan and other East Asian countries for point of sale (POS) transactions in physical stores via user smartphones was a crucial step in that development, for example. India’s adoption of the unified payments interface (UPI), the instant real-time mobile-only payment system developed by the National Payments Corporation of India and regulated by the Reserve Bank of India was an essential step in the direction to
Asia remains the only region in the world where more merchants offer QR code payment technology than do USSD. The Indonesian central bank recently introduced standardised Indonesian QR codes and a single integrated platform for all QR-code transactions across multiple digital wallet providers in the country, for example. In contrast, the Malaysian electronic wallet (eWallet) provider Boost has partnered China’s UnionPay to allow QR-based payments at major retails in both countries.
Varied transaction mix
There are significant regional differences in the type of goods and services being paid for using mobile money within the broader region. In South Asia, 52% of all transactions involve airtime top-ups for example, slightly above the global average of 48%, while the equivalent figure in East Asia and the Pacific is 35%. Variations between the value of those transactions (2.4-2.6% of the total) is roughly the same in all three cases, however.
Yet countries in East Asia and the Pacific see volumes of merchant payments (over 31%) which dwarf those in other regions of the world (5.2% in South Asia) while the global average is only 7.7%. The reason for this owes much again to the early adoption of QR codes by merchants in Japan, Korea and China, and laws in those countries which are more favourable to the purchase of physical goods and services using mobile money services.
Those merchant payments still represent a fraction of the overall value, however (6.6% in East Asia and the Pacific and 2% in South Asia) with the most considerable sums of money involving person to person (P2P) transfers, which make up the around 77% of the value in both regions. Bill payments too are common, though more so in South Asia where they make up 13.2% of total transactions compared to just 7.7% in East Asia and the Pacific.
Beyond payments into remittances, loans, insurance and savings
The volume and value of international remittances are almost negligible in both regions, however. Despite these services being offered by around a third of mobile money providers across the continent, the value of the international remittances they handled in 2019 was only US$85m, a fraction of the total US$35bn processed by other financial channels.
Mobile money providers are gradually branching out into other financial services through both provision and adoption remains low for the moment. The GSMA also estimates there were 47 mobile-enabled insurance services across nine Asian countries in 2019.
U Mobile, a leading Malaysian telco, launched its GoPayz eWallet smartphone app in partnership with UnionPay International (UPI) in November 2019, allowing consumers to make ATM withdrawals and pay for insurance and other financial services alongside mobile phone top-ups, e-commerce purchases and utility payments.
The GSMA now sees three main drivers of future growth for mobile money services across Asia. Two involve taking financial inclusion beyond access and usage to include a broader range of financial services and extending the reach of mobile money further across sovereign borders to support the greater volume of international remittances.
Growing awareness of services and mobile money capabilities amongst the region’s women is also judged crucial to expanding the ecosystem. The GSMA estimates that the awareness gap between men and women is much higher in certain Asian countries – including Bangladesh, India and Pakistan. Reaching out to the continent’s female population is key to growing Asia’s mobile money customer base.
Regulation introduced in 2019 should also make it easier for mobile money services to launch and thrive in 2020 and beyond. That will be enabled not only by the new open banking rules in South Korea but also in countries like Afghanistan and Cambodia, which both launched national financial inclusion strategies. Singapore now allows non-banks to issue e-money and provide mobile money services.
The current pandemic and the need for governments in the region to disburse benefits to the underbanked will further accelerate wider adoption of these open banking rules.